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Paycheck Protection Update for 4/24/2020

April 24, 2020

With yesterday's Congressional approval for an additional $310 billion in Paycheck Protection Program (PPP) loans we are once again initiating our daily blog. As you read below, please keep in mind that time is of the essence for those that will be applying in this round. For those that received funds out of the initial PPP allotment, please keep in mind that the forgiveness of these loans is not automatic. Much care should be taken with regard to documentation and planning with regard to the use of the money. As more information is released with regard to the forgiveness provisions, we will be letting you know.

On Thursday, the U.S. House of Representatives passed legislation to approve the $484 billion Paycheck Protection Program and Health Care Enhancement Act, which includes an additional $310 billion in funding to replenish Paycheck Protection Program (PPP). The PPP provides forgivable loans intended to provide much-needed funding to small businesses impacted by the COVID-19 Pandemic.

The $310 billion for the PPP includes $60 billion in loans to be made by small banks, credit unions, minority-owned banks, and other small lenders. Of that total:

• $30 billion is for loans by FDIC-insured banks and credit unions that have assets between $10 billion and $50 billion.
• An additional $30 billion is for lenders with less than $10 billion in assets. Those include community banks, credit unions, and community development financial institutions, which provide loans to low-income communities and to people who lack access to financing.

Also included in the Act is an additional $60 billion for the Economic Injury Disaster Loan (EIDL) program, which provides working capital loans of up to $2 million that small businesses may use to pay fixed debts, payroll, accounts payable, and other bills that can’t be paid because of the impact of a disaster. The interest rate is 3.75% for small businesses and 2.75% for not-for-profits. Of that $60 billion, $10 billion will go to small business grants of up to $10,000 for disaster relief that do not have to be repaid.

The Act also includes $75 billion for hospitals, and $25 billion to expand COVID -19 testing.

The majority of the first round of funding of $349 billion was on a first-come, first-serve basis, through your local bank and was exhausted in 13 days. While it is not clear when this next round of funding will become available, we urge businesses to not delay in taking action before the rush to apply begins and contact your bank as soon as possible. Your banker can put you in the best position to understand what paperwork will be needed to get you in line quickly.

We also suggest that you model the impact the PPP funds would have on your operations. Consider what the forgiveness amount might be and put a plan in place to track expenses. With the limited information currently available on the forgiveness provisions, we are emphasizing that you exercise caution in planning for the use of the funds. We are available for assistance as needed.