PPP program, armed with more funds, accepting new applicants

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A federal small business loan program meant to offer a lifeline to companies that have seen their revenues dry up during the COVID-19 pandemic will resume accepting applications Monday morning, according to the agency that oversees the program.

Known as the Paycheck Protection Program, applications go live April 27, at 10:30 a.m., according to the U.S. Small Business Administration, after U.S President Donald Trump signed a federal aid bill pumping $310 billion more into the previously-depleted fund.

The loans are capped at $10 million and equal roughly 2.5 times monthly payroll costs. They will be forgiven if businesses use the funds to cover payroll expenses and other operating costs; eligibility extends to companies with up to 500 workers.

Nationally, 1.6 million PPP applications were approved under the first iteration of the program—33,519 from New Jersey, who were awarded a combined $9.5 billion.

“The PPP has … protected over 30 million jobs for hardworking Americans. With the additional funds appropriated by Congress, tens of millions of additional workers will benefit from this critical relief,” reads a joint statement from SBA Administrator Jovita Carranza and U.S. Treasury Secretary Steven Mnuchin.

Federal officials announced they were turning away new applications just two weeks after businesses went through the entire $349 billion originally set aside for the PPP.

That backlog could mean that any overflow applicants from last time could be first in line for this new round of funding – creating yet another backlog, suggested Tom Bracken, president of the New Jersey Chamber of Commerce.

“All those loans that weren’t funded, the applications are still within those ranks, and they just activate those applications, as soon as it’s passed,” Bracken said, calling it a “continuing cycle.”

During that first round, roughly 20 percent of applicants actually managed to get funds and the remaining 80 percent are still waiting, according to a survey released last week from the National Federation of Independent Businesses.

“It is a difficult conversation when a small business owner calls saying their loan wasn’t accepted merely because the funds were depleted and their application wasn’t even processed,” NFIB New Jersey Director Eileen Kean said last week.

Public and private

Carranza and Mnuchin, in turn, said any approved lenders should first sort through existing applications before taking on new ones from additional borrowers.

The Trump administration has fallen under criticism for the seemingly slapdash fashion in which it rolled out the program, along with another COVID-19 federal aid program known as the Economic Injury Disaster Loan.

“I think they’ve finessed the process,” Bracken said. “The second go-around, the application is already in place. The first go-around was a moving target, a lot of the procedures are now in place as they weren’t the first time.”

Many applications that received funds have fallen under public scrutiny and were criticized for not needing the funds – such as Shake Shack and Ruth’s Chris Steak House – because they are publicly traded companies with vast access to considerable amounts of funding.

Those two companies, and many other large corporations, agreed to pay back the loans.

The U.S. Treasury has since told many large, publicly traded companies that were awarded a PPP loan in the first round that they must show in “good faith” they actually need the money, or repay it by May 7.

“It is unlikely that a public company with substantial market value and access to capital markets will be able to make the required certification in good faith,” reads the treasury guidelines.

In order to make sure a decent chunk of money goes through Main Street banks – namely credit unions and community development financial institutions – the SBA is earmarking $60 billion to go through banks with less than $50 billion in assets. Those funds would then be disbursed to individual borrowers and applicants.

“Just by definition, the small banks and credit unions, I think, would be willing to take on smaller-sized businesses,” Bracken said.