‘False hopes’: Small business rescue faces crunch just days after Congress extended it

Now, some advocacy groups are warning that the funding lapse could leave thousands of small businesses on the sidelines and that Congress must spend billions more, particularly to help those that Biden promised to support with more generous loan terms implemented last month.

“This is unfair for the smallest businesses to be shut out in the final hours,” said Erik Asgeirsson, an executive with the American Institute of CPAs, which is calling for more PPP funding. “A lot of false hopes were raised.”

The sudden lurch into a new PPP funding discussion just after a debate on extending the application window underscores the challenges that lawmakers have faced in trying to understand the operations of the program, one of the largest of all the Covid-19 relief measures. Congress has been unable to obtain data on how many jobs the program has saved, for example, or the extent to which loans have reached businesses owned by people of color and women. And it’s not the first time it has run out of money, only to send lawmakers scrambling to allocate more.

Some $960 billion was appropriated for PPP, and the program has given out more than $746 billion in forgivable loans to 9 million borrowers since last April. It’s one of the most popular Covid-19 relief programs, despite funding challenges, ever-changing rules and fraud concerns. The take-up has been widespread in part because businesses can have the government-backed debt wiped clean if they spend most of the money on payroll.

The politics of the funding discussion will likely be tougher than they were last year, as the U.S. economy shows signs of rapid recovery from Covid-19. But advocates say that’s no reason to end support for small businesses that are still struggling to take advantage of the nation’s reopening.

“Vaccine-spurred job growth indicates that yes, we see light at the end of this very dark tunnel,” said Rebecca Shi, executive director of the American Business Immigration Coalition, which is calling for more funding. “But like masks, we should not let up on PPP, particularly for the smallest borrowers and rural businesses to recover and rebuild. “

Last month, lawmakers rushed to negotiate and pass bipartisan legislation to delay the program’s application deadline to May 31 from March 31 amid widespread concerns that many employers seeking aid would be left out.

The old deadline became an urgent problem after new SBA fraud reviews slowed the loan-application process, threatening to leave applicants in limbo.

The original March 31 cutoff also became a problem because Biden had just enacted new rules to ensure that loans reached the smallest, hardest hit businesses that had long strained to gain access to the program, including the self-employed, business owners with criminal records and those with student loan delinquencies.

The decision to delay the deadline coupled with the move to expand access threw off plans Congress made last year for how long the remaining PPP funding would remain available.

The SBA first disclosed the potential funding lapse late last month, when an official running the PPP told the Senate Small Business Committee that money available for loans would likely run out by mid- to late-April.

Now, the money may be exhausted well before Congress has time to fully consider appropriating new funds. Lawmakers left Washington last month and aren’t scheduled to return until next week.

The funding issue also creates complications for other changes lawmakers had been planning to make to the program.

One of the big updates legislators have been considering would allow self-employed business owners to retroactively increase the size of their existing PPP loans if they received them before Biden changed the rules last month.

The change would further increase demand for PPP money.

Senate Small Business Chair Ben Cardin (D-Md.), who has been working with Republicans on legislation to revise the PPP rules, “would also be open to a bipartisan effort to add funds to the program,” a spokesperson said.

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