Covid-19 Small Business Lending Program PPP reopens January 11th

The paycheck protection program for forgivable loans reopens Monday, the Trump administration said as the federal government steps up its efforts to save jobs and help companies weather the coronavirus pandemic and related lockdowns.

The program, administered by the Small Business Administration and Treasury Department, will initially reopen to first-time borrowers, with second borrowers being eligible to apply on Wednesday.

Only community-based lenders, such as community development financial institutions and minority deposit institutions, are allowed to process loan applications for at least two days after the program reopens. Trump administration officials said other lenders would follow soon, but did not say when.

Congress approved $ 284 billion last month to grant forgeable credits to small businesses under its broader $ 900 billion coronavirus relief act. The new iteration of PPP will be much smaller than the original, which spent $ 525 billion between April and August, and more closely focused on smaller companies that can show the need.

The reopening of the program comes at a crucial time for many small businesses that have been hit hard due to the economic consequences of the coronavirus pandemic and a resurgence of cases this winter. The National Federation of Independent Business, a small business advocacy group, conducted a survey of its members in early December and found that 45% of nearly 600 respondents would apply for or reapply for a PPP loan if the program reopened.

The paycheck protection program is designed to provide lifelines to businesses like the Yankee Tavern in New York City in August.


Frank Franklin II / Associated Press

The relaunch will be “a little rocky,” said Dan O’Malley, CEO of Numerated, a technology company that is working with around 120 lenders to process the new round of applications. “It’ll be faster than we want,” he said.

Lenders were still waiting Friday morning for the SBA and the Treasury Department to release updated borrower application forms, O’Malley said. An administration official said forms would be released shortly.

Still, Mr. O’Malley said that lenders have learned from their experience with the bumpy start of the program In April. “We’ve been here before,” he said. “We’ll get through this.”

Granting initial access to community lenders only is one of several steps the SBA said it took “To ensure better access to PPP for minority, underserved, experienced and women-run businesses.”

During the first iteration of PPP, smaller businesses and those that had no existing lender relationships were created initially had difficulty accessing the program, and the Inspector General of the SBA chided the agency for not providing guidance to lenders across underserved and rural markets.

The SBA will take steps to verify applicants’ identities and details before granting loans, senior administration officials said, a departure from the program’s first run that means borrowers will have to wait longer for approval.

The relaunch of the program is aimed at both borrowers who missed the first round and those who have already received a PPP loan and need another one. Borrowers are only allowed to get a second PPP loan if they can demonstrate that gross earnings decreased 25% during a quarter in 2020 compared to the same quarter in 2019. No loss of revenue had to be proven during the original term of PPP.

Second time borrowers can use 2020 annual tax returns to show a decrease in gross income. Additionally, borrowers taking out a second loan of $ 150,000 or less are not required to provide documentation showing a decrease in gross earnings until they submit an application for waiver.

“I wouldn’t be in business now if I hadn’t received this money.”

– Max Monks, restaurant owner in the Cincinnati area

Second loans are restricted to borrowers with 300 employees or fewer and capped at $ 2 million, compared to a limit of 500 employees and a maximum loan of $ 10 million previously. First-time borrowers are subject to the original rules.

Loans granted by financial institutions can be waived if borrowers meet certain criteria, such as spending the majority of the funds on payroll. Some non-profit organizations, the self-employed, and independent contractors are also eligible.

Trump administration officials said they believe the funds approved for the new round of the program will be enough to meet demand. More than 5,000 participating lenders issued 5.2 million loans in the first round of the program.

The program provided a lifeline for many small businesses and others this past spring and summer, allowing them to keep workers on payroll and cover some overheads when pandemic bans and restrictions went into effect. Many recipients have since used up the funds, so that some employers can no longer keep employees.

Gusto, a small business benefits and payroll platform, conducted an analysis of more than 37,000 users who received PPP loans and found that they were borrowers likely to cut jobs at the end of the period during which they can accumulate excusable expenses under the program. The analysis found that workers were 25% more likely to lose their jobs within the week that the forgivable deadline ended.

Max Monks, owner of Habanero and Mad Monks Pizza Company restaurants in the Cincinnati area, said he was thrilled to hear about the second round of PPPs. Sales at his restaurants were down 61% and 50% in 2020 compared to 2019, he said. He added that his initial PPP funding, which totaled about $ 72,000, was critical.

“I wouldn’t be in business now if I hadn’t received this money,” said Monks.

According to analysts, up to four million small businesses could be lost in 2020 as the pandemic takes its toll on the local economy. WSJ visits Yuma, Arizona, where small business owners say another round of Congressional stimulus may be too little too late. Photo: Adam Younker for the Wall Street Journal

Write to Amara Omeokwe at [email protected]

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