Businesses apply in droves for emergency loans; funds run out

WASHINGTON, D.C. — The federal government’s two top emergency loan programs for small businesses — the Paycheck Protection Program (PPP) and the Economic Injury Disaster Loan (EIDL) program — have run out of money.

“The SBA has processed more than 14 years’ worth of loans in less than 14 days,” said a joint statement from Treasury Secretary Steven Mnuchin and Administrator of the Small Business Administration Jovita Carranza. “By law, the SBA will not be able to issue new loan approvals once the programs experience a lapse in appropriations.”

As part of the massive, $2 trillion relief package signed into law by President Donald J. Trump on March 27, the PPP provided $349 billion in loans to businesses with 500 or fewer employees. However, the program promised forgiveness for any portion of the loan used to pay employees even if they were idled and the business was closed in response to the COVID-19 outbreak.

The goal of the PPP is to keep as many employees drawing paychecks, instead of unemployment insurance benefits, as possible.

Congress also expanded the SBA’s EIDL program to $10 billion to cover ordinary operating expenses, such as rent and utilities.

“They can only lend what’s been appropriated,” said Allan Peterson, head of the Small Business Development Center in Moses Lake. “Possibly, it will be replenished next week.”

During the two weeks SBA-approved lenders were making the PPP loans, Peterson said 18,906 loans worth $4.9 billion were made in Washington, with 70 percent of them at less than $150,000.

With the program funds exhausted, many SBA-approved banks say they are no longer taking applications.

“We continue to process all applications that have been submitted to us,” said Kelly McPhee, vice president for communications with Banner Bank in Spokane. “We have more than 5,400 applications in various stages of completion, and those that are done, there is money earmarked for them.”

McPhee said the SBA has “already earmarked” $436 million to Banner Bank customers who have completed or submitted their PPP loan applications, though she did not have any figures for how much of that was in Washington. According to the company’s website, Banner Bank has 193 branches in four states — California, Oregon, Washington and Idaho — with 94 of the branches in Washington.

McPhee said Banner has adjusted quickly to the massive demand for PPP loans. Prior to the outbreak, she said, Banner only had about “a dozen” employees processing SBA loans and in 2019 only processed 250 SBA loans companywide. Now, Banner has 185 employees working on SBA loans, she said.

“In the first four days, we did 450 loans,” she said.

Valli Millard, head of commercial lending and branch vice president for First Interstate Bank in Ephrata, said her bank has also stopped processing PPP applications until Congress renews funding for the program.

While the PPP loan had gotten a reputation for being difficult to get, Millard said the process was actually fairly quick if done in person with a banker. Prospective borrowers needed to provide payroll information for all of 2019 and again for February 2020 — to show they were still paying people.

But the crucial part of the PPP loan was to do it in person with a banker, she said, because the internet application was too buggy and unreliable.

“The online process does not work,” Millard said.

McPhee said that current holders of SBA 7a loans — the administration’s primary loan to small-business people — will not have to make payments on their loans for the six months beginning in April. This is not a deferment or forbearance, she explained. Rather, the SBA will make those payments itself.

“A lot of people have 7a loans,” she said. “This is good news.”

In their joint statement, Mnuchin and Carranza urged Congress to provide more funds to keep small businesses afloat.

“The high demand we have seen underscores the need for hardworking Americans to have access to relief as soon as possible. We want every eligible small business to participate and get the resources they need,” they said.