NEW YORK–It isn’t just the Paycheck Protection Program with which both lenders and borrowers are struggling with glitches and delays.
Another federal disaster loan program that was supposed to deliver emergency relief to small businesses in just three days has run low on funding and has nearly frozen up entirely, according to a new report.
“Now, business owners who applied are desperate for cash and answers about what aid, if any, they are going to receive,” the New York Times reported.
In this case, at issue is an initiative known as the Economic Injury Disaster Loan program, which is also run by the Small Business Administration and typically provides assistance to companies after natural disasters such as hurricanes, floods and tornadoes.
“To speed billions of dollars in aid along, the government directly funds the loans, sparing applicants the step of finding a lender willing to work with them,” the Times reported. “But in the face of the pandemic, the loan program is drowning in requests. Many applicants have waited weeks for approval, with little to no information about where they stand, and others are being told they’ll get a fraction of what they expected.”
Cap at $15,000
The program is supposed to offer loans of up to $2 million. But a number of recent applicants told the New York Times the SBA help line had told them that loans would be capped at $15,000 per borrower. One borrower shared just such a message with the Times.
“The fact that S.B.A. is limiting Economic Injury Disaster Loans to an initial disbursement of $15,000 shows that there is a clear need for more resources for this program,” said Sen. Ben Cardin (D-MD).
The Times noted that if every applicant received the maximum $10,000 grant, the funding would cover around one-million businesses.
In response to the demand, the SBA appears to have also added an additional restriction on the grants. The Times said dozens of business owners said they had been told that the grant, if they got it, would be limited to $1,000 per employee — meaning the smallest businesses could not receive the full amount.