In late March, Congress authorized a COVID-19 response bill that included a provision for offering emergency loans to small businesses. The provision allowed for $349 billion in loans for small businesses to stay afloat while they closed their doors. However, after only a few weeks of availability, the loan fund is out of money.
The Small Business Administration announced on Thursday that it could accept no further applications for loans. Businesses seeking relief through the Paycheck Protection Program, as the provision was called, are now out of luck. Meanwhile, democrats and republicans in office are unable to agree on how to continue funding the PPP.
While businesses all over the US are struggling, small businesses have been hurt the hardest. Local businesses with few cash reserves depend on a constant revenue stream from their communities. Social distancing guidelines to combat COVID-19 have caused most of these businesses to shut their doors indefinitely. The best finance advice in the world can’t help you if you’re not bringing in money.
While they’re closed, however, these businesses still have expenses. They need to pay their lease, and their employees still need to eat. The Paycheck Protection Program, aimed at helping businesses keep their employees on staff and getting paid, was the government’s solution. Its $349 billion allocation, however, ran out after only a few weeks.
Now, as businesses are still aching from the loss of revenue and millions of Americans have lost their jobs, Congress scrambles. Democrats and Republicans disagree fundamentally on the nature and role of government spending. Democrats believe the wealthiest country on Earth should be doing more to protect its citizens. Republicans believe it’s not the responsibility of the government to help people, except in emergencies.
American business owners, feeling the economic squeeze of the pandemic, are caught between partisan deadlock. Mitch McConnell, the Senate Majority Leader, introduced legislation to add $250 billion for the PPP in early April. Senate democrats rejected his version of the allocation. They thought it didn’t adequately protect workers.
A week later, Senate democrats introduced their own $250 billion funding bill. Republicans, however, shot it down. They argued that the bill was too restrictive, forcing businesses to jump through certain hoops to get the money. As the congressional deadlock drags on, small businesses all over the US worry about the future.
The speed with which the businesses tore through the $349 billion allocation is worrying. It could suggest that the US is in for one of the sharpest economic downturns in its history. This could rival the 2008 recession. Some economists even worry that we could be on the cusp of a depression, along the lines of the Stock Market Crash of 1929.
