Jan 8, 2021 - Economy

Small business Paycheck Protection Program to restart next week

Illustration of a hundred dollar bill as an open sign

Illustration: Sarah Grillo/Axios

The next round of Paycheck Protection Program loans will open on Monday, albeit not for everyone.

Why it matters: As evidenced by this morning's bleak jobs report, many businesses continue to be battered by the surging pandemic.

Timing: The loan application window will open Monday primarily for first-draw borrowers working with a group of smaller lenders defined as community financial institutions. On Wednesday it will be expanded to second-draw applications from those same lenders, which comprise around 10% of PPP's approved lender universe.

  • No official word yet on when it opens up to the broader universe, save for a senior administration official saying it will be "shortly thereafter."
  • A different official added that, unlike last spring, "We don't anticipate the money to run out."

One big change: SBA won't instantaneously provide loan numbers to applicants. Instead, it will use an automated system to vet some of the provided information (ID verification checks, etc.), which will run on top of the E-Tran platform that was used last year.

  • The software change means many lenders will need to enter information manually, including for second-draw loans.
  • The verification process means there is likely to be an overnight lag between application and approval.

Other changes, as previously reported, includes new payroll limits (300 vs 500) and a requirement that applicants can demonstrate at least a 25% reduction in gross receipts between comparable quarters between 2019 and 2020.

One big question is how many lending institutions will participate this time around.

  • Over 5,400 participated by the end of the initial PPP, but many bankers grumbled about it being more trouble than it was worth — and the manual inputs this time could exacerbate those sentiments.
  • There's even become a secondary market for PPP loan portfolios. Chicago-based ACAP, for example, has bought up around 34,000 loans from nearly 40 banks valued at around $4.7 billion. CEO Luke LaHaie tells Axios that he expects to help originate second-draw loans for many of those clients, as their initial lenders don't plan to directly participate in 2021.

The big picture: Almost every issue of the Axios Pro Rata newsletter now includes a VC, private equity and/or M&A blurb for a company that received PPP.

The bottom line: Better late, and a little bit slower, than never.

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