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PPP Rides Again: Small Business Bailout Loans Revived This Week

Jan 11, 2021 by Marc Rapport
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Hard-hit small-business people who didn't get in on the first round of the Paycheck Protection Program (PPP) get another chance beginning this week. The U.S. Small Business Administration and U.S. Treasury Department said Friday that they will reopen the program today, beginning the process of distributing $284 billion that was included in the spending and relief measures signed into law on Dec. 28.

The first PPP provided $525 billion in forgivable loans as part of the CARES Act passed soon after COVID-19 threw the job market into a tailspin. The SBA stopped taking applications in August after the money ran out.

First Draw and Second Draw loans included

This time around the program includes First Draw PPP Loans and Second Draw PPP Loans, the latter available to borrowers who met the rules for keeping people employed, a key requirement for forgiving the loans.

The revived program includes $35 billion for those First Draw PPP Loans and $15 billion set aside specifically for community financial institutions.

That's in response to criticisms that a disproportionate amount of the lending business -- which generated millions in fee income -- went to larger lenders and a disproportionate amount of the loans went to large businesses and not enough to minority-owned businesses and economically distressed areas.

The small lenders get to go first, but they've asked for a delay

This time around, the SBA and Treasury say only community financial institutions can make First Draw PPP Loans beginning today and Second Draw PPP Loans beginning Wednesday. "The PPP will open to all participating lenders shortly thereafter," the Friday announcement says.

But there could be a hitch. The first wave of PPP lending was a strain on lenders big and small, and the Community Development Bankers Association (CDBA) has asked that the rollout be delayed to give small financial institutions with small staffs the time to get ready.

"How are we going to do this?" CDBA CEO Jeannine Jacokes told Politico. "For most of these folks, they've got to get everything set up. They've got to get their people trained. It's not flick on the lights. People have to know what they're supposed to do."

Some things have changed and some haven't for this round

The SBA just released the application forms and other information for lenders on Friday. Businesses -- including agencies, commercial developers, and other stakeholders in the real estate investment space -- that already got a PPP loan can get a second if they have no more than 300 employees, will use or have used the full amount only for authorized purposes, and can demonstrate at least a 25% reduction in gross receipts between comparable quarters in 2019 and 2020.

More types of organizations also are eligible this time around, including housing cooperatives, and some borrowers may be able to modify their First Draw PPP loan amount. There also have been changes made in the loans' covered period.

Here is a list of guidance the SBA has released about the new PPP program:

The Millionacres bottom line

As the pandemic grinds on, millions of American jobs and businesses remain at risk, and hundreds of thousands of businesses have already failed: 110,000 restaurants alone, according to the National Restaurant Association.

In the Friday press release, Treasury Secretary Steven Mnuchin said, "The Paycheck Protection Program has successfully provided 5.2 million loans worth $525 billion to America's small businesses, supporting more than 51 million jobs."

A swift rollout, hopefully one that builds on the lessons learned from the first wave of PPP lending, can go a long way toward helping small businesses and the livelihoods that depend directly on them, as well as the millions of investors who have a stake in all this, through either direct ownership or the stock market.

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