As of last Friday, President Trump signed legislation providing $484 billion in funding aimed at giving additional support to small businesses and hospitals. Out of this pool of funding, $75 billion will be going towards hospitals to cover care for COVID-19 patients and lost revenue, and $25 billion to developing and expanding COVID-19 testing. The majority of the funds will be aimed towards providing additional relief to small businesses in the form of $310 billion for the Paycheck Protection Program (PPP) as well as $60 billion for the Economic Injury Disaster Loan program. Full text of the legislation can be found here.
The additional funding for the PPP, managed by the Small Business Administration (SBA), could not have come soon enough as funding from the third stimulus package, known as the CARES Act, quickly ran out within two weeks of the program’s launch. With the depletion of funds, the SBA has not been able to process PPP applications. The probability that backlogged application processing will quickly shrink this new pool of funding at an increased rate is a very real expectation.
Funding under the CARES Act for the PPP also exposed blind spots in regulations of the program when it was discovered that national chains and larger businesses were able to obtain funding while other small businesses in need were not. In an effort to ensure funding makes its way to smaller businesses, this new round of funding includes carve outs for smaller lenders who typically service smaller businesses. The new bill sets aside $30 billion for federally insured banks and credit unions with assets between $10 billion and $50 billion to issue in loans to small businesses, with another $30 billion for firms with less than $10 billion in assets to do the same. As with the initial program, these loans will be made available on a first come-first serve basis. The SBA’s website currently indicates that the PPP resumed accepting applications as of today, April 27, at 10:30 AM EDT.
As previously mentioned, the legislation passed Friday also boosts funding by $60 billion made available through the EIDL program. This program provides loan opportunities to small businesses who require financial assistance due to fallout from COVID-19. An advance in the form of a $10,000 grant is made available to those who apply and is not required to be paid back. Similar to the PPP, the SBA ceased processing applications when funding ran out but will now be resuming processing of these applications starting with those already queued in the system and on a first come, first-served basis. Additionally, eligibility for the EIDL has now been expanded to include agricultural enterprises with 500 of fewer employees. For more information on the PPP or EIDL program, please visit the SBA website at www.sba.gov.