Coronavirus: Trump loans being delayed by red tape as poll finds quarter of small businesses will close permanently in two months
'We should all remember that this is an unprecedented expansion of SBA lending that will take some time before it’s fully functioning'
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Your support makes all the difference.One in four small businesses (24 per cent) in the US will close permanently in two months or less due to the economic fallout of the coronavirus pandemic, according to a report released on Friday. About one in 10 (11 per cent) of businesses are less than one month away from permanently going out of business.
The report was compiled from a poll conducted by the US Chamber of Commerce and MetLife between 25-28 March, and comes as banks struggle to launch the Trump administration's emergency loan program for small businesses to stay afloat in light of the coronavirus pandemic.
A quarter (24 per cent) of small businesses have already shut down temporarily in response to the pandemic. Among those that have not, 40 per cent say they are likely to close at least temporarily within the next two weeks.
This means a total of 54 per cent of all small businesses report that they have closed or expect to close temporarily in the next two weeks.
When asked what proposals might offer the most relief, small businesses indicated support for three key provisions included in the recently enacted Coronavirus Aid, Relief, and Economic Security Act (CARES Act): 56 per cent of small businesses say direct cash payments to Americans would be the most helpful form of aid from the government. That was followed by loans and financial aid (30 per cent), and suspending payroll taxes (21 per cent).
“As the poll results show, small business owners are looking for loans and financial aid to ensure they do not have to shut their doors or go bankrupt because of the coronavirus. American banks are ready to help, but they need clear guidelines from the administration,” said Neil Bradley, chief policy officer at the US Chamber of Commerce. “American banks will be on the front lines to help businesses survive during this pandemic.”
Friday sees the launch of the $350bn lending program to help small businesses struggling with the impact of coronavirus.
As part of the $2.2trn CARES Act, the Paycheck Protection Program is intended to provide much-needed relief to millions of small businesses so they can sustain their businesses and keep their workers employed.
The program is overseen by the Small Business Administration (SBA), but run locally by lenders or credit unions already approved by the SBA.
However, banks sounded the alarm this week that the timeline for the launch was “beyond optimistic”, lacked the necessary guidelines and liability assurances, and was called uneconomic for some smaller lenders to participate.
On Thursday, the government responded to some of the concerns. The SBA announced streamlined loan verification guidance for banks, and Treasury Secretary Steve Mnuchin announced that the interest rate on CARES Act loans will increase from 0.5 per cent to one per cent to help smaller lenders. Although banks have pointed out that Congress said that interest rates are allowed to go as high as four per cent.
Mr Mnuchin and Small Business Administrator Jovita Carranza joined President Donald Trump at his daily press briefing on Thursday to encourage small business owners to apply for loans ahead of applications beginning on Friday.
It is unclear whether the last minute tweaks will be enough to head off a chaotic rollout, but a consensus seems to be growing that while applications can be made as of Friday, the program won’t get into full swing until the following week.
On Friday morning, Bank of America became the first lender to begin accepting loan applications, and has already received 10,000 through its small business portal. Meanwhile Forbes reports that JP Morgan, the nation's largest bank, is waiting on additional information, and Fifth Third Bank will not be ready until next week.
While Mr Mnuchin said that banks would be ready to make the loans on Friday, he also admitted “that doesn't mean everybody is going to get their loan tomorrow,” Politico reports.
Mr Mnuchin and Ms Carranza conceded that the effort to stand up the program had been a scramble, with Mr Mnuchin saying that their teams worked until 4am on Thursday only to return to work three hours later.
Rob Nichols, CEO of the American Bankers Association, commented: “We should all remember that this is an unprecedented expansion of SBA lending that will take some time before it’s fully functioning.”
A White House official told Politico: “The White House, in coordination with Treasury and SBA, is in constant contact with the country’s banking industry and has hosted dozens of calls and meetings in the run-up to the launch of the Paycheck Protection Program.”
“It is important to keep perspective of the unprecedented nature of this crisis and the rate to which we all need to act to provide immediate, much-needed, relief to America’s small businesses and workers,” they added.
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