Reports indicate that Senate Democrats and Republicans are approaching an agreement that would add more than $400 billion into the Paycheck Protection Program (PPP) for struggling small and medium-sized businesses (SMBs). That comes after over a week of arguments between Democrats and Republicans as to whether more changes should be inserted along with the new funds — including additional funding for local governments, hospitals, testing and access to the program for unbanked applicants.
Thirteen days after its launch, the $349 billion PPP fund — part of a broader $2.2 trillion COVID-19 stimulus package — ran out of money. The big questions are: 1) Will more funds be coming? 2) How much? 3) And when?
The answer to the first questions seems to be a yes. Throughout the PPP rollout process, Treasury Secretary Steve Mnuchin has repeatedly worked hard to reassure small businesses that issues aside, the program ultimately cannot run out of money and everyone who needs a loan via the program will be able to get one.
“I want to assure all small businesses out there: We will not run out of money,” he told CNBC a few days after the program's rollout. “If you don’t get a loan this week, you’ll get a loan next week or the following week. The money will be there,” Mnuchin said a few days after the program rolled out. Over the weekend, he more or less kept up that line, assuring reporters that a deal is close — and could be voted through as soon as today (April 20).
But those assurances have happened under a somewhat confusing backdrop. As soon as the program opened, frenetic applications from small businesses on the edge of survival buried bankers as they came in by the thousands and tens of thousands while said bankers were still trying to figure out all of the legal contours of accepting applications and distributing funds in real time.
“I don’t care what size institution of people that I’ve talked to, especially around the state of Georgia and even the large banks — people have been working themselves to death trying to get these applications completed through the pipeline. This has been long hours and weekends since it started. It is not a lack of effort from any bank of any size, believe me,” Planters First Bancorp CEO Dan Speight in a recent digital discussion with Karen Webster and Ingo Money CEO Drew Edwards.
But now that the fund is officially out of money it is an effort that has now become even more confusing, as businesses are left wondering what new funding will come and whether it will come in time.
Putting More Funds in the System
Getting new money into the fund fast, as with most things done through Congressional action on Capitol Hill, is a little easier said than quickly done.
The deal taking form as of late Sunday night would send $310 billion to the PPP fund, and set aside $60 million for rural and minority groups and the Economic Injury Disaster Loan program, respectively.
Treasury Secretary Mnuchin noted that expanded aid for local governments, hospitals and the SNAP program will likely not be in this action. President Trump, however, has indicated support for such funding pushes, and indicated they are likely on the road map for a future stimulus bill.
“We’re going to be saving that for a later date,” Trump said. “That will probably be our next negotiation, but I’m in favor of it.”
As for the current action, if the measure is passed by the Senate on Monday as is widely expected, it could be ready for a House vote by Wednesday afternoon.
“And then we’re preparing for our next bill,” House Speaker Nancy Pelosi told reporters. “Businesses will have the money in a timely fashion.”
But will it be a timely enough fashion? PYMNTS’ latest Lockdown on Main Street data casts some doubts.
Locked Down and Deeply Worried on Main Street
PYMNTS interviewed SMB owners across the U.S. on March 24 and again on April 6 a few days after the PPP relief program opened up. What we found is that those relief funds have as yet not done much to make anyone feel completely relieved.
The share of SMBs whose owners believe their firms would survive the pandemic remains largely unchanged since March 24, with just an additional 0.2 percent of SMBs feeling confident on April 6, while there was only a there was a 0.1 percentage point decrease each for the share of SMB owners who felt unstable. Other than that, the data is largely unchanged: just over 41 percent of business believe they are stable enough to ride out the coronavirus panic, while a little over 58 percent are either unsure or think they won’t make it.
The data also showed that government aid only goes so far — and it goes different distances for different types of firms.
As of April 6, the average SMB reported only having enough cash to stay open for 37 days. Government aid adds more time to the clock, with the average SMB reporting that government aid would allow them to stay open for an additional 60 days. That’s better, but since the average SMB also forecasts that the pandemic will last 150 days, it means there is still a big problem in the form a wide chasm between the number of days they expect to survive and the number they need to survive to weather the pandemic.
But the COVID-19 cash gap hits industries unequally. Technology and food industries, for example, with government aid can stay open for 95 days and expect to need to be able to last 99 days. That four-day gap is not a back breaker.
Real estate professionals, on the other hand, think that with government aid they can last for about 100 days before running out of cash. Problem is, they also think for them the pandemic is going to last for 266 days — meaning they face a cash gap of roughly five and a half months.
And of course, before anyone can bridge a gap, they have to avoid falling into it first. Remember that the average SMB reported having enough cash on hand to survive for about 37 days. That was 14 days ago — which means as of today the average SMB has about 23 days of cash flow left. If they got in on that first round, they might have bought a three-month stay of execution.
If not, well, the clock is still running, and on the most optimistic estimates by the time the House takes a vote on this, there the cash flow countdown will be at 20 days. And remember, just because the funds are released by the government, doesn’t mean they are in SMB accounts — as of last week, very few of the SMBs who had applied and been approved for their funds had actually received them deposited for use in their accounts.
If the distribution time in the second round resembles distribution in the first? The ticking on that countdown clock for entrepreneurs is going to get pretty darn loud.
Officials across party lines have promised, however, that help is on the way — and that it will be there soon. For the SMBs with roughly three weeks of cash before hitting game over, however, “soon” cannot come soon enough.