Financial services lobby groups are calling for the US government to approve further funding for the Paycheck Protection Program (PPP).
The $349 billion support package for small businesses has already resulted in $248 billion being loaned out to companies across the US, according to a report from the Small Business Administration (SBA), which is facilitating the program.
However, ongoing demand for support through the COVID-19 coronavirus pandemic is expected to see the PPP hit capacity this week.
The American Bankers Association, the Bank Policy Institute, the Consumer Bankers Association and the Financial Services Forum have written a joint letter to House and Senate leaders calling for additional funding.
The organizations said the PPP had “already provided a critical economic lifeline to small businesses across the country”.
“Unfortunately, millions of other small businesses still need assistance which is why federal funding for PPP needs to be increased,” the letter continued.
“Those businesses and their employees now face immediate economic threats related to the COVID-19 pandemic unless Congress acts. Banks of all sizes are eager to provide much-needed funding to our nation’s small businesses.
“While the Paycheck Protection Program has encountered challenges from the beginning, more than 4,600 lenders are participating.
“We call on Congress to expeditiously increase PPP funding to support lenders’ efforts, ensuring small businesses throughout our country have the opportunity to apply for and receive PPP loans.”
The SBA said the PPP had led to the approval of more than one million loans totalling $248 billion, through 4,664 lenders.
According to the SBA’s report, 70% of loans were for less than $150,000. The average loan size was $239,152, and roughly half of all funds had been loaned to companies in four sectors: “construction; professional, scientific and technical services; manufacturing; and health care and social assistance”.
The Office of the Comptroller of the Currency (OCC) has announced three “listening sessions” to receive feedback on the PPP, scheduled for April 16, 20 and 21. Details can be found on the OCC’s website.
The demand for more support for small companies follows a study published by the US’s 12 Federal Reserve Banks on April 7, which found that many companies were already facing financial difficulties before the pandemic took hold in the US.
The report, which focuses on firms with between one and 499 full- or part-time payroll employees, covered more than 5,500 companies across the US.
“Small businesses nationwide now face unprecedented challenges as the country grapples with the significant economic and social effects of the COVID-19 pandemic,” said Claire Kramer Mills, assistant vice president at the New York Fed.
“Utilizing pre-outbreak data on firms’ financial cushions and funding networks, the report and brief released today offer critical, baseline information to policymakers and stakeholders on the financial and operational challenges shared by small businesses.
“The data underscore that, while small firms reported a strong end to 2019, many continued to deal with financial challenges, and even the healthiest of firms could face tough decisions amid a sustained loss in revenue.
“Furthermore, by shedding light on the channels through which firms may seek financial recourse, the data can inform the design of new loan and grant programs and offer insights on how to reach businesses in need.”
A majority of companies covered by the Small Business Credit Survey experienced revenue growth in the most recent financial year and more than a third added staff.
However, almost two thirds said they were facing financial challenges by the end of 2019. Many firms also said they had had to rely on an owner’s personal savings to support business costs, while less than half had obtained funds from a bank within the past five years.
According to an additional report from the New York Fed, “even profitable firms with low credit risk may find it difficult to weather a sustained revenue shock using cash reserves alone”.