At least 56 small businesses in the CNMI have received $12.6 million in Paycheck Protection Program loans before funds were exhausted nationwide last Thursday, said Rep. Gregorio "Kilili" Sablan, CNMI' delegate to Congress.
The Paycheck Protection Program was created under the Coronavirus Aid, Relief, and Economic Security, or “CARES,” Act to help small businesses and non-profits keep their staff on payroll during the coronavirus crisis.
Recipients who use the money to pay staff for 8 weeks and meet other conditions can have the loans converted to outright grants. Up to 25 percent of the loan may be used to pay rent, utilities, and other business expenses.
“Marianas businesses responded very quickly to this opportunity,” Congressman Sablan said. “That is a good thing. Because the $350 billion that Congress provided to the Small Business Administration for the Paycheck Protection Program is now all gone.”
Congress and the White House are, however, in negotiation for a second round of PPP funding with changes regarding who is eligible for the money.
The CARES Act required that only businesses with fewer than 500 employees could qualify for the loans/grants; but large restaurant and hotel chains with more than 500 workers have been able to get loans, because the law allows each individual restaurant or hotel in the chain to be separately eligible. This loophole contributed to the rapid commitment of the available funding and left many small businesses and non-profits without the help they need.
In the meantime, eligible businesses may also be able to turn to the SBA Debt Relief program, which pays the principal, interest, and fees for businesses with SBA microloans or with loans from agency’s 7(a) and 504 loan programs. This relief is extended automatically to existing borrowers and is also available to new borrowers up to Sept. 27, 2020.
Economic Injury Disaster Loans provided through the CARES Act are another victim of their own success. The program which can provide an emergency advance of up to $10,000 to small businesses and private non-profits harmed by Covid-19 is currently closed, while the Small Business Administration attempts to process 5 million applications that have come in during the past weeks. The program will also need more funding to accept new applicants, another issue now being negotiated by Congress and the White House.
The EIDL advance does not need to be repaid under any circumstance, and may be used to keep employees on payroll, to pay for sick leave, meet increased production costs due to supply chain disruptions, or pay business obligations, including debts, rent and mortgage payments.