Legislators from North Jersey want the federal government to clear up confusion over how small businesses forced to lay off workers, reduce operations or shutter completely due to the pandemic can access COVID-19 aid.
After launching April 3, the $350 billion Paycheck Protection Program (PPP), which is part of the $2.3 trillion congressionally approved Coronavirus Aid, Relief, and Economic Security Act, got off to a rocky start.
Under the PPP, businesses affected by virus-related shutdowns can receive up to $10 million in fully forgivable loans to cover payroll costs, mortgage interest, rent and utilities for up to eight weeks.
The day the program launched, most banks weren’t prepared to handle the volume of applications nor did they receive final guidance until hours before it launched. Then, on April 6, the program’s loan processing platform reportedly crashed, preventing lenders from processing applications.
The program’s shaky rollout has left lawmakers concerned that small businesses in New Jersey won’t be able to access the funding, which is being distributed on a first come, first served basis.
According to Rep. Mikie Sherrill, small business owners reported many barriers—including lenders refusing to take new applications and lenders subjecting businesses to “additional, burdensome requirements.”
“Additionally, if a business’ primary lender does not accept their PPP application because they do not meet that lender’s preference, they are left with nowhere to turn—as most lenders require previously established relationships as part of the application criteria,” she said.
Sherill was one of several Representatives from across the country to call on the Department of Treasury and Small Business Administration (SBA) to fix issues with the program.
Sen. Bob Menendez joined Sherrill in the push for immediate assistance to borrowers and lenders, including updated guidance on how the program will be administered.
Confusion Around Launch
In an April 6 letter to Treasury Secretary Steve Mnuchin and SBA Administrator Jovita Carranza, the senator said he’s heard from lenders who have expressed concerns they do not have enough guidance regarding the documentation required to determine eligibility, how to submit and obtain approval to the SBA, and the process for collecting reimbursement on those loans that qualify for forgiveness.
“Additionally, the confusion around PPP’s launch threatens to exclude community banks and their customers from PPP aid,” Menendez said. “The issues small businesses and lenders experienced during (April 6’s) application launch strongly suggests that Treasury and SBA need to provide clear and updated guidelines and additional assistance to lenders and borrowers during the application process, including ensuring SBA’s systems have enough capacity to process loans and approve new lenders.”
Lay-offs, Furloughs Implemented
Due to the ongoing, state-mandated shutdown, New Jersey’s small business community has taken a hit. In recent weeks, many businesses have conducted lay-offs or implemented furloughs in an attempt to stay afloat.
For the week ending March 28, a record 206,253 unemployment claims were filed in New Jersey, according to the New Jersey Department of Labor and Workforce Development. The hardest-hit industries are food services, which represents 16.5 percent of claims filed.
Nationally, 10 million Americans filed for unemployment over the last two weeks.
According to JP Morgan Chase, only half of small businesses have enough cash to survive for 27 days without new revenue. Many will not survive without immediate help and any delay in distributing the loans will be catastrophic for small businesses, the bank said.
Menendez said, “These dire economic conditions are straining our small businesses and they need an immediate injection of capital to survive the pandemic.”