Paycheck Protection Program Largely Depleted

The Paycheck Protection Program (PPP) was a key piece of the CARES Act, one of the first COVID relief laws passed last spring, now over a year ago. Administered by the Small Business Administration (SBA) and modified several times by Congress, the PPP offers forgivable loans to small businesses facing economic peril because of the pandemic.

To date, the PPP has disbursed $780 billion in forgivable loans in response to 10.7 million PPP applications. When Congress renewed the program in December, the pool of eligible borrowers was expanded, and the hardest-hit businesses were allowed to apply for a second loan. In March, when the program was set to expire at the end of that month, Congress extended it again, this time until May 31. However, that extension came without additional funds.

Now, even though the program is slated to continue through the end of this month, the PPP is largely out of money and has stopped accepting most new loan applications. Congress allocated $292 billion dollars to fund the PPP’s most recent round of loans, but the SBA informed lenders and trade groups earlier this week that nearly all that money is now gone.

Of the total program authorization of $809 billion, approximately $8 billion was set aside for community financial institutions, which largely serve businesses run by women, minorities, and other underserved communities. As of earlier this week, only that $8 billion remained available. Applications submitted on behalf of those businesses are continuing to be accepted until their allocation runs out.

SBA officials also said that some money is still available for lenders to fund applications that were already pending when the PPP was exhausted. However, those whose applications had not been submitted to SBA for approval by then are at risk of being shut out. After the SBA announced that most PPP funds had been exhausted, many lenders reported a backlog of loan applications pending within their institutions.

SBA has no experience with the PPP running out of funds before the loan application deadline; when the program expired temporarily last August, approximately $130 billion remained outstanding. However, when the PPP was resurrected earlier this year, the rate of loans made clear that the program could run out of money before it ran out of time.

With COVID vaccination rates on the rise and states around the country lifting many pandemic restrictions, Congress is expected to have little appetite to allocate additional funds to the PPP. That reticence is likely exacerbated by the availability of financial support via other SBA programs, including the preexisting Economic Injury Disaster Loan program, the Shuttered Venue Operators Grant Program, and the Restaurant Revitalization Fund, which began accepting applications this week.