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Small businesses face $2bn cut in latest Covid relief fund


Washington
CNN

Congress plans to take back some of the money it authorized last year for a small business relief program to pay for new Covid-19 vaccines, tests and therapies.

The Biden administration asked Congress to provide more money weeks ago, warning that funds are needed to continue to fight Covid-19. But lawmakers disagree on how to pay for the claim. Senate Republicans insisted that any new funding be fully offset by reallocating money from Covid-19 relief legislation that Congress had previously passed.

A bipartisan deal reached in the Senate earlier this month would fully offset the $10 billion legislation by reallocating a variety of Covid-19 relief funds that were previously authorized by Congress but have yet to be spent.

The majority of these unspent funds came from programs that have already expired. But the deal also proposes to take about $2 billion from a $10 billion program for small businesses that has yet to disburse funds.

“There is a big difference between funds that have not been used and funds that have not yet been deployed,” said Katie Kramer, vice-president of the Council of Development Finance Agencies, a national association dedicated to the development. support for economic development.

The program in question, known as the State Small Business Credit Initiative, provides money to states to help them create small business financing programs. It is a long-term relief program that aims to help small businesses access capital as the economy rebounds, instead of providing grants and emergency loans like others. Covid-19 aid programs.

After months of planning how best to use the money, the threat of the cut puts the states’ plans on ice.

Like many states, Oregon was ready to launch several small business funding programs as soon as it received the money from the Treasury Department. If funds are cut, it could mean big delays.

“What’s frustrating for us is that we’ve been engaging with communities for months, letting them know these resources are coming,” said John Saris, chief financial officer of Business Oregon, the state’s economic development agency. ‘State.

He expected Oregon to receive more than $83 million, enough to potentially reach 1,000 businesses. But if Congress reverses some of the money, the state could see up to $20 million cut, leaving it with resources to help just 700 small businesses.

“With these cuts, we will have to totally revise our plans. Some programs might disappear altogether – that’s how bad it is,” Saris said.

The State Small Business Credit Initiative allows states to create a variety of funding programs for small businesses and startups emerging from the pandemic, including venture capital programs and loan guarantees to lenders, for example.

Governments are required to match a portion of federal funds with private capital, and the Treasury expects the programs to generate small business loans and investments of at least 10 times the amount of the federal contribution.

That means a $2 billion cut in federal funding for the state’s Small Business Credit Initiative could cause more than a $20 billion reduction in private investment for small businesses, according to the Council of Development Finance Agencies.

The state’s Small Business Credit Initiative was originally created in 2010 to help small businesses recover from the Great Recession. The American Rescue Plan Act, which was signed into law by President Joe Biden in March 2021, reauthorized the program and provided $10 billion in new funding.

States had to submit applications to the Treasury in February and tribal governments have until May 11. But no application has yet been approved and no money has been disbursed by the Treasury.

A Treasury official told CNN that the agency’s rollout of the small business credit initiative “has been in accordance with the law and has included outreach, input and engagement with states, tribes, lenders, small businesses and experts, as well as technical assistance to ensure programs are in place to effectively deploy these funds.

The official noted that Congress created new elements for the program that were not included in 2010, including the addition of allowances for tribal governments and socially and economically disadvantaged business owners, as well as a new technical assistance program.

After weeks of negotiating the Covid-19 relief bill, lawmakers went on a two-week recess without voting on the bill. The latest hurdle came when Republicans demanded a vote on an immigration amendment to restore Title 42, a pandemic-era rule that allowed immigrants to be immediately returned to their home countries by invoking a public health emergency.

The bill calls for reallocating several buckets of previously approved Covid-19 relief funds to pay for new health care spending, in addition to money it would take from the state’s Small Business Credit Initiative.

The bill would use nearly $2 billion left over from the Shuttered Venues Operators Grant program, which gave money to concert halls, theaters and museums that have been forced to close for a period of time due to the pandemic. The program stopped receiving applications in August. It has awarded over $14 billion in grants.

The bill would also reuse about $900 million left over for the Covid-19 Economic Disaster Loan Advance Program, which allowed some small businesses to receive up to $15,000 that didn’t have to. need to be reimbursed. The program would have enough money to accommodate pending loan modifications and the recently announced six-month deferral on loan repayments, according to a summary of the bill provided by Senate Democrats.

More than $2.3 billion is believed to come from the Aircraft Manufacturing Jobs Protection Program, which provided funding to companies to cover up to half of their payroll costs for certain categories of employees for up to go up to six months. In return, these companies were required to make several commitments, including not to lay off or involuntarily lay off employees of this group during the same six-month period.

The bill would also use unspent money remaining in the Higher Education Emergency Relief Fund, totaling $500 million. This program provided funds to colleges so they could provide emergency financial aid grants to students whose lives have been disrupted by the pandemic. Another $1.6 billion of unspent funds that were previously going to the US Department of Agriculture would also be reallocated.

Congress could pass the new Covid-19 relief legislation next week after lawmakers return from recess. Spokespersons for Senate Majority Leader Chuck Schumer and Republican Senator Mitt Romney of Utah, who were negotiating the funding deal for Republicans, did not return CNN emails seeking comment. on this story.


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