Facing 'extinction-level event,' small businesses urge Congress to replace disastrous loan program with direct payroll grants

"Without a substantial, immediate response that addresses the magnitude of this problem, our small business sector will be devastated."

With millions of small businesses on the brink of collapse and struggling to obtain coronavirus relief after the Trump administration's disastrous rollout of a $350 billion rescue fund, progressives are calling on Congress to authorize direct payroll grants to companies in need instead of dumping hundreds of billions more into a deeply flawed program.

The Paycheck Protection Program (PPP)—authorized by the massive coronavirus stimulus package President Donald Trump signed into law last month—had a chaotic launch last Friday amid mass confusion among small businesses and banks tasked with distributing relief loans backed by taxpayer money.

"Focusing on direct payroll and healthcare subsidies for small employers is an approach that will mitigate potentially severe impacts for employers and workers."

—Main Street Alliance

Amanda Ballantyne, executive director of Main Street Alliance (MSA), a progressive coalition that includes 30,000 small-business owners, told the WashingtonPost on Tuesday that the program's rollout was a "train wreck" that will not be remedied by simply pouring more money into its coffers.

On Twitter, MSA said the loan program "suffers from design flaws—money should be distributed by the Treasury Department, perhaps in partnership with local or state governments, instead of banks."

"Small business should be given #GrantsNotLoans," the group tweeted.

MSA is calling on Congress to pass legislation that includes "direct federal subsidies to employers impacted by COVID-19 to cover payroll, health insurance premiums, and rent" as well as "5-10 year no interest loans with streamlined application process to cover other fixed expenses."

"Focusing on direct payroll and healthcare subsidies for small employers is an approach that will mitigate potentially severe impacts for employers and workers," MSA said on its website. "This is an extinction-level event for small businesses in the U.S. Without a substantial, immediate response that addresses the magnitude of this problem, our small business sector will be devastated."

In a series of tweets on Wednesday, Sen. Elizabeth Warren (D-Mass.) echoed MSA's call for direct grants to struggling small businesses instead of loans distributed through big banks.

"Everyone except Trump knows the launch of the small business program—PPP—was a fiasco," Warren said. "Regulations were late, systems crashed, and people couldn't do loan applications. [The Small Business Administration] and Treasury need to fix it."

"Everyone except Trump knows the launch of the small business program—PPP—was a fiasco. Regulations were late, systems crashed, and people couldn't do loan applications. SBA and Treasury need to fix it."

—Sen. Elizabeth Warren

"Congress also needs to dramatically simplify PPP so it actually works," Warren added. "Replace loans with grants to keep people on payroll, ensure that banks provide equal access to all borrowers—and do it NOW."

With PPP rapidly running out of money even as many small businesses say they have not received any funds, Treasury Secretary Steve Mnuchin on Tuesday asked Congress to authorize an additional $250 billion to replenish the program, which is open to businesses and non-profits with fewer than 500 employees.

In a joint statement Tuesday night, House Speaker Nancy Pelosi (D-Calif.) and Chuck Schumer (D-N.Y.) signaled that they would approve the additional small business funding if the legislation also includes more money for hospitals, state and local governments, and the Supplemental Nutrition Assistance Program (SNAP).

Trump said Tuesday that the SBA has processed more than $70 billion in loans from more than 225,000 business that have applied for relief. But as Bloombergreported, "that amount hasn't been given to firms yet, but rather is the value of loans SBA has registered and guaranteed for lenders to complete the process and disburse funds."

In a tweet last week, Rep. Alexandria Ocasio-Cortez (D-N.Y.) accused the Trump administration of providing "concierge service" for big businesses seeking bailouts while forcing small business owners to jump through unnecessary hoops.

Since PPP's launch on Friday, social media and news reports have been brimming with anecdotes from small business owners who say they have struggled to navigate the program as they desperately seek assistance to cover payroll costs amid the coronavirus pandemic.

"Right now, it's just a waiting game," Adam Rammel, co-owner of the Brewfontaine restaurant in Bellefontaine, Ohio, told the Wall Street Journal.

"We don't know when that money is going to hit," said Rammel.

Warren on Wednesday urged Congress and the Trump administration to listen to the concerns of the small business community and take immediate action.

"If anyone has any doubts about what needs to be done, just ask some small business owners," Warren tweeted. "Millions of them have been put through hell over the past two weeks as they scrambled to try to get access to the money they desperately need."