It’s been just 14 days since small businesses were able to first apply for loans through the $350 billion Paycheck Protection Program (PPP). And it was earlier today that the Small Business Administration (SBA) announced that it had run out of funds; shutting down its application and ceasing the enrollment of new lenders into the program.
The PPP, which was administered by the Small Business Administration through participating banks, has been rife with complaints from the start. Firstly, it was known the $350 billion allocation would not be enough from the start. And the only reason it did not run out sooner was because the programs first week was rife with technical glitches, confusion from business owners looking to apply, and misinformation from bankers.
The recent news will no doubt have a devastating impact for small business owners. Many whom are struggling to keep their business alive as well as avert layoffs. More money is expected to come, but a good estimate of when has yet to come. This has led some business owners to turn to the Federal Reserve’s Main Street Lending Program.
Unlike the PPP (which can forgive loans), the Main Street Program is more of a traditional loan; though one with significantly low interest rates. The program is open to companies with as many as 10,000 employees and will support up to $600 billion total loans. Additionally, businesses that have been approved for PPP loans can also apply for Main Street loans. To be eligible though, businesses will need to have at least $250,000 in earnings before taxes.
For many, the Main Street Loan might be a last resort option while business owners wait for further funding of the PPP. Recent proposals for further funding have centered on an additional $250 billion in funding. However, lenders and small business advocates have estimated the amount needed might be closer to $1 trillion.
The Trump administration has expressed their support for the GOP proposal of an extra $250 billion for the program. But Democrats blocked the bill in Congress; pushing for any bill to include provisions that include funds for hospitals and local governments that are struggling to deal with the coronavirus.
It’s been reported that ~5000 banks had made around 1.6 million loans under the program. Major lenders include Wells Fargo, Bank of America, and JPMorgan.
The loans provided to these small businesses will be forgiven if the funds are used to pay employees, rent or mortgage.