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PPP Program Is Out of Funds -- But Firms Should Keep Applying

Rodrigo Sermeño, The Kiplinger Letter

Less than two weeks after the program's debut, the $349 billion allocated for the Paycheck Protection Program has been spoken for.

Congress and the White House are arguing about authorizing more funding to the PPP, and the Small Business Administration has stopped accepting applications.

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But small businesses affected by the COVID-19 pandemic should continue to apply.

If you have already applied for a PPP loan through your lender, your loan application may already have a place in the SBA's approval queue. Some lenders are still accepting applications or are at least collecting information from prospective borrowers so it's a good idea to get a place in the queue before additional funding is approved and the SBA restarts processing PPP applications.

Why? The terms are just that good. The Paycheck Protection Program will provide capital to small businesses without collateral requirements, personal guarantees or SBA fees. All loan payments will be deferred for six months but will accrue interest during this period. The SBA will forgive the portion of the loan that is used to cover the first eight weeks of payroll costs, rent, utilities and mortgage interest. Businesses must keep their workforce largely intact during that period to qualify for loan forgiveness. No more than 25% of the forgiven amount can be used for non-payroll costs. Loans can be up to 2.5 times the borrower's average monthly payroll costs or up to $10 million. The interest rate will be fixed at 1%.

It's widely expected that Congress will authorize more funding to the PPP in coming days. Congress and the White House are currently in negotiations about providing more funding to the SBA. Even if you can't find a lender that is currently accepting applications, it's a good idea to prepare your application (the form can be found here) and collect your documentation so that you're ready when Congress appropriates more funding.

Congress will also likely provide more funding for SBA disaster loans. As of April 16, the SBA is no longer accepting applications for the Economic Injury Disaster Loans program. The CARES Act broadened the EIDL program maintained by the SBA. The CARES Act significantly expanded the disaster loan eligibility and may provide emergency cash advances that may qualify for forgiveness if used for paid leave, payroll maintenance, meeting higher supply chain costs and other qualified expenses. Those applying for a disaster loan can receive a cash grant of up to $10,000 within three days of applying for the loan. There are restrictions on businesses that receive the loans. Small businesses must apply for the loans directly with the SBA.

For those needing help to keep up with payments on your current SBA loan, the agency's Small Business Debt Relief program could help. The program provides immediate relief to small businesses with non-disaster SBA loans, such as the SBA's 7(a) and 504 loans and microloans. Under the program, the SBA will cover all loan payments on existing loans, including principal, interest, and fees, for six months. If you have more questions about your current SBA loan you can contact your loan servicing office.

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