The Small Business Administration is already tapped out of emergency loan funds approved last month to help companies stay solvent and avoid having to terminate workers.
The $349 billion allocated to the Paycheck Protection Program was part of the $2 trillion stimulus package signed into law by President Donald Trump on March 27. Treasury Secretary Steven Mnuchin announced late Wednesday that the programs have run out of money after thousands of applications flooded into the SBA.
In addition to the PPP, the stimulus bill added $10 billion to the existing Economic Injury Disaster Loan program that also aims to provide low-cost loans to keep businesses with less than 500 employees from going under.
Mnuchin called on Congress to come up with additional money to help keep grants and loans flowing. By law, the SBA cannot process any more applications unless more funds are appropriated.
“The SBA has processed more than 14 years’ worth of loans in less than 14 days,” Mnuchin said. “We urge Congress to appropriate additional funds for the Paycheck Protection Program— a critical and overwhelmingly bipartisan program — at which point we will once again be able to process loan applications, issue loan numbers, and protect millions more paychecks.”
The launch of PPP created a frenzy for commercial banks that helped applicants navigate the application process with the SBA.
Martha Henderson, executive VP and manager of entertainment banking for City National Bank, has been working round the clock for the past two weeks to help clients apply for the loans. The loan terms are designed to provide employers incentive to keep employees on their payroll, with promises that as much as 75% of the loan will be forgiven if the money is spent to keep the lights on and stave off layoffs.
Henderson told Variety the scope of the need among small businesses in entertainment-related fields is “breathtaking.” Loan terms are two years and have ranged from $10,000 to $10 million.
“I’ve been a banker for more than 40 years,” Henderson said. “Clearly this is unique and different.”
Henderson said City National Bank has handled thousands of loan applications in the past two weeks, about half of them for entertainment clients.
“People are trying to survive and figure out a way to keep their staff working and focused on the future,” Henderson said.
The demand for SBA funds flowing into small businesses was reinforced by the latest numbers on unemployment insurance filings. The Labor Department reported Thursday that another 5.2 million Americans filed for unemployment last week, bringing the total to more than 22 million since the coronavirus lockdown began in mid-March.
On Thursday, CNN and others reported that negotiations were underway in Congress to pump more money into the PPP.
“The high demand we have seen underscores the need for hardworking Americans to have access to relief as soon as possible,” Mnuchin said. “We want every eligible small business to participate and get the resources they need.”
Henderson noted that the hardship in the entertainment sector is unusual given that the industry is typically resilient during economic downturns. But the abrupt end to public gatherings has been a once-in-a-century shock to media and entertainment.
“Usually the entertainment industry is not as impacted as the rest of the country,” Henderson said. Movies, live performances and TV services “are usually an inexpensive way for people to entertain themselves. This is the first time we’ve seen the entertainment industry impacted first.”
(Pictured: Treasury Secretary Steven Mnuchin)