Maryland’s two U.S. senators said Tuesday that a second round of funding for the Paycheck Protection Program will help businesses unable to secure loans before the previous funding dried up and that more stimulus measures are expected as the nation battles the COVID-19 pandemic.
Sen. Chris Van Hollen and Sen. Ben Cardin, during a Greater Baltimore Committee webinar Tuesday, said changes to the program in this round of funding should boost disadvantaged businesses’ access to those federal funds. The lawmakers, however, acknowledged the $320 billion in new funding does not completely fix the program’s shortcomings.
“This new version basically funds what we had in the CARES Act. It does not change the eligibility rules or expand the size of that program. That’s something we’ll take up in the (debate over the) next stimulus package,” Cardin said.
The PPP program was created as part of the larger $2.2 trillion Coronavirus Aid, Relief, and Economic Security Act to help keep small businesses from laying off employees during the COVID-19 pandemic. Initially, Congress authorized roughly $350 billion in funding so businesses could borrow up to 2.5 times their pre-coronavirus outbreak payroll.
These loans were intended to cover eight weeks of payroll and allowed for up to 20% to cover expenses, such as rent and utilities. If businesses maintained their pre-coronavirus workforce the loans could be completely forgiven.
Roughly 26,000 businesses in Maryland received loans, according to the SBA, totaling more than $6.5 billion.
Many businesses, however, were unable to get loan applications processed before the funds ran out on Friday. Because the lending went through traditional banks, some also argued that smaller disadvantaged businesses were shut out.
There were also problems with large businesses, like burger chain Shake Shack, getting funds intended for small firms.
One significant change in this tranche of funding, compared to the program Congress approved last month, is lawmakers walled off $60 billion for community lenders, such as Community Development Financial Institutions. Those financial institutions, the senators said, provide smaller minority-owned businesses without relationships with traditional banks greater access to capital.
“We hope that will address some of the frustration that many small businesses have been experiencing,” Van Hollen said.
Cardin touted regional banks’ efficiency in processing loan applications. Those types of banks, he said, have greater interest in cultivating relationships with small businesses, and he specifically mentioned Hoard Bank, which approved 797 loans worth about $785 million.
A decent amount of the blame for businesses struggling to get access to PPP funds, Cardin said, rested with larger banks, such as Bank of America. That bank, before altering its policy, required businesses that had loans with the institution to also be credit-card holders.
“We know they made it difficult for even some of their existing customers to get their loans processed,” Cardin, the ranking member on the Senate’s Committee on Small Business and Entrepreneurship, said.
One issue that Van Hollen said this latest round of funding does not address is flexibility in terms of the length of time the funds can be used to cover payroll. That’s a particular problem, he said, for restaurants.
But there will be additional chances to fix those shortcomings, both senators said. They expect to take up what Cardin called “stimulus 4.0” in the near future. It’s also expected that the PPP will need additional money even after this latest round of funding.
“My guess is we’ll be back in several weeks if we’re still dealing with all of these closures. We’ll have to replenish those funds again,” Van Hollen said.
There’s also bipartisan interest in passing a $750 billion infrastructure bill to bolster the nation’s economy. That proposal, Van Hollen said, is more of a long-term method of boosting the national economy after the coronavirus crisis is under control.
“I think there’s a very large appetite for it, but there’s lots of questions,” Van Hollen said. “Lots of questions both in terms of design and architecture on the policy side, but as well as the financing.”