Though COVID-19 has hammered the U.S. economy on a whole, small businesses have taken an exceptional beating. As part the CARES (Coronavirus Aid, Relief, and Economic Security) Act, lawmakers initially allocated $350 billion to small business owners in the form of PPP loans. Short for Paycheck Protection Program, these loans are specifically designed to help businesses retain employees, or rehire those who were initially laid off. The best part? These loans are completely forgivable, provided business owners use 75% of their proceeds or more to cover payroll costs.
On Thursday, April 16, however, the program officially ran out of money, leaving countless small business owners in the lurch. Thankfully, a second round of funding was approved late last week, funneling over $300 billion into the program -- almost as much as its initial seed money.
If you missed the first round of funding, it pays to submit a PPP loan application as quickly as possible. But don't delay -- that $300 billion cash infusion is expected to run dry as quickly as the initial round of PPP funding, which means the more you delay, the more you risk getting left out in the cold.
Technical glitches and hiccups galore
A second round of PPP funding was supposed to be good news in theory, but many small business owners came away from the application process just as frustrated as they did the first time around. For one thing, the Small Business Administration's system for processing loan applications reportedly experienced technical difficulties earlier in the week, leaving some lenders with a lag in submitting applications. That puts a large number of small business owners at a real disadvantage, since funding is dished out on a first come, first served basis.
Also, since so many banks were left with backlogs from the first round of funding, it stands to reason that those applications will be processed before new applications are considered. In other words, if you didn't apply for a PPP loan during the first go-round, you may need to wait in a serious line.
Furthermore, while banks are trying to communicate updates to nervous small business owners anxiously awaiting the results of their applications, many are overwhelmed and are, as such, limiting communication to generic messages. Other small business owners are being told that their PPP applications have been received, but that they're waiting in a queue with more than 100,000 applicants ahead of them. Talk about frustrating.
Will there be a third round of PPP funding?
Since there's talk that the second round of PPP funding will disappear just as quickly as the first round, many small business owners are wondering whether follow-up funding is in the cards. Right now, talks of additional funding are mostly speculative, though one thing to keep in mind is that PPP loans themselves are only designed to cover an estimated two-and-a-half months of payroll costs. If the COVID-19 crisis keeps the economy shut down well into the summer months, many businesses that received funding during the first round could easily blow through that cash by then, thereby creating a need for additional help.
Of course, it's too soon to tell when the economy can open back up on a large scale, but if your business is struggling now, drop what you're doing and submit a PPP application if you haven't done so already. Doing so could save your business at a time when so many run the risk of closing their doors on a permanent basis.