A federal loan program launched to assist small businesses struggling to pay their bills because of the response to the COVID-19 pandemic is off to a slow start in Tennessee and across the country, according to some business groups.
The federal Paycheck Protection Program, part of the federal $2 trillion Coronavirus Aid, Relief and Economic Security (CARES) Act, allocates $350 billion in forgivable loans to small businesses nationwide. The loans can be fully forgiven if they are used for payroll costs, existing interest payments on mortgages, rent payments, leases and utility agreements. Loans can be used for other expenses, but that money would not be forgiven.
A business can apply for 250 percent of its average monthly payroll expenses through the program, up to $10 million. The loans are managed by the federal Small Business Administration (SBA).
The program launched in Tennessee on Friday, but not all businesses were able to access the loans they needed.
“We are hearing from far too many small businesses that they are being shut out of the Paycheck Protection Program forgivable loan program,” Brad Close, president of the National Federation of Independent Business (NFIB), said in a statement. “Small businesses make up half of our economy and employ nearly half of all workers, but this has the potential to be the last straw for many small businesses and their employees.”
Jim Brown, NFIB’s Tennessee state director, told The Center Square that small businesses in the state are at various stages of the loan process. Although some were able to submit loan applications Friday, some were delayed because banks were either waiting for federal guidance or waiting for approval from SBA.
“Time is short for many of these small business owners,” Brown said.
Many of the problems have been because of delays in banks getting online because of unanswered questions, technical challenges and concerns with fraud liability, Brown said. He said bankers are working hard, but that the demand is very high.
“What’s done is done, for now,” Brown said. “The bureaucracy wasn’t ready to handle the tsunami of loan applications, but it better be up and running at maximum capacity very soon, or many small businesses will close their doors forever.”
Bradley Jackson, the president and CEO of the Tennessee Chamber of Commerce, told The Center Square that banks with an existing SBA relationship quickly were able to get up and running, but a lot of delays have come from other banks.
Jackson said the best way to speed up this process is to get more lenders online. He also said the federal government should watch the $350 billion in dedicated funding and ensure it is replenished if it gets used up.
Gov. Bill Lee addressed the slow launch during a news conference Tuesday. He said SBA usually only managed $28 billion every year and this program is a major undertaking.
“It’s an unprecedented government initiative to provide financial assistance to [the] small business community and others,” Lee said. “And we want small business owners across our state to be aware of this new program and to be aware that it has gone live in our state and that they can pursue this incredibly important assistance for small businesses in the season ahead that they face as a result of the difficulties around COVID-19.”
The SBA did not respond to a request for comment.
