Demand is slowing for the US government’s $660bn small-business rescue programme, reflecting fears among some enterprises that they cannot meet its requirements for loan forgiveness.
Businesses rushed to apply for money when the second round of the loan scheme opened last month, with $90bn being allocated in the first three days. Demand was so high the scheme’s website crashed on the first day.
But demand has slowed since then, with only just over $100bn having been claimed in the subsequent 11 days, leaving over $122bn in the pot.
Industry groups say they are concerned that some businesses are being discouraged from applying for loans because of uncertainty around if and when they might have to pay them back.
When the Trump administration launched the scheme, it said loans would be forgiven if 75 per cent of the money was used to pay staff in the eight weeks after receipt. But restaurants and many other enterprises say that with lockdown rules likely to remain in place for the foreseeable future, they will find it difficult to bring employees back to work in time.
Paul Merski, head of congressional relations for the Independent Community Bankers of America, which represents small banks, said: “People are worried that they are not going to be able to use the money to bring back employees within eight weeks, and that they will then be stuck with a loan and not a grant.”
In addition, some are concerned that businesses are being put off from claiming money after several high-profile cases where companies decided to hand back their loans following public pressure, including the restaurant trains Potbelly and Shake Shack.
Marco Rubio, the Republican chair of the Senate small business committee, tweeted: “Scrutiny over what businesses received loans turned into hysteria [and] is scaring many from applying.”
Steven Mnuchin, the US Treasury secretary, said on Monday that the administration was trying to change the programme’s rules so more small businesses would apply for the funds.
He said the administration was particularly concerned about restaurant owners being unable to hire back employees who are earning more money from unemployment benefits than they would at work.
“One of the things we’re particularly sympathetic to are the restaurants,” Mr Mnuchin said in an interview with CNBC. “Many of the restaurants are just beginning to open up and have said that they’d really like to hold the money. They can’t do that. That’s not something we can do. But we’ll look at a technical fix.”
The administration has promised for weeks to provide further guidance for when and how companies would be expected to pay back the money they had claimed. But those representing small businesses say the lack of clarity is already doing economic damage.
Roscoe Jones, a lawyer with the Washington-based firm Gibson Dunn, said: “Companies are having to make tough decisions during the Covid-19 crisis, and guidance on how companies can ensure their PPP loans are forgivable is necessary and long overdue.”