Following approval last evening by the House of Representatives and signature earlier today by the President, Congress has green-lighted an additional $310 billion for the Payroll Protection Program (PPP), a provision under the CARES Act designed to assist small businesses that have been economically affected by the COVID-19 pandemic.
Initially passed in late March, the CARES Act is designed to support American families, small businesses and industries hit especially hard by the coronavirus. In particular, the PPP was established with the goal of providing businesses with fewer than 500 employees loans necessary to cover payroll and some operating costs as social distancing protocols have caused a large percentage of such businesses to shut down or reduce operations. If at least 75% of the loans are used to meet eligible payroll expenses and the remaining funds are used on eligible operating expenses, then the loans will be forgiven.
Applicants began applying for PPP loans when funding became available on April 3. However, the first tranche of funding—$349 billion—quickly was depleted following heavy demand. In still other instances, small businesses without existing relationships at participating banks were disenfranchised from the program. Key aspects of the current round of funding seek to avoid such issues thereby evening the playing field for such businesses. For instance, approximately $60 billion of the $310 billion was earmarked specifically for banks with less than $50 billion in assets.
The new funds are expected to be depleted quickly, so businesses seeking PPP loans should apply as soon as possible while the funds are available. At this time, it is unclear whether Congress will provide any additional funding for the program.
OFP Shareholder Michelle DiCintio provides an overview of the PPP on our web site, and interested businesses can access the loan application here. It is important to note that the PPP loan application requires, among other things, that applicants certify that the current “economic uncertainty make this loan request necessary to support the ongoing operations of the applicant.” Guidance regarding this provision and others was issued by the SBA yesterday in the form of updated FAQs (see question 31 regarding the “necessity” certification).