Popular Small Business Relief Program (PPP) Given New Life

As part of the $2.2 trillion coronavirus stimulus package, known as the CARES Act, on March 27, 2020, $349 billion was allocated to small businesses, initially as loans.[1]  The Paycheck Protection Program  ("PPP"), administered through the Small Business Administration, was authorized to provide small businesses with loans to pay eight weeks of salary, benefits and other eligible costs.[2]  Those loans are eligible to be forgiven if a business restores its full-time employment and salary levels by June 30.[3]

Many small businesses (and large as shown in recent headlines[4]) jumped at the opportunity, and within 2 weeks, the PPP funds were entirely depleted.  On Tuesday, April 21, the Senate approved a $484 billion relief package that includes an additional $310 billion for the PPP effort, as well as more funding for hospitals and coronavirus testing.[5]  The House is expected to vote on the bill this week and President Trump has already signaled his support for the measure and is expected to approve it quickly.

While the replenished PPP funds will undoubtedly be helpful for businesses that have been hit hard by the pandemic and unable thus far to secure Covid-19 financial relief, this next PPP tranche is expected to deploy very quickly.  Indeed, most commentators expect the funds to be depleted in days, rather than weeks.[6]  This rapid timeline is thanks to a backlog of applicants from the first tranche and a ready pool of new applicants as lenders have continued to process new claims in the event further funding was appropriated.

Small business owners are therefore encouraged to proactively engage with their bank or lending partners to initiate the application process for the new PPP loans as quickly as possible.

[1] The Coronavirus Aid, Relief, and Economic Security Act (H.R.748) ("CARES Act"), March, 27, 2020.

[2] Id. at § 1102.

[3] Though the CARE Act leaves ambiguity in its guidelines, several parameters have been stated for full forgiveness such as: (1) 75% of the funds must be spent on payroll, (2) No reduction in Full-Time Employees - meaning you must keep your staffing at the same levels from the beginning to the end of the loan period, (3) No reduction in salary of greater than 25% for those making less than $100k, or providing a minimal salary of $100k for those making greater than $100k.  Id. at § 1106.

[4] For example, Shake Shack received more than ten million dollars in PPP funding, but in a widely-reported development, and in the interest of smaller businesses shut out by the first tranche, opted to return or not accept the loan it had been approved to receive.

[5] H.R.266 – 116^th Congress (2019-2020) – Paycheck Protection Program and Health Care Enhancement Act, § 101.

[6] Paul Merski, Group Executive Vice President of Congressional Relations and Strategy at the Independent Community Bankers of America, a small-bank trade organization.