Paycheque Protection Program May Run Out of Money Before May Deadline
Customer Tamara Jenkins tries on a hat with Meeka Robinson Davis, owner of One-Of-A-Kind Hats, at the Windsor Hills neighborhood store in Los Angeles on November 24, 2020.
Patrick T. Fallon | AFP | Getty Images
Small businesses are realizing that they may not have a lot of time to use the paycheck protection program as they expected.
It is because the money is running out.
Lawmakers have overwhelmingly supported the extension of the PPP last month, extending the May 31 deadline to May 31. The program, which was established by the CARES Act last year to provide small businesses with loans that are forgivable if they are primarily spent on payroll, reopened in January for a second round with more than 284 billion dollars in funding.
The US bailout adopted in March allocated an additional $ 7.25 billion to the PPP, bringing the total to nearly $ 292 billion.
As of April 5, the Small Business Administration, which oversees the program, approved nearly 4 million PPP loans worth about $ 224 billion, according to the agency. That means there is about $ 68 billion left.
The idea of money depletion had not been a major concern, at least in this cycle of the program, just before the extension passed. In a March 24 hearing before the Senate Committee on Small Business Entrepreneurship, Patrick Kelley, associate administrator of the SBA’s Office of Access to Capital, noted that there was about $ 79 billion left in the PPP. , which would be sold out by mid-April if applications continued at a similar pace. pace.
In addition, at the time, the SBA had approximately 190,000 loans that were held to resolve outstanding application issues, which further reduced the remaining funds.
“This program is not going to, you know, continue until May 30, because the money is going to run out,” said Erik Asgeirsson, president and CEO of CPA.com, the business and technology arm of the company. ‘American Institute of CPA. . “I don’t think anyone knew the money would run out until the SBA made this announcement.”
The bumpy road of PPP
The program, although it has helped millions of businesses keep their employees on their payrolls, has been plagued by problems from the start, thanks to its rapid rollout. The first round was quickly used up, and the money mostly went to bigger and more established companies, leaving out the most vulnerable.
When the second round opened in January, small businesses were able to better access finance, but processing times took longer as the SBA implemented new rules to fight fraud.
And, other changes have led to more confusion. In February, the Biden administration announced program eligibility updates, a new loan calculation formula for sole proprietors and a two-week priority application window for businesses with less than 20 employees.
The aim was to help smaller businesses, which are mostly owned by women and people of color, to access forgivable financing. But the timing of the adoption of the new rules gave companies little time to take advantage of it. Also, sole proprietors who applied before the loan recalculation was announced were upset because the difference could be. thousands of dollars in forgivable funding.
The extension of the program gave these smaller businesses more time to apply for the loans. Ending it too soon, or not allocating more funds, would mean more the most vulnerable companies would be left behind.
“We’re finally at a point of equity for our hardest to reach and most underserved businesses,” said Rebecca Shi, executive director of the American Business Immigration Coalition, which calls for more funding as well as a loan. retroactive. ups “for sole proprietors.
Certainly, there are signs that the economy is improving and emerging from the pandemic. The country added 916,000 jobs in Marchand vaccinations are accelerating. In addition, there are other programs through the SBA that will help small and recently developed businesses, such as the Economic disaster loan.
Yet this is not a reason to end the PPP and its forgivable loans, according to Shi, but perhaps to consider more targeted aid. The pandemic and its economic impact are far from over, especially for small businesses that are not benefiting from the so-called K-shaped recovery, Shi said.
More money, more changes
Now lenders and borrowers are calling for further changes to the program. These include more financing, allowing small businesses to get a second loan, and retroactive the new loan formula for sole proprietorships.
If lawmakers vote to crown the program, it will hopefully be sooner or later, according to Sam Sidhu, chief operating officer of Customers Bank in Wyomissing, Pa.
“When you feel like you’re running against the clock, it creates that anxiety that was there in April of last year, that is, ‘I’m not going to get this money,’ Sidhu said. His estimate is between $ 100 billion and $ 150 billion of dollars would probably be enough funding for the PPP to reach May 31 with some money left over.
In the meantime, companies that wish to take advantage of the program – especially those that have not received PPP money – should apply as soon as possible.
“Businesses don’t know they have to hurry, but they better hurry,” Asgeirsson said, adding that he was also concerned that lenders would start shutting down their platforms as the money sank. ‘out of print. “It will freak people out.”
Sarah Foster, 49, runs a jewelry and design store in Prescott, Ariz., And is one of the sole owners who would have benefited from the new loan formula. Foster applied for a second P3 loan as soon as she could this year and got around $ 5,250 in March.
Sarah Foster applied for a second PPP loan as soon as she could. If she had waited, her loan could have been around $ 9,000 higher under the new rules.