The Trump administration’s small business relief loan program has opened its forgiveness portal, but many companies are waiting before applying in the hope that a new economic relief package could make the process easier.
Small businesses say they are unable to plan for the future and that some may even be forced to close permanently if further aid from the federal government doesn’t come soon.
“There’s been so much traction in Congress to simplify the forgiveness process,” said Chris Hurn, CEO of Fountainhead Commercial Capital, a small business lender. “Lots of large lenders are not opening the forgiveness portal for borrowers and advising them to hold off for a week or two in the hopes of a deal coming through.”
Hurn was referring to legislation proposed by Republican Florida Sen. Marco Rubio, that is expected to be a part of the next economic relief package would essentially grant automatic forgiveness for all small business relief loans less than $150,000, rather than requiring businesses to spend many hours filling out government forms.
While the next coronavirus relief package negotiations are in a stalemate due to disagreements over unemployment insurance and aid to states, Democrats have signaled support for the small business aid plan offered by Rubio, the Senate Small Business Committee chairman. Rubio’s plan would that would restart the small business relief program and allow businesses that have seen their revenues decline by 50% become eligible to receive a second small business relief loan.
The Small Business Administration’s relief program, called the Paycheck Protection Program, shut down on Saturday, after providing struggling small businesses with $525 billion in forgivable loans. The loans will be forgiven if at least 60% of the loan went to paying for worker salaries, and the loan was spent over a 24-week period. The same loan stipulations are expected to apply for a second round of small business relief loans.
Hurn said that there was no significant risk if a business waited a few weeks to apply for their forgiveness since their eligibility won’t change over time, and the blanket forgiveness expected in the next relief package could save businesses a lot of effort. Furthermore, applications for a second relief loan will likely be easier and quicker, given that banks and the SBA already have the pertinent details needed from the first round of loans distributed to businesses.
Hurn, whose company is licensed to make SBA loans, said that of the 5.4 million small business loan recipients from the first round of PPP, at least a third, if not more, will likely qualify and need a second loan from the small business agency.
By Hurn’s estimate, a couple of million businesses will qualify for another relief loan. If these businesses don’t receive further funding soon, that could affect tens of millions of jobs, he said.
“It will be devastating to the small business community if nothing happens till September,” Hurn said.
“If something isn’t done before Labor Day, then we’ll see a dramatic increase in layoffs again because business owners will look out for themselves first and foremost,” said Hurn.
More than half of small businesses nationwide are worried about having to close permanently, while 45% say they are are not comfortable with their cash flow, according to a survey by the U.S. Chamber of Commerce released at the end of July.
“This jarring news should compel Congress to move swiftly to provide targeted and temporary assistance to unemployed Americans, employers, and state and local governments,” said Chamber of Commerce Chief Policy Officer Neil Bradley.
Some small business owners, particularly those in the hospitality industry, say a second round of loans is critical for them to survive.
“Another loan is immensely important for businesses like us that have missed our prime season, we make most of our money in the four to five months of the summer,” said Duane Zobrist, CEO of Resort Outfitters, a recreational activities company.
“We will be in really dire shape in two or three months, but the urgency to get more relief now is to help us sleep at night,” said Zobrist.
A report released Tuesday by the National Federation of Independent Business said that currently, the outlook for sales growth for small businesses is not strong and uncertainty levels are high, both of which are deterrents to making investments for the future.
Zobrist said he was “disappointed” that Congress hadn’t passed another economic relief package with the small business relief provisions. Another relief package would allow him to hire more employees, invest in more company resources, and plan better for the future.
