IE Business Daily Business news for the Inland Empire.
The multi-billion relief package approved by the House and Senate last week should help small businesses stay on their feet, at least for awhile. However, more help will be needed to get through the COVID-19 crisis, which has already led to an estimated 26 million unemployment claims nationwide.
Small businesses are getting more help from the federal government in their battle against COVID-19.
On April 21, the Senate approved $484 billion in aid for small businesses and hospitals. Two days later, the House of Representatives passed its version of the bill, an extension of the CARES Act stimulus package that President Trump signed in March.
The relief package includes an additional $310 billion for the Paycheck Protection Program, which will help small businesses meet their payrolls. It also provides an additional $60 billion for the Economic Injury Disaster Loan Program, which provides funding for any business need.
Finally, the bill – which was passed on a voice vote in the Senate and received only five dissenting votes in the House – includes $60 billion for community banks and small lenders, $75 billion for hospitals, $25 billion for testing and $60 billion for emergency disaster loans and grants, according to reports.
The legislation now goes to President Trump, who is expected to sign it. The president has said that once that bill becomes law, he wants to begin negotiating another Coronavirus relief bill, one that will include more help for states and local governments.
Any new relief bill should also address infrastructure, tax incentives and a possible reduction in the payroll tax, Trump stated in a tweet.
Congress probably had little choice but to pass the second relief package: the first Paycheck Protection Program bill amounted to $350 billion, all of which was gone in two weeks.
California alone had nearly 113,000 PPP loans – a total of $33.4 billion – approved by April 16, according to the U.S, Small Business Administration, which backs the loans.
That created intense pressure on the government from small businesses, many of which went from a strong economy to possibly going out of business in less than one month, said Christopher Lorenzana, deputy director of the SBA’s Inland Empire/Orange County office in Santa Ana.
“We did more business in 14 days than we did in the previous 14 years,” Lorenzana said of the SBA. “The demand was so overwhelming that the funding only lasted two weeks.”
Nearly 5,000 lenders participated in this program, with “significant” lending from community banks and credit unions, Treasury Secretary Steven Mnuchin said in a statement.
Nearly 20 percent was processed by lenders with less than $1 billion in assets, and about 60 percent of the loans were approved by banks with $10 billion in assets or less.
No lender accounted for more than 5 percent of the money loaned, and seventy four percent of the loans made were for under $150,000, Mnuchin said.
A PPP loan can go up to $10 million depending on the size of the business, while an EIDL loan can go to up to $2 million. Of the $60 billion in the EIDL program, $10 billion is set aside for “advanced” emergency loans that never have to be paid back.
“You can spend it on rent, utilities, inventory anything you want,” Lorenzana said. “A lot of businesses are going to have to restock their inventory.”
Virtually every business that applies for an EIDL is expected to get some kind of advanced loan, Lorenzana added.
The latest vote by both houses of Congress last week was good news to any of the estimated 26 million people who have filed jobless claims since the Coronavirus outbreak began. It was especially good news to anyone who owns a small business, which the SBA defines as 500 or fewer employees.
“We’re calling it a massive economic relief effort,” Lorenzana said. “It’s good that Congress is reacting to the problem, and that something is being done about it on a national basis.”
Enterprise Funding, a Redlands non-profit that arranges federal loans for small businesses through the SBA, has been overwhelmed with pleas for help ever since the COVID-19 crisis began, said Jeff Sceranka, president of the company.
“We’ve had hundreds of calls, but we can’t really help them because we’re a Certified Development Company, and they’re not allowed to get involved in this,” Sceranka said. “It’s frustrating, because I really believe we could help, but all we can do is give out information. We can’t provide any resources.”
One reason the first relief bill ran out of money so quickly was that larger businesses were able to secure more of the funding than smaller ones, according to Sceranka.
“The community banks were supposed to take care of the smaller businesses and the larger banks were supposed to take care of the larger businesses, but the larger businesses ended up getting most of the money,” Sceranka said. “There wasn’t enough protection for the smaller businesses.
“That’s something they needed to address in the latest bill,” Sceranka said. “The government had to do something. What we’re looking at right now is historic, maybe the worse thing since the Great Depression. I’ve never seen anything like it. We’re going to need more help.”
