SEMA eNews Vol. 23, No. 15, April 9, 2020

Congress Intends to Add $250 Billion for Small Business PPP Loans

By SEMA Washington, D.C., Staff

Congressional leaders are negotiating legislation to expand the Paycheck Protection Program (PPP) loan by $250 billion with half of that amount being distributed through community banks.

The PPP loan was a key component of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) which became law on March 27, 2020. The CARES Act provided $349 billion for initial funding to guarantee PPP loans for small businesses through the U.S. Small Business Administration (SBA) that equal up to 250% of a company’s monthly payroll (capped at $10 million), which can be used to cover payroll, mortgages, rent, and other specified expenses. The PPP program began on April 3 but the initial amount funded by Congress is insufficient to address the large numbers of small businesses taking advantage of the program, hence lawmakers are moving to increase the funding level.

PPP loans offer favorable terms (1% interest rate, no collateral or personal guarantee requirements, no borrower or lender fees, and no payments for six months) and SBA will forgive the portion of the loans used to cover payroll, mortgage interest, rent payments, and the cost of utilities for the first eight weeks if small businesses retain their employees and payroll levels.

If your bank is currently not accepting an application, we encourage you to consider working with a local community bank—many of which specialize in working with the SBA. Find the nearest community bank.

For alternative relief, you may want to consider taking advantage of the SBA’s Coronavirus Disaster Loan Program, which provides loans of up to $2 million at 3.75% and is funded directly through the SBA rather than the bank. More importantly, the first $10,000 is a grant (no need to pay back) which will be provided in as few as three days. Further, the disaster loan can be converted into a PPP loan if that becomes available at a later date.

For more information, contact Eric Snyder at erics@sema.org.

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