By Ryan Wood

To help small businesses during the COVID-19 outbreak, the federal government signed the Coronavirus Aid, Relief, and Economic Security (CARES) Act on March 27, 2020. Part of the bill was the Paycheck Protection Program (PPP), an approximately $350 billion forgivable loan program to assist small businesses during these difficult times (Yin). The program went into effect on April 3, 2020, but small business owners are very frustrated awaiting loans that have not yet come.

Many small businesses are in desperate need of loans because they do not have enough money to pay their employees or other expenses, like rent. Small businesses are tight on cash for a couple of reasons. First, some small businesses have been labeled as “non-essential,” forcing them to close and leaving them with no source of income. Others simply cannot generate enough business anymore because of social distancing restraints.

As a result, small businesses are restlessly awaiting to see if their loans have been approved. Other small businesses, who have had their loans approved, have yet to see any money. Much of the blame has been attributed to the Small Business Administration (SBA), the federal agency charged with running the Paycheck Protection Program.

To begin with, the SBA was ill-prepared to handle so many loan requests at once. During a “boom year,” the agency normally “backs $30 billion of small-business loans” which is “about the same amount that banks are now seeking on behalf of their customers in a day” (Flitter et al). Additionally, lenders have expressed their frustrations with the SBA’s sluggish loan application system and lack of guidance.

One bank reported a single loan application taking over an hour to process, considerably slowed by the system crashing over a dozen times (Flitter et al). Banks are pleading with the SBA for more guidance because many are fearful that technicalities will render their loans partly or entirely invalid. The SBA, for example, has not yet specified the exact language banks must include in “promissory notes when distributing funds” (Pompken et al).

For this reason, some banks have decided not to hand out any loans until more specific guidelines are in place from the SBA. Other banks have agreed to accept applications but will not process any loans (Rogers and Spring). Also, the lending ability of big banks is especially handicapped right now because tight regulations prevent these banks from distributing loans until the SBA establishes definitive technical rules.

Part of small business owners’ frustrations is that the federal government has applauded the early success of the program, but many small businesses have not been able to reap any of the benefits. On April 6, 2020, early Monday morning, Jennifer Kelly, speaking on behalf of the SBA, revealed that “the program had guaranteed nearly $38 billion to nearly 130,000 applicants at over 2,400 lenders” (Pompken et al).

Guaranteed money is certainly not “money in the bank” though. Small business owners cannot pay their employees with guaranteed money; they need cash. The federal government may praise the early success of the PPP, but the reality is that many small business owners are struggling to stay alive during the COVID-19 crisis. Time is of the essence. Small businesses can only survive for so long. Delays in processing loan applications mean small business owners feel increasing pressure to lay off employees.

Ultimately, only time will tell how effective the PPP is at bolstering small businesses during this turbulent time. Clearly, however, the rollout of the program has not been seamless. For now, all small business owners can do is put their frustrations aside and weather the storm.