The PPP loan opened on Friday, April 3, 2020, two weeks ago today. These loans are being approved by the SBA, but they are being made through lenders and various FinTech companies (think Square and QuickBooks). While any lender can make the loan, we found out quickly that banks restricted applications to their existing clients. That means that it was likely that you are, practically, shut out of this program if your current banking relationship does not have an SBA lending arm. Covering the smaller, unbanked business, was a driving factor for qualifying FinTech companies to make these loans.
The Good News
As of yesterday, 4/16/20, the SBA announced that 1,700,000 applications have been approved by the SBA. They reported that $340,000,000,000 dollars have been committed, through this program, across the 1.7M applications. The average loan approval was approximately $230,000. This means that the average business applying for these loans have approximately $1.1M in labor costs.
The Bad News
The bad news is that the program is now fully subscribed. The result is the SBA is not accepting any further applications, which means that the program is effectively closed. The program can, theoretically, reopen if congress appropriates additional funds for the program.
It doesn’t mean that $3.4B has been distributed. Unfortunately, the 1.7M applications has been a crushing burden for the entire banking system. By way of comparison, the SBA in FY 2019 made 63,500 loans to small business, distributing $28,200,000,000. That means that in the last two weeks alone, the system processed 27 times the total number of small business loans made in 2019! The result is that the banks are still trying to match the approvals with the applicants and distribute the money. That will still take some time. While there are definitely applicants who have received funding, the majority have not been funded.
As of yesterday, there were 800,000 pending applications. This number represents the number of completed applications, in the pipeline, as of the date the program was closed by the SBA. This number also does NOT include those businesses who have not yet submitted an application to their lender. With 30 billion small business (does not include large businesses with over 500 employees), you can see that the approved and pending applications represent less than 1% of businesses.
Conclusion
While we have absolutely no idea if Congress will appropriate additional funds, we would highly recommend that you get your application prepared and in the hands of your lender as soon as possible. Given these metrics, it is likely that even a new appropriation will also run out of funds. Being prepared and in line is your only and best chance at getting funded.
There are other programs for relief. This is just the most popular, especially as it is completely forgivable (assuming that the funds are used properly). My only point is that I you do not receive, or are not eligible for a PPP loan, there are other options and programs available. If you would like additional information about other programs which may be available to you, please let us know by calling us at (619) 696-0520.