New money for loans to small businesses battered by the coronavirus crisis could reportedly dry up almost as soon as it arrives.
The US Senate approved $310 billion in extra funds this week for the feds’ Paycheck Protection Program, which exhausted its initial $349 billion budget in two weeks. But banking groups say so many businesses sought help that most or all of the new funding will likely be eaten up by those that have already applied, the Associated Press reported Wednesday.
“The majority if not all of the funding Congress is considering right now is already exhausted,” Nick Simpson, a spokesman for the Consumer Bankers Association trade group, told the outlet.
The US Small Business Administration had approved more than 1.6 million loans through the program as of April 16, when the money ran out.
The low-interest PPP loans are guaranteed by the federal government and can be forgiven if the recipients retain workers and meet other criteria.
But big chunks of the money were eaten up by publicly traded companies such as the Ruth’s Chris Steak House restaurant chain and Ashford Hospitality Trust, a hotel firm whose subsidiaries were granted about $30.1 million in loans. That reportedly left droves of small businesses waiting for help when the the first round of funding dried up.
Merchants who have yet to apply may be able to get in the queue at small banks, which will get about a third of the new funding should the House of Representatives approve it, according to the AP. But the money may not last long because those banks have been dealing with a deluge of applications, the AP reported.
“I know one bank that got roughly 5,000 applications and was able to get 2,000 approved, so it already has 3,000 PPP applications in hand and ready to go when and if there’s additional funding,” Paul Merski of the Independent Community Bankers of America, a trade group for small banks, told Inc.com this week.