Please ensure Javascript is enabled for purposes of website accessibility

Will There Be a Second Round of PPP Loans? Lawmakers Say Yes.

By Maurie Backman – Jul 23, 2020 at 8:01AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Paycheck Protection Program has already saved millions of jobs. But at this point, small businesses are desperate for additional relief.

When COVID-19 first took hold in the U.S., non-essential businesses were largely forced to close, and even essential businesses had to change the way they'd normally operate. As such, a lot of companies -- smaller ones especially -- took a hard hit during the pandemic's early months, with over 100,000 small businesses shutting down permanently in its wake.

Thankfully, relief was made available early on in the form of the Paycheck Protection Program. Under the PPP, businesses with 500 employees or fewer were eligible for a forgivable loan equal to two-and-a-half times their monthly payroll costs. Forgiveness would hinge on spending at least 60% of those loan proceeds on payroll, but for staff-heavy businesses, that was more than doable.

Man typing on calculator while holding small piece of paper

Image source: Getty Images.

When PPP loans first became available, many businesses clamored for them, and much of the program's funds were disbursed in April and May. But at this point, many of the companies that received PPP loans have exhausted those funds, and with the economy still deep in recession territory, it's clear that additional relief is needed. And if it doesn't come through, small businesses may have no choice but to implement layoffs that make our current unemployment problem even worse.

There may be a second PPP round

Recently, Senate Majority Leader Mitch McConnell said that a new stimulus package is in the works that will include a targeted second round of PPP loans for those small businesses that need them the most. That's consistent with a statement Treasury Secretary Steve Mnuchin made last week -- that the PPP's remaining $130 billion could be topped off with additional funds to allow for a second round of loans.

But qualifying for those loans may not be as easy the second time around as it was the first time. During the initial round, businesses were able to qualify for a PPP loan on the basis of general economic uncertainty. Loan applicants did not have to provide proof of lost revenue or canceled contracts to receive funding.

If a second PPP round is approved, it will likely come with more restrictions. Namely, businesses that apply will likely have to show a steady decline in revenue from previous levels so that any remaining funds are targeted toward the companies that need that money the most.

Mnuchin also stated that the Small Business Administration should consider providing blanket forgiveness for PPP loans under a certain threshold that have already gone out. At the same time, any follow-up round of loans should have added safeguards in place to prevent fraud.

Of course, there's still much to be ironed out when it comes to a follow-up COVID-19 relief package, and many small business owners are no doubt eager to get an update soon. If there is indeed a second PPP round, it's still unclear as to how much money companies would be eligible to borrow, and what criteria would need to be met to qualify for loan forgiveness. But the fact that an additional round is being discussed is a step in a positive direction.

The Motley Fool has a disclosure policy.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.