SEMA eNews Vol. 23, No. 16, April 16, 2020

U.S. Congress Debates How to Add $250 Billion for Small Business PPP Loans

By SEMA Washington, D.C., Staff

Small businesses are anxiously awaiting passage of legislation by the U.S. Congress to add funds to the Paycheck Protection Program (PPP), which has spent the initial $349 billion authorized in late March. While there is bipartisan support to add $250 billion in additional funding for the PPP, there is disagreement over including additional funding for cash-strapped states and hospitals as well. Earlier this week, SEMA and more than 250 other organizations sent a joint letter to Congressional leadership requesting that Congress pass legislation to increase funding for PPP.

The PPP loan was a key component of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which became law 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, mortgage, rent and other specified expenses. Lawmakers are now seeking to increase the PPP funds to meet unmet demand. The SBA reported that it has approved more than 1.6 million applications for loans from nearly 5,000 lending institutions.

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 the SBA will forgive that 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 (75% of the amount forgiven must be for payroll).

It is recommended that applicants work with a bank where they have an existing relationship, as there are reports that many banks are not providing loans to businesses they haven’t worked with previously. Borrowers may find eligible lenders through the SBA’s webpage, which brings up local financial institutions offering PPP loans.  

SEMA is also urging Congress to provide additional funding for the SBA’s Economic Injury Disaster Loan (EIDL) program for businesses that have been adversely impacted by the Coronavirus, as it is close to running out of its original $10 billion in funding. The EIDL provides loans of up to $2 million at 3.75% and is funded directly through the SBA rather than the bank. However, recent reports note that the SBA has limited initial loans under the EIDL program to $25,000 to $35,000 or less as a result of resource constraints. Loans may be used to retain employees, address interrupted supply chains, make rent or mortgage payments and pay other bills. The first $10,000 of the loan is a grant that does not need to be repaid. If a company later receives a PPP loan, the grant will be applied to amounts forgiven under the PPP loan.

For more information on PPP, EIDL, and other federal programs related to Covid-19, check out SEMA’s resources at www.sema.org/coronavirus.

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

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