Here's how business owners can still get financial aid as the government's small business loan money runs out
This week, the United States government's $350 billion-worth program aimed at helping small businesses stay afloat during the coronavirus pandemic and associated recession ran out of money, even as many small business owners were desperately trying to apply for loans.
Congress is currently negotiating the possible release of additional rescue funds, however, the program has been mired in issues from the start, including technical glitches and complaints from owners who claim they don't know of other businesses that have received the funds. Around the country, would-be borrowers were turned away by banks because there were too many applicants.
Candace Senato, a small-business owner told NBC News, "We survived the 9/11 economic hardships and the 2008 economic downturn that seemed to go on forever, but I don’t know if we will survive the COVID-19 economic disaster." She added, "I believe that, tragically, the number of small businesses who have to shut their doors will far exceed the anticipated number. I would like to know who received the funds, and from which banks. So far, none of the small businesses we know like ours received funding from our bank.”
The Small Business Administration (SBA) opened two programs: The $350 billion Paycheck Protection Program offered businesses with fewer than 500 employees a loan that can turn into a free grant if used to cover payroll and other allowed expenses and employees aren’t laid off. The Economic Injury Disaster Loan provided up to $2 million in financial assistance for any business that has losses as a result of the pandemic.
Some customers have reported success getting through the program, however, many small-business owners find themselves waiting for loans they are not sure they will get. As of April 16, the SBA has approved 1,661,367 loans split among 4,975 lenders. The average size of an individual loan is $206,000 and roughly 74 percent of all loans were for $150,000 or less. Roughly 13 percent were between $150,000 and $350,000.
The construction industry received about 13.1% of all loans approved, followed by professional, scientific, and technical services (at 12.7%), manufacturing (12%), health care and social assistance (11.7%), and accommodation and food services (8.9%). By state, California received the most PPP loans, at $33 billion, followed by Texas ($28 billion); New York ($20 billion); Florida (almost $18 billion) and Illinois (nearly $16 billion).
However, less than the promised $350 billion was approved as approximately $6 billion went to lender fees, as prescribed by the legislation. Moreover, to the extent the required language or forgiveness terms remain unclear, funding and/or closing of loans may be delayed, which would block financial aid to businesses and potentially impede the recovery, according to Fitch Ratings.
Small businesses may have other recourse, however. This week, the US Chamber of Commerce launched the nationwide “Save Small Business” Initiative which provides up to $5,000 for businesses that employ between three and 30 people, are located in a "vulnerable area," and have been affected by the coronavirus. The application goes live on April 20 at 3 pm EST.
Mark Zuckerburg's Facebook also has a Small Business Grants program that has committed to supporting 10,000 US small businesses with a $40 million fund. Additionally, digital fundraising and advocacy platform Hello Alice is offering emergency grants of up to $10,000 for companies impacted by the coronavirus pandemic in partnership with Verizon.
There are also state-specific grants program from Michigan, Illinois, Texas, Virginia, Wisconsin, and Washington. Moreover, cities are also offering relief on a smaller scale -- those cities offering grants include Seattle, Denver, Thurston, Philadelphia, Portland, Fitchburg, and Saint Paul (Minnesota).
Industry-specific grants are also available. Yelp is offering advertising credits for small, independently owned restaurants and bars. The Council of Fashion Designers of America (CFDA) and Vogue are offering grants of up to $100,000 for fashion industry businesses that are at least two years old, employ no more than 30 people, and generate less than $10 million in revenue a year.
There are also identity-based grants. Spanx and The Spanx by Sara Blakely Foundation are providing 1,000 grants of $5,000 to women-owned small businesses affected by the coronavirus pandemic. Digitalundivided is providing funds for black female entrepreneurs.
Small business owners can also track new funding opportunities and grants through trackers developed by Duke University and GrantWatch.com. The latter consists of international, Canada and USA federal, state, local, foundation, and corporation grants that are available.