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April 29, 2020

DeLauro: Will third time be the charm for small business bailout?

Photo | Center for American Progress and Women's Voices U.S. Rep. Rosa L. DeLauro (D-3) says a third round of business financing is coming for the federal government's Paycheck Protection Program.
By Michael C. Bingham

Just five days after Congress passed a second round of small-business financing, U.S. Rep. Rosa L. DeLauro (D-3) said a third federal stimulus funding package is inevitable because last week’s “interim” financing round, like the first passed April 3, is certain to be depleted soon.

DeLauro made that prediction during a Tuesday morning virtual conversation hosted by the Greater New Haven Chamber of Commerce and moderated by its president, Garrett Sheehan.

DeLauro said the initial federal stimulus package, the $349 billion CARES Act and its lifeline, the Paycheck Protection Program, was plagued by “unbelievable difficulties in accessing the funds. The first tranche of the funding was exhausted quickly,” she said, in part because much of the stimulus money went to larger companies than originally intended, and also because the banks that processed loan applications moved their own commercial customers to the front of the line — in part to access “much higher fees.” Small businesses and/or those without existing relationships with a lender found themselves left “with nowhere to go — in an untenable position,” she said.

“Those flaws generated the need” for a second funding round, enacted just last Thursday following two weeks of partisan bickering in Washington. The new package increased the Paycheck Protection Program pool from $349 billion to $659 billion, DeLauro explained. The Economic Injury Disaster Loan (EIDL) grant fund was also increased from $10 billion to $20 billion.

In addition, $30 billion was carved out for lending by community and minority-owned banks and credit unions with less than $10 billion in assets, DeLauro explained, “to try to address the failures and flaws of what had happened the first time around.”

Despite being paved with good intentions, the second small-business stimulus round, which kicked off Monday, was not prepared to address the demand. “It appears that the system is overwhelmed” by the number of applications, DeLauro said. “It crashed because of the overwhelming need.”

That need, she added, makes a third round of business stimulus inevitable. “There will be a next package,” DeLauro said. “That is what we’ll be trying to work through over the next several weeks.”

Among the business sectors hardest hit by the nationwide shutdown in response to the coronavirus pandemic are the restaurant and hospitality industries. Hailing from a neighborhood (Wooster Square) and a city renowned for its restaurants, DeLauro bemoaned the plight of the food service industry.

“Restaurants have only received 9 percent of PPP loans” to date, DeLauro noted. 

Nationwide four out of ten eateries remain shuttered six weeks into the shutdown, while the rest struggle to make ends meet with takeout and delivery service, she added. The problem is that to qualify for PPP loan grants, restaurants must commit to bringing back 75% of their workers while their doors remain closed. DeLauro said she testified in favor of amending that requirement in the next stimulus round to accommodate restaurants that remain closed until state governments allow them to reopen for business.

DeLauro also answered questions about the ineligibility of 501(c)(6) non-profit organizations such as chambers of commerce and professional organizations to qualify for funding, because the initial stimulus package legislation categorized them with lobbying groups and made them ineligible.

“Along with about 60 of my colleagues we have urged the Speaker [House Speaker Nancy Pelosi, D-Calif.] to remedy this [ineligibility] in the next stimulus package we are looking at,” DeLauro said. “I understand the hardship that the chambers are facing. You are critical in terms of your support of our small businesses. I will continue to make the case for including the chambers and associations” in the next stimulus package, she added.

“We just need to get businesses back on their feet and get our economy back as soon as we can,” DeLauro added. She urged business owners to contact her district office at 203-562-3718 with problems and concerns.

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