New Small Business Loans: Can They Meet Demand?
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What is the main topic discussed in this episode?
Here's your money briefing for Thursday, April 23rd. I'm J.R. Whalen for The Wall Street Journal. Last week, the federal rescue package for small businesses ran out of money amid huge demand. Later today, the House is expected to approve a $320 billion expansion to the loan program. But many lenders and small businesses fear that still may not be enough.
How urgent is demand for the new $320 billion small-business loan package?
The Paycheck Protection Program is really a measure that is meant to keep businesses afloat for about eight weeks. And so some lawmakers are saying we need to start thinking about what small businesses are going to need when it's actually time to reopen. And they're saying that the Paycheck Protection Program has kind of almost run its course.
That's Wall Street Journal reporter Amara Omokwe.
Why did the initial Paycheck Protection Program funding run out so quickly?
Coming up, she'll discuss the expectations for the new round of funding and some of the bugs in the original plan that people hope have been ironed out this time around.
The U.S. House is expected to approve a new $320 billion small business loan package later today. But lawmakers and businesses already fear that amount may not meet the demand. Wall Street Journal reporter Amara Omokwe is with us to discuss. So, Amara, what kind of demand is expected for the second round of small business loans?
Lenders and small business advocates are expecting very strong demand. They expect that for a couple of reasons. One, even before the program's initial funding ran out, lenders were saying that they had a very large backlog of applications. And they have continued to compile those applications even during this funding lapse when they couldn't submit those applications to the SBA.
What application backlogs and borrower groups will drive demand in round two?
So that backlog has grown even larger. Another thing is that independent contractors and sole proprietors were only able to apply to the program for a few days before the funding ran out. So during the next round, they're expected to really pile on to the demand that is expected.
What were the obstacles that businesses faced when they tried to apply for loans the first time around?
Businesses were reporting a lot of obstacles. One thing that happened was that when the program initially opened up, some of the banks were saying that they only wanted to process applications from their existing customers. So for those customers that didn't necessarily have a relationship with the bank, they were kind of shut out. Another thing that businesses were reporting was just a lack of communication. And I think a lot of the lenders were just really overwhelmed by the volume of applications that they were seeing that they couldn't even really kind of get back to applicants and let them know what was happening with their applications.
What obstacles did businesses and lenders face during the first application round?
And then, of course, the funding ran out. And so everyone whose application was kind of sitting at their lender for it to be processed, they didn't get it in in time before the funding closed. So they're kind of just in the queue for when the funding reopens.
Plus, the banks had to ramp up their processing speeds.
The banks had to sort of get their technology in order. They had to understand the guidelines that were coming out from the Small Business Administration and the Treasury Department. And those guidelines actually came out kind of piecemeal. They kind of trickled out. So every day leading up to the launch of this program on April 3rd, Lenders were pretty much getting a new piece of guidance that they then had to process and understand how it was going to work.
Could the new funding shift support from large chains to smaller local businesses?
So the lenders themselves have said, you know, the process of ramping up was really difficult for them. And of course, those difficulties translated into difficulties for the applicants.
And I guess if you consider this small business lending 2.0, do you think there might be a reset of the line between smaller and larger businesses looking for assistance?
I think that some of the smaller businesses and some small business advocates are definitely hoping for that. There was a lot of backlash for some of the bigger brands like Roots Chris and Shake Shack that participated in the program during the first round.
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Chapters
7 chapters
1
What is the main topic discussed in this episode?
0:05–0:26
2
How urgent is demand for the new $320 billion small-business loan package?
0:26–0:48
3
Why did the initial Paycheck Protection Program funding run out so quickly?
0:48–1:48
4
What application backlogs and borrower groups will drive demand in round two?
1:48–2:44
5
What obstacles did businesses and lenders face during the first application round?
2:44–3:25
6
Could the new funding shift support from large chains to smaller local businesses?
3:25–4:42
7
Is this $320 billion tranche likely the final round and what comes after PPP?
4:42–5:03
Speakers
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