As part of the CARES Act, $349 billion dollars was originally allocated to small businesses, initially as forgivable loans through the Paycheck Protection Program. Within 13 days, those funds were completely exhausted – with many applicants frustrated in even getting their application completed or submitted. This past Tuesday, April 21, the Senate passed a measure that will inject another $310 billion dollars into the Paycheck Protection Program. The House passed the bill on April 23 and is expected to be signed by the President on Friday, April 24.
This second round sets aside money specifically for community based financial institutions to better reach minority owned and rural area small businesses. In addition, the new round of funding will also add money for grants and loans under the Emergency Economic Injury Disaster Loan (EIDL) program administered by the U. S. Small Business Administration. However, remember that the disaster loan program does not have a forgiveness feature and requires personal guarantees for loans greater than $200,000 and require collateral.
These new funds are expected to go just as quickly as before as many institutions are still processing applications from the first round that were approved to be funded, as well as a backlog of applications already in queue.
Steps you should take:
- Contact your bank. Some institutions are not accepting new applications until those already in queue are approved. Other institutions are taking applications now to be submitted once the next round is approved. It is also important to understand how your application will be prioritized by the bank.
- Establish a relationship with a smaller lending institution or community bank. Make inquiries into multiple institutions to determine which one can best serve you. Bear in mind however that only one institution can transmit your loan application to SBA.
- Have all your necessary information and documentation ready to go as soon as the application process begins again. Your bank can provide you with the list of documents and information that you will need to submit.
This second round of PPP funding and any changes to the SBA rules implementing are not final and are still evolving, so stay tuned to further BHMK updates that impact our small business clients and their employees.