The Small Business Administration Just Burned Through $350 Billion

$350 Billion in CARES Act funding is dried up. How?

The Small Business Administration helps the big guys first.

Few small businesses are seeing emergency advances or full funding through the Economic Injury Disaster Loan (EIDL) program, and are having nothing but problems tapping into Paycheck Protection Program (PPP) funds, yet the SBA claims it has burned through all of the $350 billion the CARES Act allocated to them.

That is the equivalent of 35,000 businesses qualifying for, and receiving, the full $10 million each under the PPP program. A long shot, of course, since only a certain number of small businesses will have the privilege of falling into the $1–5 million bracket.

It is also the equivalent of 175,000 businesses receiving the maximum EIDL loan of $2 million.

How is this possible?

Better question: How is it possible so many businesses got funded so quickly when the application process is yet to be completed on many major bank websites?

Big Banks Lending to Big Businesses

Honestly, the big fish jumped on the hook before the ink dried on the landmark Bill. Small businesses had little, if any, time to react.

More than 1.4 million loans were approved by April 15, although the number who received funds numbered in the thousands.

Small businesses are desperate. Politicians are arguing semantics. COVID-19 has caused more financial chaos in its short time in America than nearly every major financial event in U.S. history combined, and that is no understatement.

Larger banks are incentivized to lend big; commissions are much higher, interest payments are much more attractive, and large amounts of money can be moved quickly to avoid approving 10,000 smaller businesses who generally require less to survive.

Interestingly, the Federal Reserve just put their loan “backstop” online Thursday, which allows banks to use the loans they are writing as collateral for a credit facility they can take out with the Fed.

Will More Funds Be Allocated?

There is hope that $250 billion will be dumped back into the PPP and EIDL programs as there is bipartisan support for such action. The Democratic Party is unwilling to budge on their desire to make loans available to disadvantaged businesses, which traditionally reside in minority rural areas.

I will update this story as new information is made available.