The U.S. Small Business Administration intends to resume taking loan applications Monday for another round of the Paycheck Protection Program.
Legislation that Congress passed this week and President Trump was expected to sign today injects another $310 million into the PPP, which was established to help employers keep employees on the payroll during the COVD-19 pandemic. The SBA went through $349 billion in potentially forgivable loans in the PPP’s first round in just two weeks before halting applications April 16.
Small businesses that missed out on the first round of the PPP and still want to apply should begin contacting their lenders, SBA Great Lakes Regional Administrator Rob Scott said.
Scott expects the SBA to go through the second round just as quickly.
“It’s going to go, obviously, at a fast rate again, and it was a very successful program the first round and we expect it to be successful the second round,” Scott said today in a media conference call.
Congress created the PPP as part of the massive $2.2 trillion CARES Act enacted in response to the COVID-19 pandemic. The SBA approved loans for 1.6 million small businesses nationwide in the first round. That’s as many loans as the SBA processed in the previous 14 years combined.
Loans averaged $206,000 each, with 74 percent of them at less than $150,000, Scott said.
The SBA approved loans totaling $10.38 billion for nearly 43,500 small companies in Michigan in the first round.
Scott expects the initial wave of applications for the PPP’s new round to come from 5,000 lenders nationwide who had applications queued up when the SBA depleted the first round of funding.
“There’s a number of lending institutions that kept taking applications during this period of time that we were waiting for a second round of reappropriation. You’re going to have these lending institutions that are going to be submitting those applications that they’ve had finalized over the past few days since we ran out,” Scott said.
To get money into rural and underserved areas in the second round, Congress targeted $30 billion to federally designated community development financial institutions (CDFIs), plus banks and credit unions with less than $10 billion in assets. Banks and credit unions with assets between $10 billion and $50 billion will get another $30 billion.
The legislation also directed $60 billion in funding to the SBA’s Economic Injury Disaster Loan program Congress set up earlier in the pandemic.
The legislation excluded public companies from participating in the PPP’s next round. National media reports this week cited how large companies such as chain restaurants received millions from the PPP. That included Grand Rapids-based Meritage Hospitality Group Inc. (OTCQX: MHGU), a Wendy’s franchisee and operator of 337 restaurants in 16 states, which received a $29.1 million PPP loan, according to a statement it issued last week.
The U.S. Department of the Treasury on Thursday issued new guidance for the PPP. They guidance states that applicants must “must certify in good faith that their PPP loan request is necessary” and that “economic uncertainty makes this loan request necessary to support the ongoing operations of the applicant.”
“Borrowers must make this certification in good faith, taking into account their current business activity and their ability to access other sources of liquidity sufficient to support their ongoing operations in a manner that is not significantly detrimental to the business,” the Treasury Department guidance states. “For example, it is unlikely that a public company with substantial market value and access to capital markets will be able to make the required certification in good faith, and such a company should be prepared to demonstrate to SBA, upon request, the basis for its certification.”
The Treasury guidance underscores how the SBA quickly set up the PPP and has been making needed adjustments as problems arise and come to light, a process Scott described as “building the airplane as we fly it.”
“The program is not perfect. It’s going to have hiccups here and there,” he said. “Obviously, when you start a new program there are some growing pains. We’ve grown into them and, certainly, we’re prepared for anything and everything that’s going to be coming at us.”
“We’re going to get better and better as we go along.”
News coverage in the small business section of MiBiz is made possible by advertising support from the Small Business Association of Michigan. SBAM is the statewide and state-based association that focuses solely on serving the needs of Michigan’s small business community. This advertisement has no effect on editorial consideration in MiBiz.