Paycheck Protection Program Runs Out of Money
By Diane Giordano, Partner, Tax & Business Services
The U.S. Small Business Administration, which oversees the Paycheck Protection Program (PPP), announced on May 4, 2021, that the program has run out of money. Outstanding loan applications will continue to be processed, but other than those already submitted and being processed, the website is closed to new applications. The program was extended by the President in March and the funds were exhausted shortly thereafter, prior to the deadline.
The PPP was established in March 2020 as part of the CARES Act, in response to the coronavirus pandemic. Since its inception, the program has distributed more than $780 billion in forgivable loans to more than 10.7 million borrowers.
The PPP, with Congressional approval, was considered Washington’s marquee COVID-19 relief program for businesses and nonprofits, which consisted of federally guaranteed loans of up to $10 million for first-time borrowers and $2 million for second-time borrowers. The loans had an application deadline of May 31 and included an interest rate of 1% and are forgivable if certain terms are met.
Industries receiving the greatest number of loans nationwide included hotels/restaurants, construction, healthcare/social services, and professional/technical services. The average loan is $46,000.
The SBA will continue to fund applications that have been approved. New qualifying applications will be funded through Community Development Financial Institutions (CDFIs). CDFIs are nonbank lenders that aid the smallest businesses, some of which are owned by women, veterans or members of minority groups or are in economically disadvantaged neighborhoods. The SBA will no longer accept loan applications from banks.