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The paycheck protection program is cash strapped for most borrowers. What would you like to know

The paycheck protection program is running out of cash for most borrowers before its scheduled end on May 31, the Small Business Administration said.

Going forward, the program will only accept new applications from community financial institutions, which typically serve minority borrowers, as approximately $ 8 billion in funding has been earmarked for these businesses.

The SBA will continue to fund outstanding approved PPP applications from other lenders, but will not accept any new applicants.

The depletion of funds, which was announced on Tuesday, comes just weeks after the PPP was extended until the end of May to give borrowers more time to apply for forgivable loans. While many lenders and borrowers believed the program would likely run out of cash before the May 31 deadline, the exact timing was not known.

“We were a little caught off guard,” said Sam Sidhu, vice president and COO of Customers Bank, a subsidiary of Customers Bancorp, based in West Reading, Pa. The bank, which processed about 20,000 PPP loans per week. , still has thousands of borrowers who are now stranded in the pipeline, Sidhu said.

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Other lenders also have arrears awaiting SBA approval and more claims than they could have submitted.

Chris Hurn, managing director of Fountainhead Commercial Capital, a non-bank lender, said he had a backlog of more than 60,000 applications awaiting validation from the SBA, and nearly 35,000 more that could be submitted if the portal was not closed.

“Everyone is going to be waiting now to see what the SBA is doing, if anything,” Hurn said.

One year of PPP

The PPP was created in March 2020 as part of the CARES law in response to the coronavirus pandemic. Since its inception, the program has provided more than $ 780 billion in forgivable loans to more than 10.7 million borrowers, according to the latest available data.

This year, Congress allocated about $ 292 billion for a new round of the program, allowing some businesses to apply for second-draw loans. Separately, the Biden administration this year relaxed some rules for borrowers, changed the formula for calculating loans for individual businesses, and gave smaller businesses a priority application window.

The updated rules helped some borrowers who had been excluded from repayable finance get loans, but also added confusion and frustration for others who missed larger loans in just days. Additionally, banks and borrowers have also called on the SBA and Congress to make some of the rules retroactive to help more businesses as the US economy reopens.

Other relief available for small businesses

Even as vaccinations continue and the United States relaxes restrictions, small businesses are still struggling. There are other relief programs available through the SBA, some of which also provide grants to businesses.

The SBA’s Restaurant Revitalization Fund began accepting nominations on Monday. The program was created in March as part of the $ 1.9 billion stimulus package and has received $ 28.6 billion in funding. In the first 21 days, the SBA will only approve applications from small businesses owned by women, veterans, or those who are socially and economically disadvantaged.

There are concerns that the funding may not be sufficient 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 on Wednesday.

In April, the SBA also reopened applications for the Shuttered Venue Operators Grant Program, which has $ 16 billion in funding for theater owners and other venue operators who have had to close during the pandemic. The SBA will approve applications in stages, first addressing those experiencing the most loss of revenue.

These programs are especially important for small businesses now that P3s are mostly exhausted.

“We need to ensure that existing programs such as the Grant for Closed Site Operators, the Restaurant Revitalization Fund and other federal relief funds are delivered quickly and effectively to reach the hardest-hit small businesses, by especially those in underserved areas, “said John Arensmeyer, founder and CEO of the Small Business Majority advocacy group, in a statement Wednesday.

He also said Congress or the SBA may decide to cancel some loans made under other programs, such as economic disaster loans for small businesses.

If you applied for a PPP loan but did not receive approval before general funding ran out and you would like to share your story, send an email to [email protected]

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