Hours Before Its Start, The Small Business Bailout Is On Verge Of Collapse

Tonight at midnight, the most critical – if hardly biggest – part of the Fed’s $2 trillion fiscal stimulus is expected to begin: that’s when small and medium business with 500 employees or less can request a loan of up to 2.5x the average monthly payroll (capped at $10 million), meant to buy cash-strapped companies just under 3 months in liquidity. As we discussed previously, the loans which are packaged under the SBA’s Paycheck Protection Program carry a 0.5% interest rate, and would be forgiven if their proceeds are used toward operational uses such as payrolls, utilities, and rent.

Needless to say, getting these loans into the hands of America’s 30 million small businesses is absolutely critical: they employ about half of U.S. private sector employees, according to the Small Business Administration website.

There is just one problem: with just hours to go until millions in small businesses across the nation scramble to apply for much needed funding, the program appears to be on the verge of collapse amid what appears to be sheer chaos between the Treasury, the Small Business Administration, and the various commercial banks that will be tasked to loan the action money.

One reason why the program is woefully unprepared for a Friday midnight rollout is that banks that haven’t underwritten SBA loans before will need to get onboarded in the system. However, as Politico reports, as of last night, there was no application available for banks to do this, and as CNBC’s Kayla Tausche adds, Treasury remains committed to originating these loans beginning tomorrow, despite hiccups.

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As we progress into the Fourth Turning, the government is succeeding in eroding our confidence in their ability to do anything correctly with increasing speed.

David DeGerolamo