States that acted swiftly to request coronavirus relief last month are getting an outsize share of small-business disaster loans compared with those that waited just a day or two longer to make the call.
Connecticut, where Governor Ned Lamont sought a disaster declaration on March 15, got about 20 loans for every 10,000 small businesses in his state, data released by the Small Business Administration on Tuesday show. In Texas, where Governor Greg Abbott made his request just two days later, the results were far worse: His state has won only about 5 loans per 10,000 businesses.
It’s a similar picture across the rest of the country. Together, the states that submitted their requests the earliest, including California and Washington, got 16 loans per 10,000 small businesses. The laggards, including Pennsylvania and Missouri, got 6. The surprising result is evident in loan-approval data through April 20 for the first $5.6 billion of SBA Economic Injury Disaster Loans authorized by Congress in early March. That lending is distinct from the $349 billion Paycheck Protection Program, which offers forgivable loans to cover payroll expenses.
The SBA started offering coronavirus disaster loans to small businesses—those with less than 500 employees—only in states that had requested a declaration. The agency reviewed loan applications on a first-come-first-served basis. And demand for the program was so overwhelming that loan applications from the earliest states swamped the system, crowding out those that became eligible later. By the time the SBA began approving loans in late March, every state had become eligible, but the backlog was like a traffic jam that persists long after the original obstacle is cleared away.
The disparities among states weren’t limited to the first few days of the program. Lending in April also favored states that made their requests early, the data show. The tally of winners and losers looks much the same if states are ranked by the value of loans per capita rather than by number of loans per small business.
Asked about earlier data showing a disparity among states, Carol Chastang, an SBA spokeswoman, pointed in an April 7 email to the sequence of states’ requests. The SBA has not responded to questions about whether it has taken steps to level the playing field. The agency said last week that it stopped accepting new disaster-loan applications because the ones already received would exhaust its $7 billion spending limit. The House is expected to vote Thursday on a bill authorizing an additional $50 billion.
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Most states sought declarations on March 17, the same day the SBA changed its rules, making it easier for states to become eligible. Texas’s governor applied within two hours of getting word of the rule change, according to John Wittman, a spokesman. He referred other questions about the disparities to the SBA.
The list of early-acting governors skews Democratic. Of the 13 states to seek eligibility before March 17, only two were led by a Republican.
A different disparity cropped up in the much larger Paycheck Protection Program, which tended to favor Midwestern states over the coasts for reasons that haven’t yet been explained. Many states, such as California, got an undersized portion in one program and a plus-size helping of the other. Some states, such as Maine, did well in both programs. New York, the epicenter of the coronavirus pandemic in the U.S., fared poorly in both. Governor Andrew Cuomo sought a disaster declaration on March 17—earlier than some and only four days behind the leaders, but long enough to delay billions of dollars in aid over the next month.