Another $310 billion is being added to the federal government’s Paycheck Protection Program so that lenders can offer more forgivable loans to small businesses.
The loan program – which the Small Business Administration had to shut down on April 16 when the first $349 billion tranche ran dry in less than two weeks – will open again on Monday at 10:30 am, according to a statement from US Treasury Secretary Steven Mnuchin and SBA Administrator Jovita Carranza.
The loans, which are part of the government’s coronavirus relief package, don’t have to be paid back if they’re immediately used to meet pre-crisis payroll expenses
Here’s what you need to know:
I’ve already applied. Do I have to apply again?
You shouldn’t have to if the lender you’ve been working with has been processing your loan application. In some cases, the bank may even have it ready to send for final approval to the SBA.
“The majority of banks continued processing applications after PPP funds were exhausted in anticipation of additional funding. Once SBA reopens the program, those pending applications should be processed in the order they were approved by the bank,” a spokesman for the Consumer Bankers Association said.
While it may be tough to get through, try checking with your loan provider to see if there’s anything more you need to do to expedite the matter.
How likely is it that I will get money during this second round?
It’s somewhat likely if you already applied. The problem is there is a huge backlog of applications that didn’t get approved before the first round of funds ran dry
Estimates of just how many are already in the queue range from 1 million to a few million. Plus, even after the PPP shut down on April 16, many lenders continued accepting new applications on the assumption that Congress would add more money to the pot.
During the first round of lending, 1.66 million applications were approved, according to the SBA. A roughly similar number may get approved in the second round.
“We already believe that pending applications exceed newly appropriated funds. So there is going to be a shortfall requiring an additional appropriation,” said Jaret Seiberg, analyst at Cowen Washington Research Group, in a note to clients.
There is likely to be continued pressure for lawmakers to do more to help small businesses.
I haven’t applied yet. Should I even bother?
Seiberg estimates pre-existing applications could “consume all the new funds by the end of the week.” So new applicationsmight not makethe cut this time. But applying anyway may be worthwhile for a few reasons.
First, there’s always a chance lawmakers may approve a third tranche of funding in the coming weeks and you would be in line for that.
Second, if you’re a very small business – especially in an underserved area, such as a low- or moderate-income neighborhood or rural community – you might consider applying at a lender designated as a Community Development Financial Institution or to a small local community bank or credit union with assets under $10 billion.
That’s because $30 billion of the new funding for the PPP is earmarked for those smaller lending institutions. Even those lenders – who were very active in the first funding round – may have long queues of existing applicants. But it may be worth a shot if you can file before Monday, said Gwendy Brown, vice president of research and policy at Opportunity Fund, a nonprofit small business lender.
And third, even if those lenders can’t get you funding this time, the more small businesses that apply, the more it will demonstrate to lawmakers just how much support will be needed to help small businesses survive, Brown said. “It’s quantifying the need.”
(Here is SBA’s list of approved lenders for the PPP.)
Will public companies still be getting loans from PPP?
There was outrage that some public companies got loans – more than 175 of them, according to a CNN Business analysis.
Some have said they will return the money and more may do so in light of new guidance from the Treasury, which reiterated public companies’ obligation to certify in good faith that they need the money and warned they should be prepared to demonstrate that need upon request from the SBA.
Translation: If you don’t need it, don’t apply. And if you already got a loan, pay it back or else.
“The SBA and Treasury are effectively threatening to bring fraud charges against publicly traded companies who received Paycheck loans. … We believe this will force the majority of publicly traded companies that received Paycheck Protection forgivable loans to return the cash by May 7,” Seiberg said.
It’s still not officially clear what will happen to the returned money – because there are technical issues that have to be worked out. But in a tweet Friday morning, Senator Marco Rubio, chairman of the Senate’s small business committee, said that the money paid back “will be added on to whatever Congress appropriated” for the loan program.
