The U.S. Small Business Administration’s $349 billion Paycheck Protection Program, launched March 27 as a lifeline for small businesses struggling with the economic fallout of the coronavirus pandemic, ran out of money on April 16, leaving the vast majority of applicants in a lurch.
But PPP is about to receive a new round of funding to the tune of $310 billion, with $30 billion set aside for community-based lenders, small banks and credit unions, and another $30 billion for mid-sized banks and credit unions, according to an agreement announced by the House and approved by the Senate on April 21.
It’s part of a $484 billion interim emergency relief package that includes additional help for small businesses in the form of $50 billion for SBA emergency disaster lending and $10 billion for emergency disaster grants, with “strong protections to ensure that our nation’s farmers have access to this vital assistance,” according to House Democratic leadership.
PPP provides loans up to $10 million to small business owners to cover payroll, rent, utilities and other costs, and are forgivable after eight weeks if employers keep workers on the job and maintain compensation levels. The loans are provided through banks and other lenders rather than through SBA. The interim package also contains $75 billion for reimbursements to hospitals and healthcare providers for coronavirus-related expenses and lost revenue (in addition to $100 billion in the CARES Act) and $25 billion to expanding coronavirus testing nationwide.
The interim package, which the House passed Thursday is meant as a bridge between the original, $2 trillion CARES Act signed March 27 and CARES 2, which is likely to be more in line with in terms of cost and likely to entail another bitter partisan battle. The interim package itself came about only after lengthy political standoff followed by intense negotiations between the two sides, with House Democrats holding out for conditions on how the money is spent and funding for hospitals, health systems and first-responder and front-line workers. Democrats failed to secure more funding for state, tribal and local governments reeling from the economic and public health impact of the pandemic, though House leaders noted that President Trump has signaled support for such funds to be included in CARES 2.
U.S. Rep. Filemon Vela, speaking by phone Wednesday from Valley International Airport, en route to Washington D.C. for Thursday’s vote on the interim package, said it’s better than nothing although he still has concerns, pointing to news reports that a number of large, publicly traded companies received PPP loans intended for struggling small businesses before the program ran out of money.
“If you have a bank like JPMorgan Chase, and they’ve got a certain pot of money they’re going to give out under PPP, and all that goes to New York businesses like Shake Shack, that’s money that’s not going to our local restaurant, gym owners and things like that,” Vela said. “That’s where the damage is being done. Also, we didn’t get the state and local money that we really need, but we were able to get some hospital funding.”
Shake Shack, which made $459.3 million in 2018 and has 168 locations in the United States, has said it will return the $10 million it received through PPP, while other large companies that receive loans through the program are under pressure to follow suit.
At any rate, Vela said he planned to vote for the interim package, which he called “really just patchwork,” even as he worries about how CARES 2 will take shape.
“I’m going to support this mainly because we were able to procure a $60 billion set-aside for local, community, smaller banks so that the money can get to where it’s supposed to,” he said. “But I’ve got some real concerns with the way the PPP program is being administered. We’ve seen it in our casework. Of all our constituents — and we’ve had a lot, it’s never been like this — that have called who are having their problems getting their PPP loans, most … were customers of banks where the decisions are made out of town, versus virtually no complaints from constituents who bank locally.”