One official says demand could exceed $1 trillion.
The Trump administration is urging Congress to approve an additional $250 billion for small businesses as concern grows over the quickly depleting aid.
President Trump made the announcement Tuesday, and Senate Majority Leader Mitch McConnell indicated that he wants to pass the funding on Thursday.
On March 27, Trump signed the CARES ACT into law, including a $349 billion Paycheck Protection Program that is supposed to keep small businesses running and encourage employers to keep workers. The program provides forgivable loans equal to the amount spent on payroll expenses, rent, mortgage interest, healthcare benefits, and utilities for eight weeks.
The application process opened April 3. Larry Kudlow, the administration’s top economic adviser, said Tuesday that 178,000 loans valued at $50 billion have been funded already.
On Wednesday, House Speaker Nancy Pelosi and Senate Minority Leader Chuck Schumer introduced a $500 billion plan that includes $250 billion for small businesses. However, half of those funds would be for women, minorities, and veterans. The plan would also bring aid to hospitals, state and local governments, and those on food stamps.
Why the CARES Act shortchanges restaurants
Independents sound off on relief bill's gaps
The demand has overwhelmed banks and the Small Business Administration. For example, Naomi Pomeroy, owner of Beast in Portland, Oregon, said Monday that her bank stopped taking applications because they were overwhelmed—a sentiment shared by institutions nationwide. There are also barriers to some businesses receiving loans. Pomeroy noted that she’s heard many businesses haven’t been able to apply at banks if they don’t have prior debt.
The SBA typically handles about $30 billion in loans each year, which is about the same amount banks are hoping to give customers in one day, the New York Times reported. Michael Strain, who works for the American Enterprise Institute, told the Times that demand for loans could exceed $1 trillion.
The additional $250 billion won’t likely be enough to satisfy the restaurant industry. The funds are contingent on employers hiring back workers, but many operators have said it doesn’t make financial sense to bring back furloughed or laid-off workers if the stores are unable to open.
Operators in the independent segment created the Independent Restaurant Coalition and sent a letter to Congress Monday asking to extend the maximum loan amount to three months after restaurants are allowed to reopen and operate at full capacity, increase the Paycheck Protection Program to more than $350 billion, reinstate a $500 million gross revenue cap to allow more funds for smaller independent restaurants, and increase the loan repayment term from two years to 10 years. In addition to those changes to the program, the group wants a $50 billion to $100 billion investment and tax rebates.
In a letter to Congress on March 18, prior to the CARES Act becoming law, the National Restaurant Association requested a $145 billion restaurant and food service industry recovery fund.
According to the Association, in March, the industry saw its largest one-month drop in employment on record. Eating and drinking establishments, which account for almost 80 percent of the 15.6 million jobs in the sector, lost a net of 417,000 jobs. The previous record was a loss of 67,000 in 2000. In the six months prior, eating and drinking locations averaged a net addition of 36,000 jobs per month.