Investing in the nation's crumbling infrastructure is never a tough sell in the business community. After all, businesses benefit when everyone can get from point A to point B without busting an axle, and they also stand to gain from the winning sizable construction contracts.
To wit, the current infrastructure bill, formally dubbed the Infrastructure Investment and Jobs Act, calls for spending $550 billion over five years. In addition to existing authorized funding, that number currently stands at just under $1 trillion over five years and north of $1.2 trillion over 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.
It's not as though these programs aren't being utilized. While the PPP is over and no longer supporting loans to small businesses, the other programs are indeed active. Starting with the Cares Act, Congress charged the SBA with making debt relief payments to help hard-hit businesses into certain SBA-backed loans including the agency's flagship working capital loan 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.
And demand is increasing along with lender bandwidth, says Tony Wilkinson, president and CEO of NAGGL. "As our lenders were moving away from the PPP program, they had more time to focus on the regular program," he says.
The news about lawmakers' plans to redirect funds has lenders scrambling to get loans done, adds Wilkinson. By his estimation, the funds for SBA's debt relief program could even dry up by September 20.
Unless lawmakers get to it first. With recess approaching, leaders of the House and Senate could call their members back to vote on an infrastructure bill at any point. The Senate could even approve the measure this week. Should it land on President Biden's desk this month, and as such stimulus funds suddenly expire, many in-need businesses now banking on that money would be left adrift.
Mark Yuska's events business 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 like we were doing takeout. It wasn't a downturn; [business] was gone," says Yuska, who had to let his entire staff go, 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. Now that plan might fall through.
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. "It's a matter of risk tolerance," he says. "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 adds that while lenders are trying to expedite existing loan applications, he fears that many borrowers with loans still in the pipeline will get dropped, because 1) they can't afford the fees without the moratorium and 2) the lender might pull the plug. "Washington has created such uncertainty for these borrowers. Now we're having to tell some of them we don't know what will happen," adds Arie. "There's a high likelihood that for several of these loans, it truly becomes a question of access to 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.