Paycheck Protection Program (PPP)

PPP Application

By: Jeff Todashi

The Small Business Administration (SBA) is reporting that the Paycheck Protection Program (PPP) has run out of money for most borrowers before its planned end on May 31, 2021.  Going forward, the program will only accept new applications from community financial institutions, which typically serve minority borrowers, as about $8 billion in funding was set aside for such businesses.  The SBA will continue to fund outstanding approved PPP applications from other lenders but won’t accept any new applicants.

The exhaustion of funds, comes just weeks after the PPP was extended through the end of May 2021 to allow borrowers more time to apply for the forgivable loans. While many lenders and borrowers thought that the program would likely run out of money ahead of the May 31 deadline, the exact timing wasn’t known, so the announcement this week was a surprise.  There are approximately 90,000 applications still awaiting approval.

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 given more than $780 billion in forgivable loans to more than 10.7 million borrowers.  This year, Congress allocated about $292 billion to a new round of the program, allowing some businesses to apply for second-draw loans. In addition, the Biden administration this year relaxed certain rules for borrowers, changed the loan calculation formula for sole proprietors and gave the smallest businesses a priority application window.  The updated rules helped some borrowers who had been shut out of forgivable funding get loans, but also added to confusion and frustration for others who missed out on bigger loan amounts by just a few days. In addition, banks and borrowers also called on the SBA and Congress to make some of the rules retroactive to help more businesses as the U.S. economy opens back up.

In Hawaii, there have been more than 40,000 total PPP loans.  More than $3.7 billion has been paid to Hawaii businesses with the average loan amount being $92,000.  The average number of employees funded was 10.  

The SBA’s Restaurant Revitalization Fund began accepting applications. The program was established in March 2021 as part of the $1.9 trillion stimulus package and was allocated $28.6 billion in funding. In the first 21 days, the SBA will only approve applications from small businesses owned by women, veterans or socially and economically disadvantaged people.   There are worries that the funding won’t be enough to help all the businesses that still need support. In the first two days of the program, 186,200 restaurants, bars and other eligible businesses applied for funding, according to a White House report released Wednesday.

In April 2021, the SBA also reopened applications for the Shuttered Venue Operators Grant Program, which has $16 billion in funding for theater owners and other live venue operators who had to close during the pandemic. The SBA will approve applications in tiers, addressing those with the most revenue loss first.  These programs are especially important for small businesses now that the PPP has been exhausted for most.