Paycheck Protection Program Funding Expanded—Here’s What It Means for Small Businesses
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Small business owners who missed out on the initial round of stimulus funding through the Paycheck Protection Program may get a second bite at the apple.
On Friday, April 24, President Trump signed into law a second round of relief funding, including more money for small business owners affected by the COVID-19 outbreak.
The funding package, worth $450 billion, should help to refill the Paycheck Protection Program’s coffers, which saw an initial $350 billion in funding depleted in just two weeks.
PPP Loan Demand Left Many Businesses Without Options
The Paycheck Protection Program (PPP), which launched April 3, is currently set to run through June 30, 2020 without a congressional extension. In a nutshell, it’s designed to help small business owners affected by the coronavirus pandemic by offering loans to keep employees working.
For a deeper dive into the process for applying for a PPP loan, check out our earlier article here.
An estimated 26.4 million Americans have filed for unemployment benefits so far as a result of the COVID-19 pandemic, shuttering businesses nationwide.
The program provides funding in the form of loans backed by the Small Business Administration (SBA). However, loans issued through PPP could be forgivable if:
• Funding is used to keep employees on the payroll for eight weeks, and;
• Loan proceeds are used to cover payroll, rent, mortgage interest, or utilities
It’s estimated that as many as 70% of small business owners in the U.S. applied for loans through the program, according to the National Federation of Independent Businesses (NFIB). Approximately 1.66 million loans were approved before the program exhausted its funding.
While the number of approved loans is encouraging, the program has drawn criticism after several large restaurant chains received multi-million dollar loans. At least one company, Shake Shack, agreed to give the loan back amid complaints that smaller mom and pop businesses were being shut out in the cold.
More Funding Is On the Way for Struggling Businesses
The $484 billion stimulus package passed on April 24 will contribute more money to aid small businesses. Specifically, the new stimulus package provides $310 billion for the Paycheck Protection Program (PPP), with $60 billion of the funds set aside for community banks and small lenders.
In addition, the stimulus package provides more funding for the SBA’s Economic Injury Disaster Loan (EIDL)
program . The program, which also saw its initial round of funding depleted, provides $10,000 emergency advance loans to small businesses directly affected by the coronavirus pandemic. These loan advances are designed to help businesses fill cash flow gaps and do not need to be repaid.
According to the NFIB, 55% of business owners applied for EIDL funding, though only 4% have been approved. Reportedly, no business owners who were approved for funding through the program had received it, as of April 9, 2020.
A smaller amount of funding is included in the stimulus package that isn’t reserved for small business. This funding amount, still totaling in the billions, will go to further coronavirus testing and support struggling hospitals.
While the latest round of stimulus funding is designed to help small businesses, lawmakers are already discussing future stimulus bills. There’s talk of expanding funding to extend help to states as well as essential workers who’ve been affected by the pandemic.
Funding for cities and states would be aimed at offsetting some of the losses associated with falling tax revenues driven largely by ongoing stay at home orders. The Trump administration has countered that extending funding to states could complicate federal plans to reopen the economy.
On April 21, Trump tweeted that discussions will soon begin on “fiscal relief to State/Local Governments for lost revenues from COVID 19, much needed Infrastructure Investments for Bridges, Tunnels, Broadband, Tax Incentives for Restaurants, Entertainment, Sports, and Payroll Tax Cuts to increase Economic Growth.”
Senate Majority Leader Mitch McConnell hinted that the next stimulus package would “likely not be approved until May,” shining light on the national debt as something for lawmakers to keep their focus on.
Small Business Owners Have Other Funding Options
Based on the quickly-drained first round of funding, the new funds now available through the PPP may go quickly. But there are a few other programs small business owners can explore.
If you already have a relationship with an SBA Express Loan lender, you may be eligible to receive up to a $25,000 loan with accelerated underwriting and funding. The SBA is also offering business owners temporary relief from penalties, fees, and interest on existing 7(a), 504, and microloans for six months.
Beyond federal relief options, business owners can look for loans or grants through their state governments, local chambers of commerce, and nonprofits. And it’s important to keep in mind that SBA loans or other small business loans may still be available outside of federal relief options.
Small Business Loan Options with Lantern
SoFi’s marketplace for financial lenders, Lantern, is an option for small business owners looking for relief. With a single application, small business owners can apply to multiple lenders for PPP loans to use towards employee salaries, rent, utilities, and more.
Lantern is owned and operated by SoFi, and searches for options across multiple lenders to find the loan that works best for your financial situation.
SoFi receives compensation in the event you obtain a loan through the Lantern marketplace. The Lantern website is owned by SoFi Lending Corp., a lender licensed by the CBO under the CFL, license number 6054612, NMLS #1121636. Loans may not be available in all states, such as MS.
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