Investing in the nation’s crumbling infrastructure is never a tough sell in the business community. Businesses benefit from being able to get from A to B without having to break an axle. They also stand to benefit from large construction contracts.
To wit, the current infrastructure bill, formally dubbed the Infrastructure Investment and Jobs Act, calls for spending $550 billion over five years. This figure is in addition to the existing authorized funding. It currently stands at just below $1 trillion for five years and $1.2 trillion for eight years. But you may chafe at the real price tag–particularly as much of it calls for repurposing some $205 billion in untapped-yet-in-demand Covid-19 relief aid.
Under the current bill, $38 billion would be diverted directly from extant small-business relief programs. That includes $17.6 billion from the Small Business Administration’s Economic Injury Disaster Loan (EIDL) program, $13.5 billion from the Targeted EIDL Advance, $4.7 billion from the Paycheck Protection Program, and $1.4 billion from the Economic Stabilization Program. Another $992 million is getting yanked from the SBA’s business loans program account.
These programs are still being used. The PPP has ended support for loans to small-businesses and is now focused on . However, other programs remain active. The Cares Act gave Congress authority to the SBA to make debt relief payments to assist hard-hit companies in certain SBA-backed loans, including its flagship product, the 7(a), loan program. The Economic Aid Act sweetened the pot, allowing the SBA to increase its loan guarantee to 90 percent from 75 to 85 percent, depending on the size of the loan.
According to National Association of Government Guaranteed Lenders (NAGGL), loan approvals for 7(a) loans shot up to $2. 04 billion last week, up from $865 million the week prior. This debt relief program expires on September 30, 2021, or when funds run out.
Similarly, the pace of EIDL approvals has recently reached more than $5 billion a week, with $7.5 billion in EIDLs receiving approval last week. As of July 29, 2021, businesses have filed 3.8 million EIDLs, amounting to $236 billion in funding. According to Tony Wilkinson (CEO of NAGGL), the demand for funding is growing along with the lender bandwidth. He says that lenders had more time to concentrate on the regular program because they were leaving the PPP program.
Lenders are scrambling for loans, as the news about legislators’ plans to redirect funds makes it difficult to find funding. Wilkinson adds that By his estimation, the funds for SBA’s debt relief program could even dry up by September 20.
Unless lawmakers start to get on it. Leaders of the Senate and House could call their members back at any time to vote on an infrastructure bill, as recess is approaching. The Senate could approve the measure as early as this week. It could land on President Biden’s desk this week, and many in-need companies that depend on the stimulus funds would be left without a source of funding. Mark Yuska’s events company is one. When the pandemic hit his Sterling, Virginia-based Alliance Nationwide Exposition, revenue, which had clocked in at $20 million in 2019, dropped to zero in 2020.
“We went from 100 percent to zero. It wasn’t as if we were eating takeout. Yuska says that it wasn’t a downturn and [business] was gone. He had to let go of his entire staff, including himself last year. The company only recently began hiring again; it brought in 100 people in July in anticipation of events picking back up in August. But he has more work than what 100 people can do. “We still have 250 shows on the books this year; 100 people just isn’t enough,” he says, noting that he’d use the $2 million 7(a) loan for which he applied two months ago to support the additional hires. This plan may not work out.
For small-business owners like Yuska, 2020 losses loom large among lenders. The federal stimulus–chiefly, the SBA’s boosting of its guarantee to 90 percent and the fee moratorium–helped make those loans more palatable, says Joe Arie, president of the SBA division at Bank of Edison, a national lender based in Edison, Georgia. He says, “It’s a matter if you are willing to take on risk.” “If we make a $2 million loan, and the SBA drops its guarantee back down to 75 percent, that risk goes from $200,000 to $500,000. “
Arie says that although lenders are working to speed up loan applications, he is concerned that borrowers who have loans in the pipeline might be dropped because they cannot afford the fees and the lender may pull the plug. These borrowers are now in a state of uncertainty because Washington has made it so. Arie adds that we now have to tell some of these borrowers we don’t know what the future holds.” It is likely that several of these loans will be used to access credit. “
Update: An earlier version of this article contained preliminary tallies for 7(a) lending for the weeks ending July 23 and July 30, 2021. The weekly loan volumes were $865 million and $2. 04 billion, respectively.