The Small Business Loan Relief Program Is Already Out of Money

The COVID-19 crisis has been particularly hard on small businesses. Many have already been forced to close their doors or lay off staff, while countless more risk a similar fate.

As part of the $2 trillion economic stimulus package that was introduced in late March to provide relief, roughly $350 billion was made available to small business owners in the form of forgivable loans through the Paycheck Protection Program. Specifically, business owners could apply through local banks and receive up to two-and-a-half months' worth of payroll costs. Those who then use 75% of that money or more for payroll purposes are eligible to have their loans forgiven completely.

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But as of Thursday, April 16, the Paycheck Protection Program was officially out of money. And that leaves small business owners all over the country in a very desperate position.

The road to relief hasn't been smooth

On the one hand, forgivable business loans read like a lifeline at a time when so many companies are struggling. But the process of applying for those loans has been far from smooth.

When those loans first opened up roughly two weeks ago, many banks' online application systems couldn't handle the influx of customers seeking a piece of that pie. As such, small business owners left and right were barred from applying due to technical difficulties. Once that issue was solved for, many lacked the specific information needed to complete their applications successfully.

The Paycheck Protection Program, meanwhile, was designed to operate on a first-come, first-served basis. Businesses that encountered hiccups in the application process may have therefore lost out on an opportunity to get the funding they need to stay afloat.

Of course, plenty of businesses do stand to get relief. A good 1,661,397 loans were already processed prior to the Paycheck Protection Program running out of money. But that doesn't help those business owners who didn't manage to apply. Furthermore, those who did apply but haven't heard back from their banks are effectively in limbo right now, not knowing whether they'll be eligible for relief money or not.

Is more money coming?

It's clear that the Paycheck Protection Program needs additional funding, or that the introduction of a different yet comparable program is crucial to avoid a scenario of mass small business closings across the country. As lawmakers battle out the specifics, many small business owners are scrambling and holding out hope for relief, while others are resigning themselves to the possibility of having to close their doors -- possibly forever.

Businesses who didn't manage to apply for a loan in the past few weeks should prepare to act quickly if (and hopefully when) a new round of funding is introduced. Unfortunately for some, the process will favor those who already have existing relationships with banks that are expediting these loans, but coming in prepared with payroll costs and other financial information will give all business owners a fighting chance.

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