Small businesses in limbo again as relief loans end
Small businesses are in limbo again as the coronavirus outbreak rages and the government’s $659 billion relief program draws to a close.
Companies still struggling with sharply reduced revenue are wondering if Congress will give them a second chance at the Paycheck Protection Program, which ended Saturday after giving out 5.1 million loans worth $523 billion since the program started April 3.
“They’ve exhausted their funds and are looking for a Round Two,” says Molly Day, a spokeswoman for the National Small Business Association, an advocacy group.
Congress is debating further help for small business as part of a broader coronavirus relief package. One proposal would allow the hardest-hit businesses — those whose revenue is down over 50% — to return for a second PPP loan; there’s still over $100 billion in unclaimed money in the program.
Some businesses are expressing concerns. For example, the 50% requirement will leave out many small businesses, says Sean Kennedy, an executive vice president at the industry group National Restaurant Association. Many hard-hit groups such as restaurants have managed to keep some revenue flowing in, but still need a financial lifeline,
“At that level only about 45% of restaurants would qualify. A second round of PPP will make or break these restaurants,” he says.
At the moment, negotiations on the relief package have bogged down over unrelated issues including unemployment benefits for laid-off workers.
When the PPP was created, the widespread expectation was the pandemic would subside by the summer, businesses would reopen and life would return to some semblance of normality. That’s why Congress mandated that businesses use the money within eight weeks or forfeit the chance for loan forgiveness.
Instead, late spring and summer brought a resurgence of the virus in many parts of the country as companies reopened. Many restaurants are either closed again or operating with severe restrictions on the number of diners they can serve. Sales are down at many retailers as customers would rather shop online than take a chance on an in-person visit.
Many businesses spent the PPP money to meet the terms for loan forgiveness, although they would have been better served saving it. (Congress later gave businesses 24 weeks to spend the money, but it was too late for many.) Five months after the pandemic hit the U.S., they need another loan.
While restaurants are among the hardest hit because of their extended shutdowns, other companies were able to get more benefits from the loans.
“There were challenges at the outset but once it got up and running, it really did what it needed to do,” says Chris Netram, a vice president at the National Association of Manufacturers, an industry group whose members include thousands of small businesses. But, he noted, many manufacturers need more help.