The Paycheck Protection Program reopened on Monday with $284 billion in funding authorized under the coronavirus relief package passed last month and revamped rules meant to get forgivable loans to the small businesses that need them most while also cutting the fraud and abuse seen when the emergency loans were previously offered. The program has so far provided 5.2 million loans worth $525 billion, the government says.
The relaunched program will initially be available to first-time borrowers before expanding on Wednesday to businesses looking for second loans.
The new structure some changes for returning borrowers, including a lower payroll cap of 300 employees, down from 500, and a lower maximum loan amount of $2 million, down from $10 million. Applicants for a second loan will also have to show a drop in gross receipts of at least 25% in comparable quarters from 2019 to 2020, but those looking to borrow $150,000 or less can wait to provide documentation of the hit to their business before applying for loan forgiveness. Borrowers must still spend at least 60% of their loan on payroll to qualify for full forgiveness. Returning borrowers must have used the full amount of their initial loan before getting additional money.
Only smaller community lenders will take applications for at least the first couple of days, a step meant to ensure the relaunched program is available to minorities, women and other underserved communities.
To reduce fraud, the SBA added new checks to verify application information.
The program is scheduled to be open until March 31, and officials say that, unlike the initial round of loans, they don’t expect funding to run out.
Loans for as little as $1: While the average size of Paycheck Protection Program loans distributed so far was just over $100,000, about 300 businesses got $99 or less — and some got just $1, Stacy Cowley reports in The New York Times.
“The profusion of minuscule loans is yet another illustration of how the relief program’s hastily constructed rules sometimes led to absurd outcomes,” Cowley writes. “But lenders and accountants — who have spent months poring over the program’s complicated and frequently revised rules — noted that the relief effort was focused on minimizing job losses, not preserving struggling businesses.”
One self-employed college admissions consultant in New Jersey got $13. “That’s supposed to help my business? It was a joke,” the consultant, Stephanie Ackerman, told the Times.