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The number of small business owners applying for aid through the Paycheck Protection Program surged over the weekend, as they scramble to survive the economic calamity brought on by the coronavirus pandemic.
As of Monday morning, banks have processed 880,000 loans worth more than $215 billion, according to a senior Small Business Administration official. More than 4,500 lenders participated in the program.
The $2.2 trillion CARES Act passed at the end of March established the $349 billion Paycheck Protection Program, which is designed to get cash in the hands of small businesses devastated by the coronavirus pandemic and incentivize them to keep staff on payroll, or rehire workers who have already been laid off.
For the first week, the program was exclusively available to small business owners, but beginning April 10, it opened to self-employed individuals and independent contractors. If the current trend in demand continues -- one week ago, about $50 billion in loans had been processed; that jumped to $160 billion by Friday -- the program could be close to running out of money by Friday.
Treasury Secretary Steven Mnuchin asked Congress last Wednesday to approve an additional $250 billion to replenish the loan program. On Thursday, however, Senate Democrats blocked an attempt by Majority Leader Mitch McConnell to unanimously pass the legislation, pushing for changes to the small business aid program and more emergency funding for hospitals and states. The Senate adjourned until Monday.
Companies with no more than 500 employees may borrow up to 2.5 times their payroll, or up to $10 million, which can be used for payroll and other expenses, like insurance premiums, mortgages, rent or utilities through June 30. The loans, which are guaranteed by the federal government, will be fully forgiven if 75 percent of the money goes toward keeping workers employed, according to the SBA.
National banks that are participating in the program include: Bank of America, Capital One, Chase, Citibank, U.S. Bank and Wells Fargo. But most have rebuffed potential applicants who do not have prior ties with the bank.
Many owners have run into problems obtaining the loans: According to a study released by an industry trade group on Thursday, 70 percent of small business owners have applied for the loan -- but just 70 percent were successful.
Time is imperative for owners. Nearly one in four small businesses has shut down temporarily in response to the crisis, while another 40 percent expect to do so within two weeks, according to a survey published by the MetLife & U.S. Chamber of Commerce Small Business Index.
If owners don’t receive further support, about 43 percent have warned they have less than six months to a permanent shutdown. One in 10 say they have less than a month until a permanent shutdown is inevitable, the survey found.