NEW YORK – The main government aid program for COVID-19 for small business is out of money.
The Small Business Administration announced Wednesday that the paycheck protection program was exhausted. As of Sunday, the PPP had issued nearly 10.8 million loans valued at more than $ 780 billion since April last year.
The program, which ran out of money twice and was reimbursed twice by Congress, was due to expire on May 31. It is not yet known whether lawmakers will approve another round of funding.
The SBA said in a statement that it will continue to fund approved applications. New applications made through community financial institutions, which are financial lenders serving underserved communities, would also be funded.
More than half of the loans and almost a third of the loan money were distributed that year. The average loan size was $ 46,000, less than half the average loan of $ 101,000 in 2020. This is a sign that smaller businesses that couldn’t get loans last year are now getting funding. Businesses were drawn to the loans because they promised forgiveness if the money was used on payroll and other essentials.
While the PPP helped save many businesses destroyed by the pandemic, the Biden government has estimated that more than 400,000 U.S. businesses have permanently closed due to the virus.
Small businesses have even more help available through SBA Economic Injury Disaster Loans, and restaurants with no more than 20 locations can apply for grants through the Restaurant Revitalization Fund, which accepted applications Monday. Aid is also available to theater and other entertainment company owners through the Shuttered Venues Operator Grants.
The PPP has been criticized because many very small businesses, including those owned by minorities, have struggled to get their applications accepted by banks. Many of these companies had to wait weeks or months for community banks, credit unions, and online lenders to join the SBA’s list of financial institutions.
“The program has always been fundamentally flawed because it was based on an unequal traditional banking system,” said John Arensmeyer, CEO of Small Business Majority, an advocacy group. Congress should consider more grants to help companies still struggling with the pandemic, he said.
Karen Kerrigan, president of the Small Business & Entrepreneur Council, said she “got a feel for PPP through conversations on Capitol Hill”. She said private sector investment and credit are needed to help small businesses recover and start new businesses.
The PPP has also been criticized for imposing restrictions on sole proprietorships without employees. For example, they couldn’t apply for loans until a week after the program started on April 4, 2020. Many also found it difficult to meet paperwork requirements for loans.
Keith Hall, advocacy president of the National Association for the Self-Employed, said all companies whose applications have been delayed due to restrictions should continue to receive their loans, even if it means Congress needs to allocate more funding to the PPP.
Joyce M. Rosenberg, The Associated Press
