As Congress and the president appeared ready to approve $310 billion in additional funding for the depleted Paycheck Protection Program (PPP), small business owners who weren't approved during the first round wanted to know what they could do to avoid a repeat performance in round 2.

The new bill, officially known as the Paycheck Protection Program and Health Care Enhancement Act, was signed into law Friday, April 24 and the SBA is expected to resume accepting loan applications Monday, April 27, 2020.

Key Takeaways

  • A new round of COVID-19 relief legislation provides $310 billion in additional PPP loan funds for small businesses.
  • The legislation mandates that at least $60 billion of that money will go to small lenders.
  • An additional $60 billion will be used to refresh the Economic Injury Disaster Loan (EIDL) program and will include $10 billion for additional $10,000 grants.
  • Small business owners are urged to contact their banks now to make sure the bank will accept PPP loan applications.
  • Consider other funding options since it is likely new PPP funding will be exhausted quickly, just as happened in the first round.

The Makeup of New PPP Funding

The new legislations provides $310 billion in new funding for the Paycheck Protection Program with $30 billion going to small lenders with less than $10 billion in assets and another $30 billion earmarked for small lenders with between $10 billion and $50 billion in assets. This $60 billion set-aside may help mom-and-pop businesses frozen out of round 1 finally obtain loans. The balance, $250 billion of new funding, will go into the regular PPP loan program which, like the set-aside funds, provides forgivable loans of up to $10 million each.

Additional EIDL Funds

The new legislation also includes $60 billion in funding for the SBA's Economic Injury Disaster Loan (EIDL) program which was also depleted along with the original PPP funds. This includes $50 billion for EIDL Loans of up to $2 million each, as well as $10 billion for $10,000 forgivable loan advances available to small businesses even if they don't end up with an EIDL loan. The new EIDL funding provides an additional avenue for small businesses, but comes with the caveat that funds from a PPP loan and EIDL loan cannot be used for the same purpose.

With experts saying this new round of funding will likely dry up quickly just like the first round, it's critical that business owners contact their banks now to make sure they will accept PPP loan applications when the new money becomes available.

Contact Your Bank Now

Asked what small business owners can do to make sure they navigate this new round of PPP funding successfully, Amanda Ballantyne, executive director of Main Street Alliance said, "It's likely that these funds will also run dry pretty quickly, so we would encourage any small business seeking support from the PPP to contact their bank, or local CDFI immediately if they have not done so already."

Check Status of Previous PPP Loan Application

If you submitted an application for a PPP loan in round 1 and didn't receive funding, find out whether your old application will automatically be considered or if you have to submit a new one.

Main Street Alliance MN founding member, Davis Senseman of Davis Law Offices says, "A small business owner who previously submitted should confirm that the bank does not need anything else to submit their request to the SBA. Be specific in your asks to your lending institution: 'Is my application at the SBA for approval? If not, what needs to be done to get it there? What do you need from me? When do you anticipate submitting it?' Do not assume that your lender is going to take care of what you need, and stay in touch with them as much as you can." 

Make Sure the Bank Plans to Accept New Applications

For those applying for a loan for the first time, Senseman suggests owners make sure the bank will accept PPP applications for the new round of funding. She noted that some banks are still waiting to process applications received in the first round of funding.

Gather Payroll and Records

"If you haven't completed the PPP form or gotten your payroll or other records together yet, now is the time to do so," Senseman said. "You want to be ready to submit as soon as the president signs the bill into law."

To apply you will need:

  • Tax returns from 2019 and 2018 if available
  • Payroll records to help verify the amount you are requesting
  • Documentation showing the legal structure of your company
  • Some demonstration of how COVID-19 has impacted your business

Apply Now

Companies should "get their applications in now if they are able," Senseman advises. "If the bank wants them to wait, I would pay close attention to the status of the funding bill. When the president signs it, reach out to the bank because the second round of funding will be tied to when the bill is signed into law."

If you missed out on previous funding because you didn't have a relationship with a large bank, a new $60 billion set-aside for small lenders may help.

Look to a Local Community Bank

One important feature of the new funding is the set-aside of $60 billion dollars out of the $310 billion to go to small and mid-size community banks, credit unions, and Community Development Financial Institutions (CDFIs). In theory, this should provide better access to small businesses left out in round 1.

Senseman cautions, however, that there is no guidance or requirement that these or any lenders prioritize actual small businesses or correct the existing issues in the PPP program. The $60 billion set-aside for smaller lending institutions is designed to help, but may not as long as banks don't have incentive to lend to smaller businesses or those with whom they don't already have a banking relationship.

Consider the EIDL Option

Since the new legislation also includes funding for EIDL disaster assistance loans of up to $2 million each, as well as up to $10,000 ($1,000 per eligible employee) forgivable loan advances, owners should compare that option with the PPP loan option to see which offers the best relief for them. Be aware that you can't use funds from both loans for the same purpose.

Don't Forget Funding from States, Counties, and Cities

Many states, municipalities, foundations, and grant-makers offer help and the key, according to Senseman is to get in before funds are exhausted.

"Apply for any of the programs that your business meets the eligibility criteria for," she says, "because you can always decide not to accept a loan or other form of funding if it doesn't make sense."

Don't Spend PPP Money Right Away

A final piece of advice comes from what Senseman says is a lack of clarity on how to spend PPP funds. This, she says, is causing even round 1 recipients to exercise caution. "We've heard dozens of reports of business owners receiving advice from their accountants to park any PPP funding they get in a bank account rather than spending them immediately because the forgiveness terms remain problematic and unclear," Senseman said.