The Small Business Administration is working to fix some of the well-documented missteps in its effort to get money into the hands of small-business owners reeling from the disruptions caused by the coronavirus pandemic, a top official said Thursday.
The Paycheck Protection Program was meant to help small businesses keep employees on payroll during the pandemic. Initially, Congress approved about $350 billion in funding under the $2.2 trillion economic rescue package. But banks disbursing the loans were overwhelmed by demand, and mom-and-pop businesses struggled to get cash, even as many bigger firms quickly saw money.
The program burned through the first round of funding in a matter of days. But with additional funding approved by Congress, the SBA is now actively encouraging Pennsylvania, New Jersey, and Delaware small businesses and nonprofits to apply for PPP loans to help finance eight weeks of payroll and other overhead.
So far in the second round of funding, the SBA has distributed $175 billion in loans to more than 2.2 million small businesses as of May 1. The agency’s regional administrator, Steve Bulger, told The Inquirer on Thursday that there’s $100 billion more left.
His interview ha been edited for clarity.
Are you satisfied with the SBA banks and other non-bank lenders so far? Are you reaching the people you need to reach?
"Are we satisfied? No, I’m not. I want every small business or eligible nonprofits to get it. There’s still some people who aren’t sure they should do it or are scared off from Round 1. There is $100 billion or more sitting there for small businesses that we absolutely want to get out in their hands.
"Our objective is to make sure that a portion of the remaining $100 billion goes to small businesses that need capital to keep their businesses going.
"What we saw in Round Two was a dramatic falloff in the size of loans on a national level from $205,000 down to $77,000 or so [the average loan size for Pennsylvania and New Jersey].
“What that meant is that clearly smaller businesses are getting funded. Anyone who didn’t get funded in Round 1 has been funded in Round 2. The smaller businesses are getting [money] from smaller lenders. That’s exactly what we were hoping for, so that’s very encouraging.”
What are you telling business owners who still haven’t applied?
“Do it now! There’s money left, we’re all caught up with applications. There’s no delays. Go to our website [www.sba.gov] and find a lender.”
Restaurant owners in Philadelphia and at the Jersey Shore say they are afraid to take PPP money before knowing whether they can reopen before the repayment period expires. Might SBA extend that into the summer?
"Congress is talking about making modifications, but until and unless that’s done, we still have the eight-week deadline.
The intent [of PPP] was to have paychecks going out during the shutdown period to small-business owners’ employees, whether furloughed or on the job. I know a lot of restaurants said they want to use the money once they’re back open. That’s not what it’s designed for. It’s a pretty big misconception. It’s not ‘the Small Business Survival’ program. It was targeted to employees, not for [business owners] to pay their bills any way they wanted.
But a lot of employees are making more on unemployment. They aren’t coming back to work.
“We’re very aware of that situation. We just came out with new guidance to address that: The goal is get people off unemployment and working again. If you’re offered a job, and you’re on unemployment, you can’t turn down a job. That’s not what the system is designed for, so bottom line, if the small-business owner offers [workers] a job in writing, say in an email, in good faith, and that employee says no, that the calculation [for loan forgiveness] will be changed. They [the small-business owners] don’t have to include that employee in their calculation.”
When will the SBA identify borrowers and lenders as the agency has in the past?
"I would expect it as soon as possible. Congress is asking for that and we want to get that information out there. Right now, we just want to get the money out. There’s going to be a list of those borrowers that initially got money, and eventually those borrowers who got forgiveness. There will be a lot more detail coming out. I don’t know when. But yes, all this will be public record.
“Look, this was the largest loan program for small businesses ever in the history of the world. We put it together in six days after Congress approved it. We were building the airplane as we’re flying.”
Have you seen incidence of fraud? And is the Department of Justice investigating those claims?
"There are lenders out there trying to scam business owners. If you’re responding to a phone call or online solicitation, be wary. Go to our website first and make sure they are on our list of verified lenders.
“Scammers are out there. We urge all small-business owners to do due diligence before you give out any information to anyone such as bank information, tax identification numbers, or credit scores.”
The Justice Department said it is already investigating PPP fraud. Do you expect there is more fraud in PPP than the usual SBA loan programs?
“That’s probably a reasonable expectation because a lot of the guidelines in place for a typical loan — credit score check, collateral, personal guarantee — none of that applied here. But we are not holding the banks responsible for doing those checks which we normally would do. Because of the need for speed here a lot of those guardrails have been taken out, or the program wouldn’t have worked. It’s very clear ... the borrower will be held accountable. ... The Justice Department will be going after people who submit false information.”