Business

Small business loan program out of money amid impasse over new funds

by Jordain Carney and Sylvan Lane - 04/16/20 10:45 AM ET

The initial $349 billion pool for emergency loans for small businesses derailed by the coronavirus pandemic has run dry as Republicans and Democrats squabble over how to replenish the relief program.

The Treasury Department and Small Business Administration (SBA) have tapped the entirety of funding allotted for the Paycheck Protection Program (PPP), which offers forgivable loans to small businesses intended to keep workers on the payroll and small firms from going under.

“The SBA is currently unable to accept new applications for the Paycheck Protection Program based on available appropriations funding. Similarly, we are unable to enroll new PPP lenders at this time,” the SBA said in a statement Thursday morning.

The SBA also said that the $10 billion Congress appropriated for Economic Injury Disaster Loans had dried up. The program was meant to get fast cash to businesses, providing them with a $10,000 advance within just a few days of application for loans of up to $2 million.

Created through the $2.2 trillion economic relief bill enacted by President Trump last month, the PPP unleashed a wave of demand for emergency loans across the U.S., overwhelming banks, credit unions and SBA technology.

Trump, Treasury Secretary Steven Mnuchin and lawmakers from both parties pledged to pour more money into the program as its initial funding quickly ran down, but leaders have been locked in a two-week showdown over potential stipulations for the next tranche of loans.

Mnuchin and SBA Administrator Jovita Carranza warned shortly ahead of the lapse that unless Congress authorizes more funding, banks will not be able to sign off on any additional loans under the program.

“We urge Congress to appropriate additional funds for the Paycheck Protection Program (PPP) … at which point we will once again be able to process loan applications, issue loan numbers, and protect millions more paychecks,” they said.

Republicans want to limit an “interim” bill to an extra $250 billion for the small business program, which provides loans and grants to companies with fewer than 500 people.

Senate Majority Leader McConnell (R-Ky.) tried to pass the funding last week, but he was blocked by Democrats who want to add an additional $100 billion for hospitals, $150 billion for state and local governments and a boost to food assistance. McConnell, in turn, blocked the larger Democratic package.

“Republicans tried to pass more money for Americans’ paychecks last week. Democrats blocked it. … Democrats did nothing and now the program has shut down,” McConnell tweeted on Thursday.

The GOP leader showed no signs of backing down on Wednesday night just hours before the small business funds ran out, suggesting that his version of the bill was the one that could pass the Senate with the support of all 100 senators.

“The cost of continued Democratic obstruction will be pink slips and shuttered businesses,” McConnell said in a joint statement with House Minority Leader Kevin McCarthy (R-Calif.). “We hope Democrats see reason soon and finally heed Republicans’ repeated calls for a funding bill that can quickly earn unanimous consent from all 100 senators and become law.”

The GOP leader has repeatedly urged Democrats to let the stand-alone small-business funds pass this week given warnings from the White House that the program’s resources will dry up. On Tuesday, he accused Democrats of “political games.”

But Democrats have similarly dug in on their positions, with Senate Minority Leader Charles Schumer (D-N.Y.) and House Speaker Nancy Pelosi (D-Calif.) urging Republicans to stop “posturing” and begin negotiating.

Mnuchin has been talking with Democrats, sparking speculation that he and Schumer might be able to cut a deal this week.

Sen. Doug Jones (D-Ala.) said on a conference call on Tuesday that his understanding was that Schumer and Mnuchin had made a “fair amount of progress” toward an agreement.

Schumer and Mnuchin spoke again on Wednesday, with staff negotiating throughout the day. But as of late Wednesday night, they had not reached an agreement. A Senate Democratic aide said negotiations with Mnuchin will continue into Thursday.

If they are able to reach a deal by early afternoon, the Senate could try to pass it on Thursday, the next time they will are scheduled to briefly be in session at 3 p.m. The House is expected to be in on Friday, otherwise any movement on additional funds will have to wait until next week.

With neither the House nor Senate expected to bring all members back to Washington before May 4, leadership will need the support of every lawmaker to pass additional money for the PPP.

It’s unclear if they will get it. Some GOP senators have voiced frustration over concerns that small businesses who have not been impacted by the coronavirus are applying for the funding. Meanwhile, Rep. Thomas Massie (R-Ky.) signaled earlier this month that he would try to block passing the package in the House by a voice vote.

“Once again, they’re recommending that just let Nancy Pelosi pass it on her own, that we could all stay home. And I’m saying that’s not going to fly, doesn’t fly with the Constitution, doesn’t fly for accountability to the taxpayers,” Massie said during an interview on Fox Business.

Niv Elis contributed.

Updated at 11:12 a.m.