If there’s any indication of how U.S. small businesses are faring during the coronavirus crisis, it’s this: The $349 billion available to them through Congress’s Paycheck Protection Program (PPP), which went into effect on April 3, was depleted in only two weeks.
According to a PPP Report from the Small Business Administration (SBA), by April 13, more than 1 million loans were approved, totaling $247.5 billion. The construction industry led all other subsectors with nearly $40 billion in loan approvals across 114,838 applications for an average of about $296,000 per loan. But, by April 16, the SBA announced it was no longer accepting loan applications.
The federally-insured, partially forgivable loans cover operating expenses of up to 2.5 times the company’s monthly payroll costs for the period between February 15, 2020 and June 30, 2020, or $10 million, whichever amount is smaller. The PPP defines payroll costs as wages, salaries, retirement contributions, and healthcare benefits.
Under the PPP program, loan payments will be deferred for six months and loans include a forgiveness policy that turns a portion of the loan into a grant that does not need to be repaid. Businesses must apply for forgiveness on their loan.
The portion of the loan used to cover the first eight weeks of payroll and certain other expenses can be forgiven if certain criteria are met by the borrower. Forgiveness will be granted if funds are used for payroll costs, interest on mortgages, rent, and utilities. It is also contingent upon employers maintaining or quickly rehiring employees and maintaining salary levels. Loan forgiveness will be reduced if a company’s full-time headcount declines or if salaries and wages for any employee decrease by more than 25%. Businesses that have already been forced to make staffing reductions are still eligible to qualify for loan forgiveness if they rehire and reach precrisis employment levels by June 30, 2020.
For amounts not forgiven, the maximum loan term is 10 years and the maximum interest rate is 4%, with no loan fees or prepayment fees.
The SBA also increased disaster assistance through its Economic Injury Disaster Loans (EIDL) and Grants program, offering small businesses a $10,000 cash advance within three days of applying for an EIDL of up to $2 million. However, according to the SBA, it received requests for $383 billion in EIDL funding. Congress, though, only budgeted $17 billion for the program. As a result, the SBA capped loan amounts at $15,000 per company.
These hurtles come at a time when many LBM dealers are worried about the viability of their businesses. According to a ProSales magazine survey of 130 LBM professionals, conducted between April 2–9, nearly 56% stated their companies had already experienced a decrease in customer demand due to the coronavirus pandemic. Additionally, 50% of respondents believe the viral outbreak will negatively affect their business for more than six months. And nearly half (49.2%) stated they are at least “somewhat worried” that revenue lost due to the coronavirus could force their company to permanently close this year.
“This is a complicated time in our history, and there seems to be a lot of misinformation out there. The association execs are working as a team across national, regional, and state lines to work toward the best resolution and mitigation throughout all of this,” said Dena Cordova-Jack, executive vice president of the Mountain States Lumber and Building Material Dealer Association.
The NLBMDA responded with a letter to Capitol Hill urging legislators to quickly pass additional funding for the PPP and EIDL. On Thursday, negotiations between Republican and Democratic legislators were underway to offer another small business stimulus package.