More aid for small businesses sought
Less than a week after the government started issuing loans to help small businesses hurt by the coronavirus pandemic, President Trump and congressional leaders say the funding is in danger of running out.
They’ve called for a $251 billion expansion of the small business loan program included in the $2 trillion stimulus package that Congress approved last month. The Senate is expected to vote Thursday.
But the package could be delayed as Democrats push for an additional $250 billion in relief, including $100 billion for hospitals, $150 billion for state and local government, and more money for food stamps.
Bay Area Rep. Mike Thompson, DSt. Helena, said that while he supports expanding loans for small businesses, there are other immediate “holes in the system” that should be fixed at the same time.
“I’m not sure why the Senate would push back on this,” Thompson told The Chronicle. “Why would someone not want to help the people that need help?”
Congress has already earmarked $349 billion for the Paycheck Protection Program’s forgivable loans, part of the Cares Act stimulus package, to help companies with 500 or fewer employees stay afloat.
More than $70 billion has already been issued in over 220,000 loans, and the Trump administration has warned the money “will soon be exhausted” given the level of demand.
Senate Minority Leader Chuck Schumer, DN.Y., has been ambivalent about whether Senate Democrats would block a vote to expand the small business loan program if their other requests aren’t met.
“The American people need to know that their government is there for them in their time of great need,” Schumer and House Speaker Nancy Pelosi, DSan Francisco, said in a statement.
Given the Senate’s procedur
al rules, Democrats have leverage to prevent a vote by the GOP. Republicans hold a 5347 majority, but need 60 votes to pass a bill.
Senate GOP leader Mitch McConnell said that lawmakers must act swiftly, and suggested the extra $251 billion could be approved by a voice vote, which wouldn’t require all senators to return to the Capitol and risk spreading the virus.
“It is quickly becoming clear that Congress will need to provide more funding or this crucial program may run dry,” McConnell said in a statement. “That cannot happen.”
Lawmakers have described the bill as an “interim” fix to the loan program as Congress negotiates a larger stimulus package some are calling Cares Act 2 to provide relief. The larger bill could include money for major infrastructure projects, paid family and medical leave for more workers, and stronger workplace safety protections.
Some Republican senators have accused Democrats of using the Paycheck Protection Program expansion to push for wish list items that could be in a later package.
“Senate Democrats should drop their shameful threat to block this funding immediately,” Sen. John Cornyn, RTexas, said in a statement. “Our small businesses desperately need help — now.”
Since the outset, the Paycheck Protection Program has been mired in confusion. Banks have said unclear guidance from the Trump administration makes them hesitant to provide loans. Businesses have been frustrated because many large banks won’t accept applications or have limited eligibility to existing customers.
Tom Low of Pivot Consulting in Oakland, which provides accounting and financial services to nonprofits and small businesses, has helped four clients apply for loans.
He said it took 20 to 25 minutes to fill out the applications, but a person could waste an entire day trying to understand the rules, which still seem to be in flux. The program offers businesses with 500 or fewer employees up to $10 million in forgivable loans to cover payroll, rent and utilities.
“My advice is, get as close as you can based on what you know today, and then get in the queue so you don’t get shut out if they run out of money,” Low said.
Concerns that the money will soon run out are amplified for selfemployed workers. Selfemployed people and independent contractors, such as Uber drivers and real estate agents, are also eligible for the program. But under program rules, they can’t start applying until Friday.
That extra week delay could make it hard for many to find lenders before the money runs out.
Independent contractors are less likely to have existing loan relationships with banks, which could slow their application process, said Daryn McBeth, a Minneapolis attorney.
Bookkeeping will be an aspect that selfemployed people and independent contractors need to tackle, Macbeth said. Since the loans are based on 2.5 times monthly “payroll,” they need to show their income, perhaps via tax statements — although they often deduct many expenses, reducing their revenues. Once it’s time to seek forgiveness of the loan, they need to document how they paid themselves.
“The independent contractors and Uber drivers of the world may need some handholding to get that done,” he said. “The mechanics of the Paycheck Protection Program are not a natural fit for independent contractors.”
There is no requirement about what work, if any, the workers perform, whether conventionally or selfemployed. The loans simply cover paying salaries, no matter how the workers are occupied, Macbeth said.
“There is no litmus test for productivity or revenue generation a loan recipient needs to meet,” he said.
Finding a bank that’s able and willing to accept applications can be the biggest hurdle. Wells Fargo, for example, had previously been unable to lend to many small businesses due to an asset cap imposed after the bank’s fakeaccount scandal.
But Wells Fargo said Wednesday it would immediately expand its participation in the program after the Federal Reserve temporarily lifted the asset cap.
“Due to the extraordinary disruptions from the coronavirus,” the Fed said Wednesday, it “will temporarily and narrowly modify the growth restriction on Wells Fargo” so that it can make more small business loans as part of the payrollloan program and the Federal Reserve’s forthcoming Main Street Lending Program.
Last week, Wells said it planned to distribute $10 billion in PPP loans to current customers, focusing on nonprofits and businesses with fewer than 50 employees. In a press release Wednesday, Wells Fargo said it would begin accepting new applications Wednesday afternoon from “a broader set of its small business and nonprofit customers.” Applicants can get more information on the Wells Fargo website.