Want a Virus Disaster Loan Fast? Easy, If You’re in California

When it comes to federal aid for small businesses, U.S. states are learning a lesson already familiar to shoppers on the hunt for toilet paper: It pays to be first in line.

Over the last nine days of March, the Small Business Administration handed out 1,790 disaster-relief loans, for a total of $357 million, most of it for businesses disrupted by the coronavirus. The data were disclosed April 4 on a government website.

Businesses in all parts of the country were eligible for these so-called economic injury disaster loans, but the data show most of the money went to just one state: California, which got $239 million. A handful of smaller states, including Connecticut and Maine, divvied up most of the rest. Texas, the second-most populous state, got just six loans worth less than $1 million dollars in all; at least a dozen states, including Missouri, Alabama and Iowa, got nothing at all.

The disparity arose because some states were earlier than others to declare disasters, said Carol Chastang, an SBA spokeswoman, in an email. Under the rules for these loans, the SBA began accepting applications only after a state’s governor declared a disaster.

California, Washington, Connecticut and Maine acted earliest, and the agency authorized lending there on March 16. The other states were added over the next few days, with the last joining March 21.

By then, the demand appears to have created a backlog that wasn’t quickly cleared when the money started flowing on March 23. Even on March 31, the latest day for which data is available, the SBA was still making more loans in Maine than in Texas, Florida and New York combined.

Technology problems may be a factor. Business owners around the country reported having trouble completing applications on the SBA website because it crashed intermittently.

Chastang said she didn’t have information about whether the numbers are less lopsided for the first week in April. She said the SBA office that would have that information is “overwhelmed” with processing loans.

Congress originally freed up enough funding for about $7 billion in coronavirus disaster loans, but the stimulus bill passed in late March contained additional funding for the program.

The early results serve as a reminder that a much larger SBA program — the $349 billion Paycheck Protection Program, authorized in the stimulus legislation signed March 27 — may be prone to similar short-term disparities.

That program offers forgivable loans for keeping employees on the payroll. It doesn’t require state disaster declarations. But it does rely on banks to make the loans, and some banks are so inundated that they’re prioritizing longtime customers over new ones.

The SBA computer system that serves lenders crashed on Monday on unprecedented volume, leading to more delays. With many restaurants, shops and other small businesses just days away from insolvency, every day counts.

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