Senate Majority Leader Mitch McConnell speaking last month on Capitol Hill.
Photo: Susan Walsh/Associated PressWASHINGTON—Top lawmakers said they plan to move within days to provide hundreds of billions of dollars in new funding for small-business loans, citing widespread demand for assistance from firms hit by shutdowns related to the coronavirus pandemic.
Heavy requests for the previously approved $350 billion in loans are pushing Republican and Democratic lawmakers to consider augmenting the program less than two weeks after it became law. Treasury Secretary Steven Mnuchin said he had spoken with congressional leaders about providing an additional $250 billion in funding for loans.
“It is quickly becoming clear that Congress will need to provide more funding or this crucial program may run dry. That cannot happen,” said Senate Majority Leader Mitch McConnell (R., Ky.), adding he aimed to pass a bill by the end of this week.
With lawmakers out of town, Mr. McConnell will need agreement with Senate Minority Leader Chuck Schumer (D., N.Y.) to pass the measure through unanimous consent or a voice vote.
Lenders have been inundated with applications for the funds since the program launched on Friday. The loans, capped at a maximum of $10 million for businesses with 500 or fewer employees, are intended to cover roughly two months of essential costs, and the government will forgive debt if businesses don’t lay off workers. Many businesses have had to shut down or sharply reduce staffing amid the coronavirus outbreak.
House Speaker Nancy Pelosi (D., Calif.) said on CNN Tuesday afternoon that she discussed passing an “interim package” for small businesses with Mr. Mnuchin. She said House Democrats would look to include measures aimed at equitably distributing the money.
“The paycheck protection program, which is a very important part of how we help small businesses thrive, really needs money right away, we know that because of the demand,” she said.
While negotiations aren’t yet complete, House Majority Leader Steny Hoyer (D., Md.), said the House could approve additional small-business assistance this week.
The move to quickly approve more funding for small businesses could scramble nascent negotiations on the next round of coronavirus relief legislation.
Earlier Tuesday, Senate Democrats sidestepped the question of whether they would block more money for small businesses in a bid to ensure that some of their priorities, including higher pay for essential workers, are included in the next aid package.
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“This is one of our very highest priorities,” Mr. Schumer told reporters on a call Tuesday, talking about a proposal to boost compensation for health-care workers, grocery clerks, transit employees and other essential workers.
A spokesman for Mr. Schumer said Tuesday he hadn’t heard from Mr. McConnell about the small-business plans.
On Monday, Mrs. Pelosi told the Democratic caucus in a call that there must be more assistance for small businesses and for those who rely on food stamps in the next package, according to multiple Democratic aides. She saw this funding as part of a new bill worth at least another $1 trillion, on top of the $2.2 trillion bill signed into law last month.
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House Minority Leader Kevin McCarthy (R., Calif.) said in a statement Tuesday that the House should move to approve additional funding after the Senate has.
The bid to rapidly put into place more small-business relief could run into difficulty if lawmakers insist on the bill including other relief measures in the bill, rather than in a subsequent one, or otherwise objecting. Any individual lawmaker could stop an effort to pass the bill by unanimous consent.
Senate Republicans who had helped craft the program, including Sens. Marco Rubio (R., Fla.) and Susan Collins (R., Maine), raised alarms earlier Tuesday about the need for more funds in the program. Mr. Mnuchin was set to make a formal request for more funds on Tuesday.
The program got off to a rocky start last week. Many lenders were initially unable to process the loans and cited late guidance from the Treasury Department and the Small Business Administration on final program rules as the cause of the delays. Some larger banks have also prioritized loan requests from their existing customers in an effort to quickly process a high volume of applications.
The loans were initially only available through lenders that already participated in other SBA lending programs, which limited prospective borrowers’ options for submitting applications. The Treasury Department has said it is working to quickly onboard additional lenders.
The Federal Reserve said Monday it would create a new program to finance the loans lenders make to small businesses, freeing up more lending capacity.
A report released Tuesday by the Federal Reserve Bank of New York said that among “healthy” small businesses, about 20% of these firms have enough cash saved to operate normally for two months if their revenue stopped. Among less financially secure companies, those who could operate normally on savings alone for two months fell to 10%. The New York Fed report defines small businesses as those with under 500 workers. Its findings were based on a national survey done in late 2019.
—Amara Omeokwe contributed to this article.
Write to Andrew Duehren at andrew.duehren@wsj.com and Kristina Peterson at kristina.peterson@wsj.com
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