'Paycheck Protection' Loan Program May Soon Commit All Its Funds
Small businesses, including many in construction and engineering, have quickly lined up to apply for a second round of Paycheck Protection Program loans after Congress approved $310 billion to restart the popular program. Congress had provided $349 billion in late March for PPP, but demand was so strong that all of that was exhausted within just 13 days. Potential borrowers are worried that the new PPP money isn’t likely to last long either.
The Small Business Administration’s lending window opened for PPP’s round two on April 27. By 1 p.m. the next day, SBA reported that it had approved nearly 476,000 loans totaling $52.2 billion in what it termed “PPP2.” For borrowers still in the queue, the math was scary. At that rate, the round two funds would be gone in less than a week.
PPP aims to assist financially strapped small businesses with forgivable loans to help them cope with economic blows struck by the coronavirus pandemic. The program was created in the Coronavirus Aid, Relief and Economic Security Act, which President Trump signed into law on March 27.
The program was formally launched on April 3, and from the start was flooded with requests from companies and nonprofit organizations. All $349 billion was gone by the end of April 16. The program also was criticized for loans that went to large, publicly traded companies.
When it became clear that the initial funding was running out, getting an infusion for PPP became a main factor behind a new legislative package, the Paycheck Protection and Health Care Enhancement Act, which became law on April 24.
Construction industry firms received the largest share among industries of the initial PPP funds, with $44.9 billion, according to SBA.
A new Associated General Contractors of America survey, conducted from April 20-23, shows that 44% of the 849 responding firms said they had received funds through the loan program. An additional 15% said their loan applications had been approved but they had not yet received funds. The survey also said 8% of the AGC firms were awaiting replies to their applications and 7% had applied but were told no more funds were available.
A National Utility Contractors Association survey, conducted at about the same time as AGC’s, shows that 61% of responding member companies said they had applied for a PPP loan. As of April 23, 55% said they had not yet received the loan funds; 34% reported that they had gotten the money. About two-thirds of the firms applied for PPP loans through their local banks, the NUCA survey said. One-third applied through branches national banks.
The loan program also has been popular among engineering firms, which fall under a SBA non-construction category. About 72% of American Council of Engineering Companies member firms responding to a recent survey had applied for a PPP loan and 14% planned to apply.“This underscores the program’s critical importance during the coronavirus crisis,” ACEC spokesman Jeff Urbanchuk told ENR.
Round two of PPP got off to a bumpy start, banks say, because of problems with the SBA online system. Rebecca Romero Rainey, the Independent Community Bankers of America’s chief executive officer, said on April 27 that her group’s member banks “found themselves kicked out of the [SBA] system.” She added, “It is unacceptable for community banks to be locked out when their customers need them most.”
Rob Nichols, American Bankers Assocation CEO, said in a Twitter post that day that banks were “deeply frustrated at their inability to access [SBA’s} system. Nichols tweeted on April 28, “Banks of all sizes worked through the night to process PPP loans with little success.”
SBA Administrator Jovita Carranza acknowledged the day one slowdown, citing “unprecedented demand” for loan approvals in a Twitter post. She said more than twice the number of users were getting on the system that day than in any day of round one of PPP.