A new survey reveals that most small businesses which have applied for coronavirus relief have yet to see a penny of it while their businesses die on the vine due to the global pandemic.
According to the National Federation of Independent Businesses, only around 20% of small businesses which applied for relief under the Paycheck Protection Program (PPP) had funds deposited in their account as of April 17. A similarly small percentage of those who applied for funds under the Economic Injury Disaster Loan initiative (EIDL) virus aid program have seen funds, according to Bloomberg.
About 40% of NFIB members surveyed reported applying for an EIDL loan from the SBA, but only 1% reported receiving proceeds as of April 17. Of those who applied for EIDL loans, 77% also requested an emergency advance of as much as $10,000 that doesn’t have to be repaid, but only 10% had received money, NFIB said. -Bloomberg
"Small businesses were prepared and ready to apply for these programs, the only financial support options for most, and it is very frustrating that the majority of these true small businesses haven’t received their loan yet," said NFIB director of research and policy analysis, Holly Wade.
The $349 billion that Congress allocated for PPP, in which the U.S. Small Business Administration guaranteed loans for lenders to disburse, was exhausted on Thursday after just 13 days. The SBA also stopped accepting applications for coronavirus-related EIDL funding last week when the $17 billion allocated for that program ran out. -Bloomberg
Almost 75% of NFIB members who responded to the survey said they applied for a PPP loan, while 26% said they were in the process of applying when funds dried up.
Earlier Monday we reported that controversy erupted after reports emerged that several large businesses had borrowed tens of millions of dollars under the PPP program designed to help small businesses get through the next eight weeks. In response, JPMorgan vowed to "end loopholes allowing major restaurant chains and hedge funds" to access the next installment of the virus aid package - for which the Senate will meet on Tuesday for a potential vote.
After burger chain Shake Shack began to take heat over taking out a $10 million loan under the PPP, the company announced on Monday that they would return it - saying that the whole process was confusing.
Separately, a consortium of small businesses are suing major banks for allegedly prioritizing large borrowers over small businesses while doling out PPP funding. Wells Fargo, Bank of America, JPMorgan Chase US Bankcorp were named in the lawsuit accusing them of processing applications for the largest loan amounts due to the massive fees they would generate, vs. processing them on a first-come-first-served basis as the Trump administration said would happen, according to Bloomberg.
The PPP was allocated as part of a massive, $2.2 trillion relief package in response to the COVID-19 pandemic.
The NFIB survey also revealed that most respondents doubt that the economy will recover until next year or beyond. Some 39% said it would happen sometime in 2021, 21% said it would happen by December, while 20% said between 2022 and 2024. 4% said beyond 2024.