Small Business Loans During Shutdown – The U.S. Small Business Administration cannot process new loan guarantee applications until lawmakers pass new spending legislation. (Jim Watson/AFP/Getty Images)
The failure of Congress to pass a spending bill has resulted in a suspension of the US Small Business Administration’s ability to process new credit applications as part of a broader government shutdown.
Small Business Loans During Shutdown
In the weeks and days leading up to the shutdown, bankers filled out loan guarantee applications at the agency, racing to secure funding before the lights went out.
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“We can read the tea leaves and see where we’re going, so lenders are working extra hard to fill out applications and get them to the SBA,” said Tony Wilkinson, president and CEO of the National Association of Government Guaranteed Lenders, an organization. which consists of about 750 small business lenders, said in an interview late Monday.
Wilkinson said his members have lent $1.2 billion to the SBA in the past two weeks, which is comparable to the volume of a normal month.
He added that SBA sources told him that as of 2 p.m. Monday, the agency had approved more than $175 million in loan guarantee applications that day alone. On an average day, he said, his borrowers would receive only $75 million in approvals. SBA officials would not confirm the numbers.
Still, even at this hectic pace, it will leave many loan applications in the balance, and Wilkinson says it could leave many entrepreneurs waiting for the capital they need to start, expand or perhaps save the business. .
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“It’s going to be really hard,” he said. “You start to see where small businesses get long-term loans, and the SBA is that. And the government shutdown opens that floodgate.”
Small business lobby groups have expressed similar concerns. Todd McCracken, president of the National Small Business Association, said the shutdown puts small businesses struggling financially in an “impossible position.”
“Do they wait a day, a week, a month for the government to reopen and risk losing the opportunity? Or do they cut their losses and move on?” McCracken wrote in an email. “Real jobs and real economic growth are in balance.”
Added John Ahrensmeyer, president of Small Business Majority, “this would easily derail the recovery we’re seeing, and the last thing small businesses need right now is the credit crunch they need to get out of the recession.”
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The SBA halted most of its operations at midnight, including processing most of its loan programs that provide tens of billions of dollars in loans each year to small and new businesses. The department’s existing loan guarantees will remain in place.
“Tonight, that process will stop and everything that comes after that will go through until federal funding becomes available again,” Wilenson said Monday.
In addition, the department would have to temporarily suspend programs to help small businesses export internationally, win government contracts and provide start-up financing, and would need to lay off more than 2,100 federal employees, about two-thirds of its workforce. job represent, get fired. according to the agency’s emergency response plan.
Almost all of the furloughed employees work in the department’s Office of Disaster Relief, which will remain open during the shutdown.
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J. D. Harrison J.D. Harrison covers startups, small business, and entrepreneurship with an emphasis on public policy, and she blogs at Small Business. i follow
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At the start of the pandemic, 140,104 were listed as temporarily closed on Yelp.com, but by August that had dropped to 65,769. However, the decline was not entirely due to the opening of businesses; instead, they are very easily discarded. According to Yelp.com’s Local Economic Impact Report, more than 97,966 businesses have closed permanently during the pandemic.
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Although many sectors of the economy have begun to recover, many small businesses are still struggling and report that they need additional financial aid and incentives to survive.
In fact, “if economic trends continue at this rate, one in five business owners expect they won’t be broke by the end of the year,” Kevin Kuhlman, vice president of federal government relations for the National Federation of Independent Business (NFIB). . ), a small business advocacy nonprofit group, said recently
But not all small businesses are equally affected. According to an August report by the Federal Reserve Bank of New York, the number of active black small business owners fell 41% from February to April (almost twice the rate of non-black businesses) as many failed to access programs. like the Wage Protection Program.
However, more help is still up in the air. Although Treasury Secretary Steve Mnuchin has said that passing a stand-alone PPP bill would be the “easiest” way to get more aid for small businesses (since there are more than $130 billion in unused funds), Congress has so far stalled on passing it. . another package.
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Meanwhile, the forgiveness phase for businesses that receive loans through PPP is imminent, although many banks still want more clarity on the process, while advocacy groups have called for smaller loans to be completely forgiven. . In response to the COVID-19 pandemic, the government is moving quickly to provide support to protect Canadians and support individuals and businesses, adapting its response as the pandemic evolves. Many government support measures have helped families, protected jobs and supported businesses in . More than eight in ten dollars spent to fight COVID-19 and support Canadians continues to come from the federal government.
In response to the COVID-19 pandemic, the government is moving quickly to provide support to protect Canadians and support individuals and businesses, adapting its response as the pandemic evolves. The government’s extensive support measures helped families, protected jobs and supported businesses across the country. More than eight in ten dollars spent to fight COVID-19 and support Canadians continues to come from the federal government.
This is a double-speed regression in many ways. There are businesses that have been able to adapt to the pandemic and thrive. But others were completely shut down by necessary public health restrictions or severely limited in what they could do — and many of those struggling businesses were our small businesses. We have to keep them standing. They are the backbone of our economy, our high streets and our communities.
The 2021 budget is a plan for targeted investment in the country’s businesses so that they can hire and train workers in the country, who will then spend more money, driving our recovery and growing an economy with more opportunities for all. This is a plan for our businesses, especially small businesses, to adopt new technologies. Restoring sustainable and long-term economic growth means we need to help our businesses come back stronger than ever.
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Extension of emergency wage allowance and emergency rent allowance and lockout support from June 2021.
Emergency Wage Assistance has helped more than 5.3 million Canadians keep their jobs, and Emergency Rent Assistance and Block Support has helped more than 154,000 organizations with rent, mortgages and other expenses. Wage support programs, rent subsidy and block support programs now expire in June 2021. Continued support is needed to get through this crisis until Canadians can recover. To provide safety and security to workers and employers in the coming months:
The Emergency Business Account (CEBA) provided interest-free, partially forgivable loans to more than 850,000 Canadian small businesses. In December 2020, the government increased the loan amount from $40,000 to $60,000 to help small businesses transition into recovery. If a business pays its debts by December 31, 2022, up to one-third of the value of their debts (meaning up to $20,000) will be forgiven. In further recognition of the ongoing pandemic, the government recently extended the CEBA application deadline to June 30, 2021.
A small number of businesses faced difficulties accessing the program, including local and rural businesses. To ensure that these businesses are not left behind, the government provides such support through the Local Assistance and Recovery Fund and the Local Business Initiative. Continue to support these businesses to:
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For the businesses hardest hit by the pandemic, hiring the workers they need to grow is an expense they may be wary of incurring. The government wants these businesses to be able to recover and grow by employing more people so that workers are at the forefront of our recovery:
As the rates for both the wage subsidy and the work program will gradually decrease over time, employers will have a strong incentive to start hiring as soon as possible.
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