Bridge loan program suspended as federal loan funds run low
ROCKFORD — A bridge loan program here has been suspended as a federal lifeline many small business owners were counting on appears to be falling far short of its promise.
Rockford Local Development Corp. CEO John Phelps said he put the bridge loan program on hold. Area banks, the city of Rockford and Sunil Puri of First Midwest Group had together contributed $2 million to a loan pool to help small businesses getting hammered by the novel coronavirus pandemic.
But the federal disaster assistance loans that the small businesses were to have tapped to repay the bridge loans and keep their businesses afloat is already low on funding. And although Illinois applicants have not yet received award letters, the amount of money small businesses are qualifying for in other states is a fraction of what they need, Phelps said.
"This is a total game changer and really a travesty that the (Small Business Administration) and federal government put out there," Phelps said. "It’s like getting pictures of a beautiful condo for your vacation, you get there and it’s a one-room cabin with no running water."
The program was billed by the Trump administration as a way for small businesses to get up to $2 million in federal loans through the disaster relief program and "minimize economic disruption to the nation’s 30 million small businesses."
Now business owners are being told they can only get two months of working capital up to $15,000, Phelps said. They were also supposed to be eligible for grants of up to $10,000 within three days of their application even if denied a loan, but those grants also appear iffy, Phelps said.
A spokeswoman for the SBA did not immediately respond to an e-mail seeking comment.
The Rockford Local Development Corp. already has closed on $900,000 worth of bridge loans that were to be repaid with proceeds from the disaster relief loans. The disaster relief loans were attractive because they could be repaid over 30 years at 3.75% interest.
Among those applying for the federal loans and local bridge loans was Jojo Gendenbaatar, owner of Crust & Crumbles, 116 N. Madison St. who said she had received no updates from the SBA about her loan application.
"It's a problem for everyone," she said in a text message to the Register Star.
U.S. Rep. Cheri Bustos said that although Congress passed the largest relief package in American history, it doesn't go far enough.
"We are continuing to work with the SBA as more details about the administration of loans and grants are coming to light," Bustos said in a statement. "I have been made aware of this issue and will continue to fight to expand much-needed small business services as we weather this storm.”
Phelps is hopeful that Congress will allocate more money for the program. He said that for most small businesses, the disaster relief loan would have been a better option than the Paycheck Protection Program, a separate $349 billion program administered by the SBA that includes forgivable loans if the money is spent to keep employees working for eight weeks. Phelps said the disaster relief loans would have been more flexible and could be spent on a wider range of business expenses.
"They should have said something a long time ago that we either need more money or we are going to have a limit," Phelps said. "Not make people wait three, four weeks and then find out that they are not going to get $300,000 or $500,000, they are going to get $25,000. It's awful. The level of incompetency in our government is startling."
Jeff Kolkey: firstname.lastname@example.org; @jeffkolkey