On April 21, the U.S. Senate approved legislation authorizing additional COVID-19-related funding, including $310 billion in supplemental funding for the Paycheck Protection Program (PPP). The U.S. House approved the legislation on April 23, and President Trump is expected to sign it tomorrow.
The PPP funding program went live on April 3 and the initial tranche of $349 billion in available funds was exhausted by April 16. Given a significant backlog of small business applicants that were unable to obtain funding in the first round because their applications did not make it through the approval process prior to funds running out, new funds are expected to be depleted in days, not weeks.
To address concerns of smaller financial institutions and borrowers that were unable to find a willing lender, the current legislation has earmarked $60 billion of the $310 billion of funds as follows:
- $30 billion for loans made by insured depository institutions, including Community Development Financial Institutions (CDFIs) with between $10 billion and $50 billion in assets.
- $30 billion for loans made by institutions with assets of less than $10 billion.
Details on how these carveouts will work have not yet been provided.
To address claims that too much funding was allocated to larger businesses, just before the House vote today, the Small Business Administration (SBA) issued new guidance, included as Q31 in its PPP FAQ. The guidance makes it “unlikely” that big publicly traded companies can access this next round of funding for the U.S. government’s small business relief program. It requires companies applying for coronavirus relief funds to certify that the loans are necessary and that they cannot tap other sources of funding. This provision contradicts guidance that was provided in the SBA’s Interim Final Rule and makes it unlikely, in the SBA’s view, that public companies with access to the capital markets as an alternative funding source would be able to participate in the PPP. While the guidance makes it clear that any borrower that applied for a PPP loan prior to the issuance of this guidance and repays the loan in full by May 7, 2020, will be deemed by the SBA to have made the required certification in good faith, the SBA, along with other government officials, have encouraged larger, publicly traded companies to return the proceeds of loans granted in the first round of PPP funding.
See Protiviti’s most recent Flash Report for additional details on the PPP. We will continue to update this document as more information becomes available.