Every day counts for Glynis Donnelly, who owns a jewelry store in Tampa, Fla. Ever since the coronavirus outbreak decimated foot traffic to her store, she has been using her savings to pay her eight part-time employees.
“It may not be the most business-smart thing to do,” Ms. Donnelly said, “but I know my employees very well, and I know that they need me as much as I need them.”
The $2 trillion stimulus package passed by Congress late Wednesday, which includes more than $370 billion for small businesses such as Ms. Donnelly’s, could bring much-needed help. The bill will allow banks to lend directly to businesses, and those loans will be backed by the Small Business Administration. And although there are restrictions, some of the terms are less onerous than other programs administered by the S.B.A.
But it could take at least two weeks after the bill is signed into law for the money to begin flowing, and for small business owners — many of whom operate on thin margins — delays could mean the difference between surviving and shuttering their businesses permanently.
Federal authorities know time is tight. Regulators on Thursday released a statement encouraging banks and credit unions to start making small loans to individuals and small businesses immediately, independent of the stimulus.
Ms. Donnelly said she intended to make quick use of the stimulus program to try to supplement her personal expenses. She has $60,000 in savings and plans to dip into her 401(k) plan after that if no other funds are available. Her husband, who works as an ear, nose and throat doctor at a small practice in Tampa, has not received a paycheck in six weeks. The practice stopped paying its doctors to shore up its finances in preparation for the coronavirus’s economic shock, she said, adding that it too could qualify for a loan under Wednesday’s bill.
The stimulus package is offering small businesses S.B.A.-backed loans to pay for basic expenses. They would not have to repay portions that were spent on paying employees, a mortgage, rent or utilities. The banks lending the money would be reimbursed for those portions by the Treasury Department, which is receiving $377 billion to fund the program.
The bill is the latest effort by the federal government to prevent the widespread decimation of small businesses as the virus, which is still spreading, forces people indoors. An earlier stimulus package offered special loans to cover employees’ benefits along with utilities and other necessities while businesses were closed. Modeled after a disaster relief function inside the S.B.A., it requires applicants to deal directly with the small agency.
But the S.B.A.’s website has been so jammed that many users have been unable to complete loan applications, and those who did are told that they will take at least three weeks to process.
Jerry Akers, who with his family owns and runs 27 Great Clips hair salons in Iowa and Nebraska, said his wife spent four hours in the middle of the night this week trying to apply for a $2.7 million S.B.A. disaster-relief loan, to cover 12 weeks of health benefits for 220 furloughed employees. The S.B.A.’s website was so overloaded that she could not send the application until 4 a.m.
Mr. Akers said he hoped the new program would be easier to use. He is also hoping the bank he has relied upon for years can participate.
“We have a banker that we’ve got a great relationship with, but I met with him three or four days ago and he said ‘We’d lend to you hand over fist in normal times, but everything is shutting down and we don’t know what that means for you yet.’”
Under the new program, individual lenders will be able to use their own paperwork to process loans and can expect S.B.A. approval within two weeks. Banks will not disburse the loans until the S.B.A. assures them that each is fully guaranteed against default.
Unlike other S.B.A.-backed loans, business owners won’t have to provide personal guarantees or use all their available assets — from real estate to equipment — as collateral. There are no fees, and interest rates are capped at 4 percent.
“Because of the scale of this effort, it really has to work,” said Paul Merski, a lobbyist for the Independent Community Bankers of America, a trade group.
Lending conditions are complicated by the fact that normal paperwork is harder to complete. Social distancing makes it difficult to get forms notarized, and appraisers are not visiting properties to inspect them. Lenders and state officials are finding workarounds; for instance, New York now allows notaries to complete their work through a video connection.
That’s another waiting period that could cripple small-margin operations like restaurants, many of which only have cash to sustain themselves for two weeks, said Karen Harned, executive director of the National Federation of Independent Business’s small business legal center.
The program comes with restrictions: Loans are limited to $10 million, to businesses with 500 employees or less. Loans to cover salaries of over $100,000 a year wouldn’t qualify for forgiveness, and businesses must demonstrate that they had not recently laid off employees, or a smaller amount of the loan would be subject to forgiveness.
Businesses would not have to repay loans covering up to eight weeks worth of payroll expenses. That means that once businesses receive their loans, a new clock will begin to tick: They’ll have to use the money within two months to avoid repaying it; they also can’t pay any employee more than $10,000 in those two months if they want that amount to be forgiven.
Michael Muscarella, who runs Dog Services, a kennel in Richmond, Va., plans to apply to fund his payroll. In late January, he and his partners met to prepare for the coronavirus outbreak and decided to pay employees through the end of April.
One of its three kennels is still open and caring for the pets of those fighting the virus, such as health care workers and emergency responders. But many of its employees have stopped showing up to work.
The business employs as many as 60 people and pays $14 an hour. Mr. Muscarella said he would use a loan to give low-wage employees an incentive not to abandon their jobs, as home delivery services like Amazon and GrubHub begin to lure workers away.
“I’ve got to find a way to keep them loyal to me,” he said.