WASHINGTON–While the Paycheck Protection Program has gotten most of the headlines, another federal government emergency disaster lending program for small businesses has been so overwhelmed by demand that it has not only significantly limited the size of loans it issues, it has also blocked nearly all new applications, according to a new report.
The Economic Injury Disaster Loan program continues to be plagued with a number of issues, as CUToday.info reported earlier here.
As CUToday.info also reported earlier, Congress gave the disaster loan program more than $50 billion in new funding to help small businesses struggling as a result of the coronavirus pandemic.
Cap on Funds
“But by many accounts, it is failing spectacularly,” reported the Washington Post. “After initially telling businesses that individual disaster loans could be as high as $2 million, SBA has now imposed a $150,000 limit without publicly announcing the change, said people familiar with the situation who were not authorized to speak publicly.”
Additionally, the agency has faced a backlog of millions of applications for the disaster loan program for the past several weeks, several SBA officials told the Washington Post.
According to the report, the SBA has been so overwhelmed by demand that it is now allowing only agricultural interests to submit applications as it works through an enormous backlog. “Key Republican senators had been pushing hard for farmers and agriculture companies to be able to tap the program, and they are now being prioritized over other prospective borrowers,” the Post said.
Funds Needed
Agency officials told the publication the holdup is because of a lack of funding and an unprecedented crush of applications.
“While the PPP is focused narrowly on keeping small businesses from laying off employees and encouraging them to rehire workers, the disaster loans are meant as an economic lifeline to help small businesses survive the crisis,” the Post reported. “It is a preferred option for some of the smallest businesses because the loan size does not depend on the number of employees.”
The Post further reported that little information has been released. On April 24, the SBA disclosed it had processed 38,984 loans totaling roughly $8 billion, which would amount to less than 1% of SBA’s total backlog. A government website labeled “SBA Today” states that 58,431 disaster loans have been approved so far in fiscal year 2020, but it was unclear how recently the page had been updated, the Post said.
Alejandro Contreras, a spokesman for the SBA’s Office of Disaster Assistance, did not respond to repeated requests for an updated count on the number of EIDL loans approved. The SBA is yet to release loan-specific data for either program.