WASHINGTON – Scores of small businesses squeezed by the COVID-19 pandemic soon could find themselves shut out of a popular federal assistance program.
Nearly a year after Congress created the Paycheck Protection Program to help locally owned stores, restaurants and service providers survive the crisis, it will stop taking applications March 31.
That’s despite a backlog of requests that have been unable to move quickly through the system and might not be processed in time.
“No applicant should be left stranded because of bureaucratic red tape,” Alice Frazier, president and CEO of the Bank of Charles Town (in West Virginia), told the House Small Business Committee Wednesday.
The impending deadline has a bipartisan group of federal lawmakers scrambling to pass legislation extending the PPP at least through May.
“It’s clear that the most vulnerable small businesses will need help beyond March 31, so we must pass this extension as quickly as possible,” said Maryland Democratic Sen. Ben Cardin who chairs the Senate Committee on Small Business & Entrepreneurship.
Cardin is cosponsoring a bill with Republicans Susan Collins of Maine and Marco Rubio in Florida that would give the Small Business Administration until May 31 to accept applications and until June 30 to process them.
A similar bill has been introduced in the House.
The PPP was created as part of the CARES Act that Congress approved in March 2020. It offered firms employing 500 or fewer workers low-interest loans of up to $10 million (that often turned into grants) to cover their pandemic-related costs. Companies apply for the money through banks and other lenders that certify the loans, which are underwritten by the SBA.
The program has been widely praised as successful, having doled out hundreds of billions to millions of Main Street businesses. But there have been miscues.
- Technical glitches slowed the initial rollout and there were allegations that banks were playing favorites with longtime customers who got the loans first.
- Thousands of of firms improperly received loans because they already had received one or were barred from doing business with the federal government, a House oversight committee concluded in a report released in September.
- Nearly 400 publicly traded companies received almost $1.3 billion in federal forgivable loans meant for small businesses desperately trying to survive the coronavirus crisis, an independent analysis of financial record filings found.
- And there were concerns that some small businesses, particularly bars, restaurants and theaters, could not take advantage of the program because of the way it was structured.
But Congress has kept refining the program: targeting the smallest of companies; expanding what the money could be used for; allowing the hardest-hit firms to take out a second loan; and opening up eligibility to include live stage venues.
President Joe Biden’s American Rescue Plan that Congress passed the past week includes another $7.25 billon for the program.
But not extending the PPP loan deadline could spell doom for thousands of businesses hanging precariously.
Fifteen percent of small-business owners report that they will have to close their doors if current economic conditions do not improve over the next six months, according to the National Federation of Independent Businesses.
“The economic recovery continues to be uneven for small businesses, especially those still managing state and local regulations and restrictions,” Kevin Kuhlman, NFIB vice president for federal government relations wrote in a letter to congressional leaders. “The PPP will continue to play a vital role for many small businesses to keep employees on payroll and assist with certain business expenses.”
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