Policies & Issues

The Paycheck Protection Program Is Out of Money, For Now

Policies & IssuesApr 17, 2020

The Paycheck Protection Program Is Out of Money, For Now

An additional $250 billion is on the table, but lawmakers have yet to come to an agreement.

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The Paycheck Protection Program, which offers forgivable loans to small businesses to cover payroll costs, has run out of money.

Washington—The Small Business Administration’s Paycheck Protection Program has run out of money, halting the acceptance of new applications.

The SBA announced the development on its website Thursday, noting it is “unable to accept new applications for the Paycheck Protection Program based on available appropriations funding. Similarly, we are unable to enroll new PPP lenders at this time.”

The program, approved by Congress and signed into law by President Donald Trump last month, is part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which will provide $2 trillion in aid to keep businesses afloat during the coronavirus pandemic.

The PPP has run through the $350 billion in available funding after applications poured in from small business owners struggling amid the shutdown.

The program offers forgivable loans to cover up to 250 percent of payroll for small businesses with 500 or fewer employees.

The program’s rollout was rocky, fraught with administrative and technical issues for both banks and small businesses, from system crashes to a lack of direction from the federal government.

As frustrations and the application pile grew higher, it was expected that the well would run dry.

The SBA said Wednesday it was reaching capacity with more than 1.3 million loans having been approved for more than $296 billion.

By Wednesday evening, more than $315 billion in loans had been approved, a source told CNBC.

Additional funding may be on the table, but Democratic and Republican lawmakers are not yet in agreement as to what the new funding package will look like.

Last week, Senate Democrats blocked a Republican attempt to put another $250 billion into the loan program, wanting the measure to include more funding for hospitals and states.

In a joint statement issued Wednesday, Treasury Secretary Steven Mnuchin and SBA Administrator Jovita Carranza said: “We urge Congress to appropriate additional funds for the Paycheck Protection Program—a critical and overwhelmingly bipartisan program—at which point we will once again be able to process loan applications, issue loan numbers, and protect millions more paychecks."

Staff for House Speaker Nancy Pelosi (D-Calif.) and Senate Minority Leader Chuck Schumer (D-N.Y.) were expected to speak with Mnuchin and his department Thursday, several sources told Politico.

With the program on hold and the funding measures up in the air, small business owners will have to wait to see how the situation unfolds.

During the waiting period, small businesses should take the time to make sure their applications are completed and ready to

go if the program reopens, advised Meredith Wood, vice president at Fundera, a company that connects small business owners with loans.

“Work with an institution that is still accepting applications during this time and do your research to ensure you’re fully packaging your application with no errors,” Wood wrote in an email to National Jeweler.

“I would say around 75-90% of the applications we receive need some form of correction—a missing piece of documentation, the wrong documentation, an incorrect payroll calculation, etc.,” said Fundera founder Jared Hecht in a tweet earlier this month.

In a Twitter thread, Hecht also outlined some of the problems banks and applicants have been facing from “antiquated software” that goes down for hours at a time to issues reaching customer service.

He noted some banks have been prioritizing their own customers when it comes to processing the loans.

“There’s unlimited demand for these loans, so banks want to provide preference to their own customers,” tweeted Hecht.

In a Jewelers of America-led webinar last week, Dentons partner Randy Nuckolls echoed that sentiment, noting if retailers use their regular banks, that may speed up the process.

In a message on its website, Fundera said it has a “high level of confidence” Congress will provide additional funding for PPP and is still accepting and packaging applications to send to its bank partners if the program reopens.

In a tweet Friday morning, Jewelers of America shared a link to a form jewelers can fill out and send to Congress, urging legislators to provide more relief for businesses.

The letter suggests appropriating an additional $600 billion for the PPP and providing additional funding for the Exchange Stabilization Fund, a program used during the coronavirus crisis to provide funding for mid-size to large businesses, which JA said may soon run out of money as well.

“The U.S. Treasury is using its Exchange Stabilization Fund during the coronavirus crisis to backstop new Federal Reserve lending programs aimed at stabilizing credit and money markets,” explained The Brookings Institution, a nonprofit public policy organization based in Washington, DC.

The JA letter also calls for an extension to the PPP, stating: “It is clear that extended public health restrictions and a slow return to normal work will result in small businesses having limited customers and revenue far beyond June 30.”

The CARES Act prohibits the use of relief funds for non-payroll expenses, including rent and utilities.

The letter asks for a change to this rule, as these expenses represent a “significant portion” of a jeweler’s financial obligations.

For more information about the letter, visit JA’s website.
Lenore Fedowis the senior editor, news at National Jeweler, covering the retail beat and the business side of jewelry.

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