NEW YORK — Billions of dollars offered by Congress as a lifeline to small businesses struggling to survive the pandemic are about to be left on the table when a key government program stops accepting applications for loans.
Business owners and advocacy groups complain that the money in the Paycheck Protection Program was not fully put to work because the program created obstacles that stopped countless small businesses from applying. For those that did seek loans, the ever-changing application process proved to be an exercise in futility.
“It was a flawed structure to begin with,” said John Arensmeyer, CEO of Small Business Majority, an advocacy group. “It favored established businesses. It was set up to give money to people with strong banking relationships.”
The program’s shortcomings also made it more difficult for minority businesses to get loans, according to a report from the Center for Responsible Lending, a research group.
The loans were designed to give companies devastated by government-ordered shutdowns money to pay staffers and survive. The money was aimed at small businesses such as restaurants, retailers and salons that are desperately trying to stay afloat as the U.S. economy reopens in fits and starts.
As of late Friday, the Small Business Administration had approved more than 4.7 million loans worth nearly $518 billion. Small businesses that also included medical offices, dry cleaners and manufacturers obtained money that ultimately saved jobs and eased the unemployment rate from April’s staggering 14.7% to May’s still-excruciating 13.3%.
But more than $140 billion in loan money remained unclaimed out of $659 billion allocated by Congress. It will be up to Congress to decide what to do with any leftover funds, an SBA spokeswoman said.
Some banks rejected any companies that did not have multiple accounts. Sole proprietors and freelancers had to wait a week before applying, and many found they could not supply the kind of documents the government and banks demanded.
The program’s biggest appeal was its promise that loans would be forgiven, but confusion abounded about requirements owners had to meet to get that forgiveness.
Those requirements and information about the program kept changing: Between March 31 and June 15, the SBA issued 35 changes to program rules and its frequently asked questions, according to a Government Accountability Office report issued last week. It was not until May 22, seven weeks after the program began, that the SBA and the Treasury Department released the first instructions and applications for loan forgiveness.
“It’s been a moving target this whole time,” Arensmeyer said.
In the dark and struggling with the effect of shutdowns, many owners said, “no thanks.”
Gabriella Borrero, co-owner of The Vault, a Boonton, New Jersey, recording studio, said she was uncomfortable with the possibility that the business, which had been shut for three months, could be burdened with a loan if it could not get forgiveness. And she could not determine up-front how much money might need to be repaid.
“We decided to simply tough it out ourselves and make it through by dipping into our savings,” she said. “I’d rather not have this looming thought, ‘Are we going to have it forgiven or will it come back to bite us?’”