Key Highlights
- 7M small businesses that generate 50% of GDP hard pressed to receive emergency aid from government due to COVID pandemic
- Of the 45% of 30.7M small businesses that applied to Paycheck Protection Program, 13% approved
- Of the small businesses that applied for Economic Injury Disaster Loan Emergency Advance, 3% approved for funding and 16% waiting for lender response
A recent survey done by CNBC/SurveyMonkey Small Business Survey just released indicates that two Small Business Administration emergency relief programs for small businesses impacted by the COVIC-19 pandemic have, so far, earned “D’s” at best.
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The Paycheck Protection Program’s (PPP) funding of $660B designated to provide emergency relief for small business owners has distributed relief aid to just 13% of applicants. 7% have already received financing and 18% are waiting to hear from a lender about the status of their application. PPP loans are to be used to pay employees, rent and interest rates and are to be capped at $100,000/employee.
The Economic Injury Disaster Loan Emergency Advance (EIDL) program has, so far, done evenly more poorly than the PPP. The EIDL program has approved only 3% of small business owners while 16% are waiting to hear the status of their application from a lender. The EIDL program is essentially a grant with a cap of $10,000.
Sole proprietorships represent 81% of these 30.7M small businesses. Of these sole proprietorships, 31% indicated they had enough cash on hand to operate for “only a few months or less,” 7% had enough cash for less than a month and 6% indicated they had less than one week to operate in current COVID lockdown conditions.
We at Harris Real Estate Coaching have documented the problems with both of these SBA programs – unprecedented demand, underfunding, dysfunctional communications among the SBA and lenders, lack of timely information, disbursements going to public companies rather than small businesses, website crashes, unrealistic and in some cases nonsensical regulatory requirements, etc.
According to Rohit Arora, CEO of Biz2Credit, “The law was murky, and both applicants and bank loan officers were ill-equipped to process the data, as requirements were c=hanging so fast.” This online lending platform for small business loans has, to date, processed $1.6B in PPP loans having an average loan size of $170,000.
Now, of course, time is running out. Even as some states are “re-opening,” re-openings are gradual and take a long time. Most “new normal” businesses are operating at a 25% capacity and who knows whether or not this new normal will ever be the 100% capacity of the old normal.
Thanks to CNBC/ SurveyMonkey Small Business Survey for Q2 2020.
Also read: So Far, 2nd Go-Around for PPP No Better than the First, 7.5M Small Businesses at Risk of Closing, Podcast: Breaking News, Agent Programs NOW Available | Housing Crash 2020 News
