Sam Rehal was pleased to see $4,000 appear in his bank account the other day. He was also a little puzzled. Where was the rest?
The money was an advance on the Economic Injury Disaster Loan that Rehal sought on behalf of his business, Sandy’s Furniture in Fresno, Calif. It’s actually an “emergency grant.” The Small Business Administration lending program included in the Coronavirus Aid, Relief and Economic Security Act pays up to $10,000 up front. The initial payment does not need to be repaid.
Unfortunately, the $10 billion EIDL initiative ran out of money before Rehal’s loan was completed.
The same thing happened to the much larger Paycheck Protection Program. Although it began with $350 billion, it quickly depleted that amount.
So, while Howard Lorton Furniture & Design’s PPP loan was approved by its bank, the money had not yet come through, Margot Cook, the Denver retailer’s senior manager for business development, said Thursday morning.
Loan completion numbers are dismal so far
Home Furnishings Association members Sandy’s Furniture and Howard Lorton Furniture & Design in Denver, Colo., were far from alone. A survey by the National Federation of Independent Business found that 40 percent of respondents reported successfully applying for the EIDL, but only 10 percent received the emergency grant and just 1 percent had their loan fully funded.
The numbers were only slightly better for the PPP. Three-fourths of respondents were able to apply for the loan through a bank, but 20 percent of those had gotten the money.
That’s been extremely frustrating for business owners, who are desperately trying to hang on through this dire time. But, help is on the way. Congress this week passed a new bill to replenish funding for the two key lending programs. President Donald Trump signed the $484 billion measure today. Key provisions for businesses:
The PPP gets an additional $310 billion. Most of that – $250 billion – will continue the current program. The other $60 billion will support lending through community banks, with half for insured depository institutions and credit unions that have assets between $10 billion and $50 billion and the other half for loans made by community financial institutions, small insured depository institutions and credit unions with assets of less than $10 billion.
The EIDL gets an additional $60 billion – six times its original amount. Of that, $50 billion is allocated for the lending program, while $10 billion will fund emergency grants.
The grants are capped at $10,000. Businesses with fewer than 10 employees are granted $1,000 for each full-time employee. Rehal has four employees.
No policy changes in loan program yet
No policy changes were made to either program. The Home Furnishings Association has asked for three adjustments to the PPP implementation:
- More flexibility in when the money can be spent. The loan can be forgiven, but only for what is spent during an eight-week period that starts when the loan is received.
- More flexibility in how the money is spent. Currently, 75 percent must cover payroll, which is difficult when businesses are closed or operating with fewer employees.
- A longer time to repay unforgiven portions of the loan. Congress meant to allow up to 10 years but the administration set a term of just two years.
While Congress didn’t offer new instructions in the latest bill, it’s possible the administration could make adjustments in how it runs the program, said Chris Andresen of Dutko GR, the HFA’s representative in Washington, D.C.
Andresen also said he expects the additional funding to run out rapidly – although loans that are already approved should be completed. That will be welcome news for Sandy’s Furniture.
Howard Lorton Furniture & Design, it turned out, won’t have to wait. The PPP loan was deposited late Thursday.
“We did get our PPP loan and signed today,” Cook said in a text Thursday night. “So now we have 8 weeks to hopefully open and bring back staff.”
Proposals for the next recovery bill
Not included in the new bill were additional proposals to help businesses. Some of those:
- U.S. House Ways and Means Committee Ranking Member Kevin Brady, R-Texas, is working on a temporary targeted tax credit that would apply to costs involved in reopening the economy, according to the National Retail Federation. He is looking at costs involved in reconfiguring workplaces, acquiring protective gear, conducting testing and providing equipment for employees to work from home.
- The Trump administration is considering the possibility of providing liability protection to small businesses that reopen and put their employees back to work, Reuters reported. “Liability protection is something we are looking at very carefully,” National Economic Council Director Larry Kudlow said. “We want small business to have some confidence that if they do reopen, they’ll stay open. So that would be one of the key factors.”
- U.S. Rep. Carolyn Maloney, D-N.Y., is one of several members of Congress considering a proposal to create a pandemic business interruption insurance program. It would be modeled after Maloney’s successful effort to provide business interruption insurance caused by acts of terrorism following the 9-11 attacks. Insurance companies would offer the coverage, but the federal government would guarantee the policies.
- Forbearance, either for business loans or rent and lease payments. This would be similar to an executive order issued by Ohio Gov. Mike DeWine April 1 requesting that landlords and lenders provide Ohio commercial borrowers and small-business tenants facing “financial hardship due to the COVID-19 pandemic” with a 90-day reprieve on rent or mortgage payments and evictions.
Any of these measures could be considered for inclusion in the next or a subsequent relief bill. The Home Furnishings Association will continue to press for programs that help members recover from the crisis and return to full operation.