The SBA Paycheck Protection Program (PPP) that is part of the $2.2 trillion coronavirus relief legislation (CARES Act) may run out of money before many small businesses have an opportunity to apply for it.
- JPMorgan COO Gordon Smith said Tuesday that as of 1:00 p.m. on Tuesday, the bank had received 375,000 applications totaling over $40 billion in PPP loans. Smith also said requests ranged from $4,000 to $2.6 million.
- Bank of America CEO Brian Moynihan said Tuesday it had received 250,000 applications since Friday and has over 4,000 specialists working on processing loans.
- White House economic adviser Larry Kudlow said the SBA had approved “$50 billion in loan commitments,” with 178,000 loans being processed.
There is a time delay from when banks receive loan applications for processing and before they are sent over to the SBA for underwriting. This delay accounts for the difference in the reported applications being processed.
These early numbers from two of the largest banks in the U.S. indicate the SBA PPP loan program could run out of money quickly.
Help On The Way
Supporting small businesses during this time of need appears to have bipartisan support, a rarity in Washington these days.
U.S. Treasury Secretary Steven Mnuchin announced on Twitter that he has spoken to leaders of the House and Senate and asked to secure $250 billion in additional funding for the SBA PPP loan program.
At the direction of President @realDonaldTrump, I’ve spoken with @SenateMajLdr, @SenSchumer, @SpeakerPelosi, and @GOPLeader to secure an additional $250 billion for the #PPPLoan program to make sure small businesses get the money they need!
— Steven Mnuchin (@stevenmnuchin1) April 7, 2020
In a statement this afternoon, Senate Majority Leader Mitch McConnell confirmed, “I will work with Secretary Mnuchin and Leader Schumer and hope to approve further funding for the Paycheck Protection Program by unanimous consent or voice vote during the next scheduled Senate session on Thursday.”
Once approved in the Senate, the bill would go to the House for approval and finally to President Trump to sign. The hope is that all this can happen before the SBA has to stop accepting PPP loan applications.
Meanwhile, the Federal Reserve is still working to establish a facility to provide term financing backed by PPP loans to help banks remove the PPP loans of their balance sheets.
This would free up banks to offer more SBA loan assistance through other programs authorized by the CARES Act.
Typically, the SBA only guarantees small business loans. It does not actually fund them as the banks provide the funds from their assets.
Chaotic and Disorganized – But It’s Getting Done
While the SBA PPP loan process seems chaotic and disorganized at times, it important to keep perspective that this program was rolled out in just about a week.
Banks had to get ready to accept applications, and it appears some community banks may have done better than the big banks. But the main application volume will come from the big banks, so they had to work on getting their systems talking with the SBA.
Everyone does appear to be focused on getting the job done to try to save as many U.S. small businesses as possible. There is no doubt that not every business will make it, but this kind of bipartisan resolve has not existed in Washington for some time.
Small businesses are the backbone of the U.S., and for the economy to recover faster after this coronavirus (COVID-19) crisis is over, it will require small businesses to help in that effort. Washington finally has found something to agree on.
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