US small business rescue fund runs out of cash
Congress has not yet reached a deal to replenish $350bn pot
Republicans and Democrats have clashed about what sort of bill should be passed to top up the programme
A $350 billion (€322 billion) US rescue fund for small businesses ran out of cash on Thursday morning after the US Treasury and congressional leaders failed to reach a deal to inject new resources into it.
The Small Business Administration said in a note on its website: “The SBA is currently unable to accept new applications for the Paycheck Protection Program based on available appropriations funding. Similarly, we are unable to enrol new PPP lenders at this time.”
The programme was set up as part of a $2 trillion stimulus package last month and allows the government to guarantee bank loans to small businesses so they can maintain their workforce during the coronavirus pandemic.
The SBA will forgive the loan if it is spent on staff or other essential costs, making it highly attractive to businesses struggling to stay afloat during coronavirus-related shutdowns.
Republicans have asked to appropriate an additional $250 billion to extend the programme. While Democrats have agreed to that number, they have countered by asking for any new legislation to contain funding for other programmes, too.
They say a supplemental bill should include an extra $100 billion in funding for hospitals to buy personal protective equipment and expand coronavirus testing capacity, $150 billion more for state and local governments to fight the outbreak and a 15 per cent increase in food stamp benefits.
On Thursday, Republican lawmakers and aides expressed alarm about PPP funding running out.
“In just 12 days, this programme has approved over $300 billion of aid. Now it’s frozen. It stops. And it’s ridiculous,” Marco Rubio, the Republican chairman of the Senate committee on small business and entrepreneurship, told Fox Business.
“700,000 applications today are in limbo...This has to end. This is no time for this kind of horse-trading.”
A Democratic aide said that House Speaker Nancy Pelosi and Chuck Schumer, the Senate’s top Democrat, had spoken with Treasury secretary Steven Mnuchin on Wednesday and were expected to speak again on Thursday.
The National Federation of Independent Business, the country’s main small business advocacy group, condemned lawmakers and the Trump administration for failing to come to an agreement.
“America’s small businesses are on the brink, trying desperately to keep their doors open and support their employees,” said the organisation’s president, Brad Close. “They have been let down by lawmakers and the bureaucracy with the smallest businesses most disadvantaged in attempting to participate in the Paycheck Protection Program.”
Mr Close added: “We’ve been hearing from our members, every day, worried the $349 billion lending programme would run dry before help gets to them. Today, their worries became a reality.”
Separate from the negotiations, banks had been looking for additional protection from risk in extending those PPP loans.
On Thursday, the Federal Reserve announced that the new facility it had set up to buy the loans from banks was now up and running.
“The Federal Reserve’s facility will support the effectiveness of the PPP by extending credit to financial institutions that make PPP loans, using such loans as collateral,” the Fed said.
“Supplying financial institutions with additional liquidity will help increase their capacity to make PPP loans,” it said, adding that the facility would be run by the Minneapolis Fed. – Copyright The Financial Times Limited 2020