When the federal government relaunched its small business aid program on April 27 with an additional $310 billion, lenders and business advocates warned the money would dry up within a few days, the Wall Street Journal reported. Nearly two weeks later, more than 40 percent of the money remains available, according to figures released yesterday by the Small Business Administration, even as small businesses continue to suffer from the fallout of the coronavirus pandemic. Several factors appear to be behind cooling demand, including the Treasury Department’s decision following an uproar to exclude public companies and others that could obtain funding elsewhere. Another reason: Some borrowers sought duplicate loans from several lenders as a backstop against loan denials or delays, according to bankers and small business advisers. Bigger banks found that more than 10 percent of their applications were duplicates, according to loan brokers and industry officials. Some smaller lenders reported that half their applications were rejected because the applicant had gotten a loan elsewhere. But the likely biggest reason for the slowdown is that many business owners have concluded that the SBA’s Paycheck Protection Program simply doesn’t meet their needs, lenders and others say, or they are waiting for the government to clarify the terms under which loans can be forgiven. The program is generally aimed at companies with 500 or fewer employees, and it requires them to spend 75 percent of their loans on payroll to have the loan forgiven. Many small retail businesses, such as restaurants and hair salons, say that is a problem because they remain largely shut down and are operating with skeletal staffs. Read more. (Subscription required.)
In related news, when American companies recently applied for U.S. government loans meant to help small businesses survive the coronavirus crisis, they had to certify they needed the cash to cover basic needs like salaries and rent, Reuters reported. The money, up to $10 million, was meant to tide them over for eight weeks. Some recipients, though, had considerable cash on hand. Forty-one publicly traded companies that got the emergency aid already had enough to cover basic expenses for two months or more when they applied for the funds, a Reuters analysis found — even if their revenue dropped to zero. Thirty had three months or more of cash. Six had enough to last at least until December, according to the review, which was based on average monthly operating expenses from 2019. All told, these relatively flush 41 companies were able to secure $104 million in government aid, at a time when legions of smaller companies with little in their coffers were being turned down. Seventeen of the 41 recipients had market capitalizations of at least $100 million. Read more.
