The coronavirus pandemic is devastating small businesses across the U.S. because of shelter-in-place orders that have forced millions to temporarily close.

So far, Congress has devoted more than US$375 billion to helping restaurants, retailers and other small companies endure the crisis, and lawmakers are currently discussing spending hundreds of billions more.

The Small Business Administration is at the center of these efforts. But early reports suggest the agency is struggling with the flood of requests it’s received for loans – more than 70% of U.S. small businesses have reportedly already applied for assistance – leading to a lot of frustration among owners desperate for support.

From 2010 through 2014, I worked as general and then-chief counsel to the U.S. Senate Committee on Small Business and Entrepreneurship, where I helped write laws to aid small businesses recover from the Great Recession.

Congress’ quick actions are encouraging, but I believe the SBA needs to do more to ensure aid goes to those most in need – including the more than 13 million small businesses owned by women that have challenges accessing capital even under normal circumstances.

An advocate for small business

The Small Business Administration was established in 1953 as an independent agency dedicated to counseling and advocating for small businesses. It replaced existing lending and contracting programs established during the Great Depression and World War II.

At the time, there were allegations of cronyism and political favoritism that made it harder for smaller companies to compete for lucrative government contracts. The SBA was meant to help small businesses bid for more contracts and access capital, as well as provide aid after a disaster.

Over time, the SBA’s mission has grown to include a suite of lending programs, contracting and entrepreneurial development initiatives.

Its roots in helping small businesses compete for government contracts has resulted in a range of definitions as to what constitutes a small business. SBA itself has different definitions depending on industry, which can range from 100 to 1,500 employees or $750,000 to $38.5 million in annual sales.

The more than 30 million small businesses the SBA counts today are vital to the U.S. economy. They create two-thirds of net new jobs and employ almost half of all private sector employees.

AP Photo/Alex Brandon

Providing aid in a crisis

One of the SBA’s main duties is providing aid to small businesses to help them recover following natural disasters such as hurricanes or tornadoes and other crises.

For example, the SBA dispensed $3.59 billion in disaster loan assistance in fiscal year 2018 following the devastation caused by hurricanes Harvey, Irma and Maria in 2017.

But the SBA has never done anything on the scale it’s being asked to do to help small businesses survive the coronavirus pandemic.

The first piece of legislation Congress passed in response to the crisis in early March included $20 million in emergency supplemental funding for SBA’s economic injury disaster loan program, which offers loans of up to $2 million.

Realizing that small businesses that were being forced to shut down in droves would need significantly more aid, Congress added hundreds of billions more funding in the $2 trillion CARES Act, which was signed into law on March 27.

The law gave $10 billion more to the SBA’s Economic Injury Disaster Loan Program to allow the SBA to hand out up to $10,000 grants immediately to applicants who are eligible for the program – even if they are ultimately denied.

In addition, it created the $349 billion paycheck protection program in an effort to encourage companies to continue to employ their workers during the pandemic. The program allows companies with fewer than 500 employees to receive as much as $10 million. Money used for “allowable” expenses such as payroll and rent doesn’t have to be paid back as long as a few other conditions are met.

Lawmakers are considering ways to provide small businesses with more support – perhaps another $250 billion or more – in another bailout package.

AP Photo/Steven Senne

Unprecedented need

But the unprecedented size of the need has led to many stumbling blocks in rolling out the programs.

The New York Times reported that applicants are waiting weeks for approval, while others are being told they will get a fraction of what they expected.

In addition, other reports have found that the $10,000 emergency grants that were supposed to be available within three days haven’t gone out to at least some applicants. An SBA official said the agency has already received over 3 million applications for the grants, which would cost $30 billion, triple the amount originally set aside.

And there was confusion over the rules companies must follow. On April 3, the SBA issued an interim final rule that said 75% of the proceeds of the paycheck protection program loan must go to payroll costs, which wasn’t in the CARES Act. Retailers, restaurants and other companies with high rents and other overhead complain that they won’t be able to meet that threshold.

Challenges for women-owned businesses

The situation is urgent as research shows that about half of small businesses typically have cash on hand to last 15 days. At the same time, loans are distributed on a “first-come, first-serve” basis.

And for businesses owned by people of color or women, things can be even more acute. My own research, for example, found that women-owned businesses tend to lack access to capital and often don’t benefit from tax breaks and other support intended for small companies. And because they are less likely to have banking relationships with the lenders the SBA traditionally works with, women business owners may need special attention to ensure they get the support they need to weather this crisis.

While getting money out the door fast is critical, it’s equally important it gets to the companies that need it most.

[You need to understand the coronavirus pandemic, and we can help. Read The Conversation’s newsletter.]