Uncertainty can be felt across all sectors of the US economy this week, but some reassurance came from the federal government today when the President signed into law a $484 billion relief package.
The $484 billion aid package, titled the “Paycheck Protection Program and Health Care Enhancement Act,” is meant to tack onto the original CARES Act passed a few weeks ago. The bill has $320 billion to replenish the Paycheck Protection Program (PPP) which ran out of funding last week.
The relief package also includes $75 billion for hospitals and $25 billion for testing. It also requires that the Trump administration expand testing across the country.
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How are small business owners affected?
Small business owners that did not receive loans under the first round of funding under the PPP can now apply for the $320 billion that is available under the Paycheck Protection Program and Health Care Enhancement Act.
When should I apply for this new round of loans?
It is recommended that you apply as soon as possible. Even if your lender is not ready to process applications for this second round, you should inform them that you are interested in the PPP. Many lenders have a backlog of applications that were not processed in time before the original amount of PPP funding ran out, so it is likely that your lender already has some applications in the queue for the new round of loans.
I’m worried that my lender will not receive any of these loans, what can I do?
While many small business owners are being encouraged to seek funds through banks where they have existing relationships, you may find success at smaller lenders. About $60 billion of the additional funding will be set aside for small lenders and mid-sized banks which will be a big boost to small businesses located in rural communities.
It is important to note that you are allowed to apply for a loan at multiple lenders simultaneously. This may increase your odds of getting funding if one bank is able to move faster than another.
Will franchise businesses be allowed to partake in this second round of funding?
The Small Business Administration recently issued a guideline requiring businesses to certify that the loans are necessary and that they do not have access to other funding, which disqualifies any publicly-traded company due to their access to the capital markets. Hopefully this guideline along with some of those franchises returning their PPP loan will result in more small businesses receiving loans.
Did anything change for the Economic Injury Disaster Loan (EIDL) program?
The Small Business Administration has allocated $60 billion for its own EIDL program which includes forgivable grants for small businesses. The breakdown for this new allocation is $50 billion for loans up to $2 million and $10 billion for forgivable loan advances in the amount of $10,000 for businesses even if they cannot get an EIDL loan.
Have other questions about how these changes might impact your business? Check out our Coronavirus Legal Center.