The U.S. Small Business Administration will begin processing the second round of federal Paycheck Protection Program applications on Monday.
U.S. SBA regional administrator Robert Scott spoke to the media on Friday as President Donald Trump was signing the new stimulus package, which includes $484 billion in additional relief to be disbursed through multiple federal programs intended to mitigate the economic distress caused by social distancing mandates to fight the coronavirus pandemic.
The second round of federal stimulus funding appropriates $310 billion to the PPP, $50 billion for the Economic Injury Disaster Loan program and an additional $10 billion for the EIDL cash advance program. Additionally, Congress appropriated $75 billion to support hospitals and $25 billion for coronavirus testing.
Of the $320 billion in additional PPP funding, $60 billion is set aside to target community-based and small lenders – half the funds will be allocated to lenders with $10 billion or less in assets and the rest will be set aside for lenders with between $10 billion and $50 billion in assets.
Several large public companies and organizations received backlash after accepting PPP funding, which was intended to support small businesses. Scott admitted there were businesses “that probably shouldn’t have gotten it,” he said.
However, interim rules provided to lenders within the last 24 hours specifically address those larger pubic companies and organizations who should not have been eligible for PPP, he said.
“Obviously, there’s still more work to be done,” Scott said. “A lot of details are still being ironed out daily by the SBA, treasury and the policy makers in D.C.”
There are a few examples of large companies who received PPP funding, but decided to return those funds after receiving criticism. Scott said these cases only account for 1% of the total funding that was disbursed through PPP. Returned PPP funds will be brought back into the pot of overall PPP funding, he added.
“Is the program perfect? No, but I would say overwhelmingly the funds have been used for what it was intended to do,” Scott said.
Several businesses whose applications were not processed through the first round of PPP funding say they have been given a number in a long line of pending PPP applications. While there is nothing under the law forbidding a borrower from submitting multiple applications, only one application per borrower can be processed through the SBA’s E-Tran system.
For example, if a business owner submitted two PPP loan applications to two different lenders, whichever lender submitted the application to SBA first will be the application that is processed. Based on Scott’s comments, it appears as though businesses could shop around for different lenders to see which lending institutions “may be able to provide better customer service,” Scott said.
The PPP program is also under a lot of scrutiny with some claiming that lenders are displaying favoritism when selecting which borrower will have their application submitted first. Although Scott said Congress has discussed favoritism as an issue, nothing has been done to address the issue.
“There was nothing in the law and nothing in our regulatory authority under the U.S. SBA that would allow us to force a bank to do first-come first-serve or categorize them under need – that is up to the lender,” Scott said.
A total of $349 billion was allocated for the first round of the PPP program. These funds were pushed out in 14 days, which equated to more than 14 years of processed loans for the SBA. A total of 5,000 lenders nation-wide offer the PPP and approximately 1.6 million loans were approved nationally.
The average loan size was $206,000 with 74% of total PPP loans approved having a loan size of $150,000 or less, Scott said. In Wisconsin, there were more than 43,400 approved PPP loans at a value of $8.3 billion. Wisconsin ranked 14 overall in the country for total funds allocated.
Just how many pending applications there are across the country is unknown. There is a lot of pent up demand, with experts suggesting the second round will run out faster than the first.
“There is discussion in Congress about a round 3 of funding,” Scott said. “Obviously, I think it’s a wait and see type approach to see from the SBA standpoint, how fast we get through this second round of funding.”
