Small businesses were promised that they would be helped once the stimulus package had passed Congress. $350 billion in the Paycheck Protection Program (PPP) is supposed to help employers keep employees on the payroll to provide relief for businesses that had to shut down.
The shutdowns are often because they simply were not getting enough business to stay open or because they were considered non-essential. In some cases, an employee or owner became infected with coronavirus and shut the doors, or employees were afraid of getting the virus.
Now that the money for small businesses has started to become available as of today, a major block seems to be in the way of actually obtaining the money. Banks such as Bank of America and JP Morgan have determined that only pre-existing customers with existing bank loans or credit cards will qualify. So far, Citigroup and Wells Fargo are not accepting applications yet.
Bank of America has told some applicants (on their website) that if they did not have open loans to go to their own bank and apply because it would enable faster processing. After hearing about this, Marco Rubio, Senator from Florida, who is the chair for the Senate Committee on Small Business and Entrepreneurship, called the requirement ridiculous and said that there is no law supporting it.
The Small Business Administration made it clear when the bill was still in the works that any business with less than 500 employees could apply. Now it looks like the banks have added their own stipulations to the program and many will not be able to access money that is supposed to go to them – at least not from those banks.
While this may change in the future, it means that many businesses will not be able to get any money because of it. It seems that the banks are treating the money as their own. This may be because small businesses were also told that the loan could be forgiven if it was used only for salaries during the shut-down period.
This seems to be an added delay for people who already desperately need the money. Last week, 6.6 million people – a record-breaking number – applied for unemployment. Since some states have not as yet implemented stay-at-home policies, it can only be assumed that millions more may apply when those states do give that order, or when a nationwide order is given.
The latest report from Washington is that 701,000 jobs ended in March – mostly due to coronavirus. Businesses such as restaurants, bars, manufacturing plants, theaters, professional offices, and many more shut their doors because they were considered non-essential or too much at risk from the virus. Some economists are predicting that another 20 million jobs will be lost in April.
If you are planning on applying for a loan to help keep your employees on the payroll, you might want to consider applying at your own bank first. If you are unable to get a loan there, the larger banks may have changed their policies by then. Hopefully, the government may encourage them to update their current policies to help every small business owner in need.