The federal program designed to keep small businesses afloat during the coronavirus pandemic still has billions of dollars available to lend, and officials think a good chunk of the money could go unclaimed.
Congress has made about $660 billion available to small businesses for loans and grants through the Paycheck Protection Program. The first round of funding of $349 billion was snapped up quickly, with the program running out of money in less than two weeks. But the second round of $310 billion has been claimed far more slowly, and as of Tuesday there was still more than $130 billion left in the PPP fund.
Worries about the rules: Designed to help small businesses keep their employees on the payroll, the PPP was rushed out the door by lawmakers as the economy imploded in March, and participants have complained about what they see as overly restrictive rules, as well as uncertainty about who will qualify to have their loans converted into grants. Those issues, along with a public outcry over publicly traded companies benefiting from the program in the first few weeks, pushed some borrowers to return their money.
Treasury Secretary Steven Mnuchin told a Senate panel Wednesday that roughly $12 billion had been returned to the PPP. On some days last month, more money was returned to the program than was lent out, The New York Times reported. The returns leave the total of approved loans at about $511 billion.
New rules could help: Congress passed a law that eases some of the regulations in the PPP, including an extension of the time period for using the loans to 24 weeks, up from the original eight weeks. Borrowers also now have more flexibility on how to use the borrowed money, with more spending on overhead rather than labor costs, and still qualify to have their loans forgiven. Mnuchin said he expects the relaxed rules to help bring more small business owners into the program and accelerate the distribution of the loans.
But it may be too late: Many small business owners have already decided that the program — which has provided loans to more than 4.5 million companies — is too much of a risk, possibly saddling them with loans that would need to be repaid even if business conditions remain depressed. Given the chaotic rollout of the program, and the instability of its rules and requirements, it’s likely that billions of dollars will remain in the PPP when the government stops processing applications after June 30.