The federal government’s massive Payroll Protection Program, which has been a lifeline for small businesses hit by the pandemic, has become so mired in confusion and delays as money runs out that hundreds of thousands of applicants may get no help, especially in underserved minority communities.
During the first months after President Biden took office, his administration far exceeded its predecessor in channeling funds to vulnerable companies. But in recent weeks, as the program’s May 31 expiration date draws near, the agency responsible for it has been overwhelmed, and lenders can’t even be sure how much money is still available for loans.
As of Friday, only about $3 billion was left of the $800 billion provided for the program, according to congressional staff. And if conservatives in Congress continue to balk at more spending, companies that have struggled through the worst of the pandemic may hit the wall just as the health crisis is seeming to ebb.
Under the program, the Small Business Administration oversees lending by private banks to firms that meet the program’s criteria, with government guarantees for forgivable loans. The relief has been especially valuable for minority-owned businesses because they typically have fewer financial resources and operate closer to the margins than firms that are larger and better capitalized.
The current crisis arose when many banks were caught off guard by what they saw as the administration’s poorly communicated change in the rules on who could make loans. Hundreds of lenders found themselves cut off. Others were paralyzed, having no idea how much money remained available.
The upshot: With only a week before the program closes, the second and last round of relief is all but frozen for hundreds of thousands of small businesses.
Many of those now clamoring for help are the smallest companies, including sole proprietors who didn’t have the know-how, contacts or confidence to get in on earlier PPP distributions. A disproportionate number are operated by relatively inexperienced minorities and women who started up businesses and hired workers on a shoestring. Conventional commercial borrowing is often unavailable for small firms.
April James, a 42-year-old Black woman, had to shut down her clothing business in Los Angeles last year because she was unable to travel to New York to buy merchandise. James said she survived by working as a hairstylist, a side vocation.
It was only a couple of weeks ago that she started her loan application after she learned about the program from a friend. James was preparing to submit additional documents to Womply, an online PPP loan facilitator, when she was told there was no point — she’d have almost zero chance of approval now.
“By the time I caught up to what I need to apply, then boom-bam-bam, they announced they ran out of funds,” said James, who was hoping for just a couple of thousand dollars to get her business back on its feet. “Where do I fall into this? People like me are suffering.”
The PPP was launched as part of the $2.2-trillion economic relief measure that then-President Trump signed into law in March 2020, during the first pandemic surge. It was conceived as a novel effort to minimize layoffs and help small businesses stay afloat with low-interest loans that could be forgiven entirely if borrowers met certain conditions involving retaining employees.
The program was subsequently extended, and this year Biden and Congress replenished its funding to meet continued extraordinary demand. More than 11 million loans have been approved over the past year, and experts say they’ve helped save millions of jobs.