The much-touted Paycheck Protection Program, a key component of the government’s coronavirus stimulus package that was supposed to save thousands of small businesses, has now run out of money less than two weeks after it began accepting applications.
The funding shortfall now leaves small businesses — including both brokerages and real estate agents — in the lurch, without a clear next step.
The U.S. Small Business Administration (SBA), which was overseeing the program, announced that the funding had run out Thursday morning. In a statement on its website, the administration said that it was no longer able to accept applications “based on available appropriations funding.”
The program started out with a pot of about $349 billion. Small businesses with fewer than 500 employees, as well as independent contractors, could apply to get the money in the form of loans for up to 2.5 times their monthly payroll. If the businesses used the cash primarily to pay their employees, the debt would be forgiven — meaning the Paycheck Protection Program (PPP) was essentially offering free money.
But right out of the gate there were problems. Information was initially scarce, and when banks began accepting applications reports abounded of glitchy systems that required hours to navigate.
Small businesses with hourly or salaried employees were allowed to start submitting applications on April 3. Independent contractors could submit applications beginning April 10. But throughout that process there were reports of applicants not hearing back from banks, which were tasked with distributing the funds. Significant confusion also persisted over how exactly independent contractors — which include most individual real estate professionals in the U.S. — could qualify given that they don’t have traditional payrolls.
The confusion had very real implications because the funding was distributed on a first-come, first-served basis. That meant people who waited for more clarity, or whose applications languished on a desk, likely ended up too far down on the list to actually get any money.
Eric Stegemann — CEO of real estate software firm Tribus, which has published information on the program — told Inman the funding shortfall doesn’t mean everyone who hasn’t received money so far won’t ultimately get anything. Rather, it means that all of the money has been allocated and the SBA isn’t accepting new applications. Some businesses that applied should still receive money and applicants should contact their lenders to see if they have been assigned an SBA loan number.
In any case, by Monday the SBA revealed that it had already distributed about $248 billion via 1 million loans. Roughly $8 billion, or 3.22 percent of the $248 billion, went to real estate and rental companies.
It was not immediately clear Thursday how much of the final total flowed into the real estate industry. As of Monday, though, the construction industry had been the largest recipient of PPP funding.
Lawmakers are trying to replenish the funds for the program, but so far they haven’t settled on anything concrete.
Republicans and Democrats are also clashing over how the money should be allocated. Republicans and the Trump administration want to simply refill the PPP pot with another $250 billion. Democrats, however, want to set aside some of the money for minority-owned businesses and hospitals.
On Wednesday, U.S. House Speaker Nancy Pelosi tweeted that the program was “crucial” but also pointed to “serious flaws.”
The Paycheck Protection Program is a crucial tool for protecting workers across the country – yet serious flaws are keeping far too many small businesses from receiving the resources they need. The @SenateGOP must stop blocking commonsense solutions that put #FamiliesFirst. https://t.co/SBIAvqQhtN
— Nancy Pelosi (@SpeakerPelosi) April 15, 2020
The next morning, Senate Majority Leader Mitch McConnell blamed Pelosi and the Democrats for blocking money for the program.
Republicans tried to pass more money for Americans’ paychecks last week. Democrats blocked it. Speaker Pelosi said she saw “no data as to why we need it." She said "we have time to negotiate.”
Democrats did nothing and now the program has shut down. https://t.co/MSwJAEybO4
— Leader McConnell (@senatemajldr) April 16, 2020
As of Thursday, it remained unclear how the political impasse would be solved or when more money might be available.
In the meantime, however, real estate businesses in particular are suffering. Real estate professionals in some parts of the U.S. have been particularly impacted by the pandemic because their work is highly dependent on in-person activities like home viewings. Most also work on commission — meaning they have no income at all if they can’t sell houses.
Thursday morning, many real estate professionals also expressed discontent about the program. One hour after a post on the funding shortfall went up in the popular Lab Coat Agents Facebook group, nearly 150 people had already commented, with many saying that they had applied for PPP loans but won’t end up getting any money.
“People I know applied and they have not received a cent,” one commenter said.
“I wonder who got those loans because I haven’t heard back from them,” another lamented.
“Awesome,” yet another sarcastically wrote. “And it barely scratched the surface of getting to people who need help.”
Update: This post was updated after publication with addition information from Tribus CEO Eric Stegemann.