The Small Business Administration initiative, called the Paycheck Protection Program, was created as part of the $2 trillion coronavirus rescue bill enacted late last month. It launched on Friday and allows companies with fewer than 500 employees to seek loans from banks that are meant to offset the recent disruption caused by the coronavirus pandemic. Since the program launched, banks and the SBA have been overwhelmed with applications. Sen. Marco Rubio (R-Fla.) — who authored the program — has led the charge in demanding more money.
McConnell said he would speak with Senate Minority Leader Charles E. Schumer (D-N.Y.) and “hope to approve further funding for the Paycheck Protection Program by unanimous consent or voice vote during the next scheduled Senate session on Thursday.”
We have days, NOT weeks to address this.
We are working with @USTreasury to make a formal request for additional funds ASAP & with Senate leadership to get fast track vote ASAP.
— Marco Rubio (@marcorubio) April 7, 2020
Many businesses have already laid off workers as their revenue evaporated when millions of Americans were ordered to stay home in an effort to stop the coronavirus’s spread. In order to try and event an even bigger flood of layoffs, Congress created the PPP. The loans are forgivable, meaning they don’t have to be repaid, if companies meet certain requirements in terms of employee retention.
The White House and Treasury Department have devoted enormous resources to get this program up and running, spending less time on other elements of the rescue law— including an expansion of unemployment insurance and payments to individual.
Businesses with fewer than 500 employees are eligible for loans of up to $10 million. The loans will be forgiven, meaning business owners will not have to pay them back, if they meet certain conditions, including using 75 percent of the money to retain or rehire employees. Businesses can receive a $10,000 loan advance that does not have to be repaid, SBA has said.
Bank of America said Monday it had received 178,000 applications from firms seeking $32.9 billion in loans as companies clamor to qualify for the $349 billion SBA program.
Wells Fargo did not begin taking applications until Saturday and by Monday morning said it had reached the $10 billion cap it had set for loans under the program. To deal with the crushing demand, the Federal Reserve launched a system for banks to offload these assets so they could originate more loans.
Democrats and Republicans have commented in recent days that the $349 billion program would likely need to be expanded, but Democrats have called for other extensions too, such as more unemployment insurance benefits for laid off workers. Schumer and other Democratic senators on Tuesday announced a push for hazard pay equivalent to $25,000 yearly for workers who have been forced to remain on the job during the pandemic, and they could try to use the GOP demand for small business funding as leverage to include it in the next rescue bill.
“All I’m going to say is that this is one of our very highest priorities” for the next bill, Schumer told reporters, referring to the hazard pay addition.
House Minority Leader Kevin McCarthy (R-Calif.) tweeted on Tuesday that “the demand for the Paycheck Protection Program has been overwhelming.”
He wrote that he had spoken with Mnuchin on Tuesday morning and “support his request for more money for America’s small businesses. Following the Senate’s approval, the House should move swiftly to do the same.”
Other Republicans also called for urgent action.
Demand for the Payroll Protection Program I co-authored, which provides forgivable loans so small businesses can survive and send paychecks to their employees, is so strong that I have urged the White House and my colleagues to prepare to increase the funding.
— Sen. Susan Collins (@SenatorCollins) April 7, 2020
This program is supposed to encourage small businesses to stop laying off employees, after 10 million workers sought unemployment claims late last month. The unemployment rate is expected to surge far beyond 10 percent this spring, and it could stay there into next year. White House officials have said they want to help enact policies that will lead to a sharp economic rebound this year, but economists have predicted that is unlikely to occur.
Bank of America’s CEO, Brian Moynihan, and several community bankers are expected to participate in a 3 p.m. call with President Trump about the program, according to industry officials.
Small businesses, which employ nearly half of the United States’ private-sector workers, have said they are facing long waits, confusing rules and rejection as they scramble to secure loans through the fund, known as the Paycheck Protection Program. Many banks have restricted access to their existing customers and say that while they have begun processing the loans, they lack the proper SBA paperwork to finish the process and turn the money over to the businesses.
There are still some unanswered questions about how the program works, including what kind of documentation they need to collect from the small businesses, banking industry officials say.
“It’s a throughput issue. How much volume you can get through the system,” said Paul Merski, an executive vice president at the Independent Community Bankers of America. It’s currently a “trickle,” he said.
Community bankers have been particularly concerned that once more big banks begin processing loans – Citigroup went online Monday — the money would fund would quickly be exhausted. “The small business borrower demand is overwhelming,” said Merski.
Some Democratic lawmakers have also encouraged the Treasury Department to loosen the guidelines for the program. For example, loans under the program must be repaid within two years instead of the up to 10 years outlined in the legislation passed by Congress. The federal guidelines also limit how the money can be used when small businesses need flexibility to keep their companies alive, Sens. Chris Van Hollen and David Trone of Maryland said in a letter to Treasury Secretary Steven Mnuchin.
“We have fought successfully to ensure this rescue package throws an economic lifeline to those who need it most by extending help to small and mid-sized businesses struggling to stay afloat,” Van Hollen and Trone said in their letter. The Treasury Department’s guidelines must not “undermine” Congress’s intent for the emergency loan program, they said.
— Renae Merle, Aaron Gregg and Mike DeBonis contributed to this article.