Business loan funds almost exhausted as Schumer, Mnuchin wrestle over deal
The Small Business Administration (SBA) warned Wednesday night that it soon will no longer be able to extend loans to small businesses as negotiations between Treasury Secretary Steven Mnuchin and Senate Democratic Leader Charles Schumer (N.Y.) failed to produce a deal.
The SBA announced that as of 9 p.m. Wednesday, there had been more than 1.5 million small-business loan applications approved totaling more than $324 billion with more than 4,900 lending institutions participating in the program.
Congress appropriated $349 billion for the program last month, which leaves only $25 billion to apply to additional loans, an amount that is expected to be used up sometime Thursday.
The talks between Mnuchin and Schumer will continue into Thursday when the Senate is scheduled to meet in the afternoon for a pro forma session.
Senators could at that time pass an agreement to provide an extra $250 billion for the popular Paycheck Protection Program (PPP) and $250 billion for hospitals and state and local governments, which Democrats are demanding — but it would require all 100 of them to agree.
Mnuchin and SBA administrator Jovita Carranza issued a statement Wednesday evening warning that funding for the program that provides forgivable loans to employers who keep workers on payroll is about to run out, and that no additional loans will be extended until Congress acts.
“By law, the SBA will not be able to issue new loan approvals once the programs experience a lapse in appropriations,” Mnuchin and Carranza said in a joint statement issued shortly before 9 p.m.
“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,” they added.
Senate Majority Leader Mitch McConnell (R-Ky.) and House Minority Leader Kevin McCarthy (R-Calif.) also issued a statement before 9 p.m. Wednesday warning the funding for the small-business lending program would run out “in a matter of hours.”
Once the agency has backed $349 billion in loans “it will have to stop accepting applications for job-saving loans,” the GOP leaders warned.
“Democrats have spent days blocking emergency funding for Americans’ paychecks and now the bipartisan program has run dry,” they said.
A senior Democratic aide said Schumer and House Speaker Nancy Pelosi’s (D-Calif.) staff spoke with Mnuchin and Treasury’s staff Wednesday and have agreed to continue talks Thursday.
That gives negotiators only a few hours to reach a deal before a ceremonial pro forma session scheduled for 3 p.m. If nothing is agreed to by then, talks will likely extend into next week, and small businesses will be turned away from submitting applications over the next few days.
However, even if Mnuchin and Schumer agree to a deal, it could be tough to get all 53 Republican senators to agree to give unanimous consent for a $500 billion package. If a single senator objected, the package could be blocked until the full Senate convenes again, which is not scheduled to happen before May 4.
McConnell last week attempted to pass by unanimous consent on the Senate floor a clean $251 billion appropriation to extend SBA’s lending capacity but Democrats objected. They said that at least $60 billion in small-business lending needed to be set aside for women-, minority- and veteran-owned businesses in underserved urban, rural and tribal areas.
They also called for the SBA funding to be paired with $100 billion for hospitals and $150 billion for state governments.
“It has been stunning to watch our Democratic colleagues treat emergency funding for Americans’ paychecks like a Republican priority which they need to be goaded into supporting,” McConnell and McCarthy wrote in their statement. “Funding a bipartisan program should not be a partisan issue. The notion that crucial help for working people is not appealing enough to Democrats without other additions sends a strange message about their priorities.”
The Republican leaders showed no sign of being ready to accept Schumer’s and Pelosi’s demands for additional funding for hospitals and state governments.
“The cost of continued Democratic obstruction will be pink slips and shuttered businesses,” they said. “We hope Democrats see reason soon and finally heed Republicans’ repeated calls for a funding bill that can quickly earn unanimous consent from all 100 senators and become law.”
Pelosi in an interview with CNN’s Jake Tapper on Wednesday blamed Republicans for being unreasonable.
She said that many small-business owners, especially those without strong pre-existing relationships with banks, are having trouble getting money.
“Why would they want to cut that whole layer of people, mostly women, minority-owned businesses, Native American, rural America, veterans, all participating in those initiatives? And so we’re just saying we can’t allow the billions, hundreds of billions of dollars, being spent to fight the horror of the coronavirus and the impact on our economy, to further harden the disparity, the lack of access to credit for so many in the small business community,” she said.
The American Bankers Association (ABA) issued a statement Wednesday evening urging Congress “to appropriate additional federal funds as soon as possible given the potential economic damage to small businesses and their millions of employees.”
“We again call on lawmakers to approve additional funding expeditiously so American banks can continue to provide this important financial lifeline to small businesses and help put the nation on the path to recovery,” said ABA president Rob Nichols.
Alex Gangitano contributed.
Updated: 10:41 p.m.