Small Business Lending Program Resumes Monday Morning: What You Should Know
On Monday at 9:30 a.m. Chicago time, the Small Business Administration is relaunching the hugely popular COVID-19 loan program, with lenders poised to submit a deluge of applications that could quickly consume the new round of funding.
A spokesman for giant JPMorgan Chase told the Chicago Sun-Times the bank was ready to submit at least 150,000 completed loan applications to the SBA on Monday. A further 150,000 applications are already in the queue for the processing of leftovers from the first round.
As the economy continues to melt due to the coronavirus pandemic and some businesses are on hold for more than a month, there is an urgent need for credit through the new government paycheck protection program – known as PPP.
The $ 349 billion originally provided by Congress was used up in two weeks. The SBA stopped accepting loan applications from lenders on April 16.
Last week, Congress replenished the PPP pot with $ 310 billion for loans and just over $ 11 billion to cover lender fees.
Here are some things you should know:
Who is Eligible for the PPP Loan?
The PPP program is aimed at small businesses and non-profit employers with fewer than 500 employees. The financial lifeline grants loans of around 2.5 times the monthly wage costs.
Does the loan have to be repaid?
No, not if the loan is used as intended to keep workers on payroll for eight weeks after the loan is granted and to pay for some operating expenses.
How many PPP loans were given in the first round?
1.6 million loans were approved nationwide. Illinois had 69,893 approved loans totaling $ 15.9 billion as of April 16.
What is expected in the second round?
“We assume that there will be just as many, if not more, applications in this second round of funding,” Nick Simpson, a spokesman for the Consumer Bankers Association, told the Sun-Times on Sunday.
Has anything been done to ensure public companies like Potbelly, Ruth’s Chris Steakhouse and Shake Shack don’t get loans in the second round? Chicago-based Potbelly returned its $ 10 million loan on Saturday.
Yes, on two fronts. The negative press these companies receive about the PPP loan will discourage other companies from applying for the loan as the public shaming is not worth it.
The new SBA guidelines, updated on Sunday, state: “Large companies with sufficient sources of liquidity to support ongoing business operations” must now “confirm in good faith that their PPP loan application is required”.
And just to be sure, the SBA has outlined the intention of the new certification: “It is unlikely,” said the SBA, “that a publicly traded company with significant market value and access to the capital markets will be able to obtain the required certification in good faith Believe and such a company should be ready to provide SBA with evidence of the basis for its certification upon request. “
On Friday, Edelson PC, a Chicago law firm, filed a federal lawsuit against three companies: Chase; the parent company of Ruth’s Chris Steakhouse; and Phunware, a data provider for the Trump campaign on behalf of Sha-Poppin, a Westchester popcorn maker. The lawsuit alleges that inappropriate “institutional clout” was used, which resulted in the popcorn company not receiving a PPP loan. Chase said it had no comment on the pending lawsuit.
Lenders get higher fees for larger loans. What is being done to ensure that lenders do not prioritize beneficiary customers so they can submit their applications to the SBA faster?
Nothing, said Robert Scott, the SBA’s regional administrator for the Great Lakes Region, at a briefing Friday with reporters.
“There was nothing in law and in our regulatory agency under the US Small Business Administration that would allow us to force a bank to come first, first served, or categorize it as needy, or whatever it is; that’s up to the lender, ”said Scott.
To curb the ability of the largest banks – with assets over $ 50 billion – to curb PPP loans, the SBA on Sunday set a cap of $ 60 billion on the loan amount for this round every bank can forgive.
What should an employer do who has applied for a PPP loan that the lender has not submitted to the SBA for approval? Can someone apply to another lender in this second round?
Yes, said Scott. If the lender hasn’t sent your application to the SBA yet, perhaps because more information was needed, it’s okay to go elsewhere.
Any tips for this second round?
Yes sir. Apply to smaller lenders who were at a disadvantage in the first round of PPP. Congress provided $ 60 billion to lenders with assets less than $ 50 billion – Community Development Financial Institutions; Minority depositaries; certified development companies, micro-credit institutions; state and federal credit unions and some community banks. For a list of lenders by state, see https://bit.ly/2yPyjF2.
The second round of PPP funding will be quick and there is no guarantee when or if Congress will add a third round.