On Thursday, April 23, 2020, the federal government passed the fourth round of coronavirus relief packages in the Paycheck Protection Program and Health Care Enhancement Act. This legislation allocates a combined $370 billion of additional funding for the Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL) programs to assist businesses affected by the economic impacts of COVID-19.

The government has been under mounting pressure over the last week to replenish funds, especially to the PPP, to help offset the negative impacts that the COVID-19 pandemic has wreaked on small businesses in the United States. The PPP offers forgivable loans to organizations agreeing to maintain payroll for a period of time during the pandemic, and EIDL offers low interest loans for small businesses needing cash to make ends meet. But, both the PPP and EIDL ran out of funding last week. The uncertainty surrounding the future of these programs resulted in increased tensions for those businesses looking for cash infusions. The SBA estimates that when the first round of funding was exhausted, the PPP had approved 1,661,367 loans through 4,975 lenders, while the EIDL program had made 26,919 loan approvals.

PPP Replenishment

This new measure allocates $310 billion more for PPP use, with $60 billion of that total slated strictly for small institutions, like small banks, credit unions, and minority-owned banks. Half of the $60 billion will go to FDIC-insured lenders possessing assets between $10 and $50 billion, and the other half to lenders with less than $10 billion in assets. This focus on small institutions is intended to help community banks, credit unions, and community development financial institutions, which provide loans to low-income communities and to people lacking access to financing. The remaining $250 billion of funds are considered unrestricted in their use for the PPP program.

EIDL Funding

Roughly $50 billion of the newly approved relief funding is slated for the Economic Injury Disaster Loan program, which provides working capital loans of up to $2 million for small business to use for debt service, payroll, accounts payable, and other bills unable to be paid due to the impacts of the pandemic (or disaster). The interest rate for this loan is 3.75% for small businesses and 2.75% for nonprofit organizations.

Also included in this Act is an additional $10 billion allocated to small business grants. These grants are in the form of a $10,000 emergency loan advance that borrowers can request during the EIDL loan process (but applicants may not have to pay back this advance). The $10,000 loan advance was a popular measure to get money quickly into the hands of small business.

No Time to Waste

It is widely assumed that these newly approved funds will once again deplete very quickly, so we urge you to be in contact with your lender of choice as soon as possible to initiate the application process.

We know that you may have questions about these often confusing processes, need guidance in allocating your funds once they’re received, and tracking your spending if you have a forgivable loan. Your CRI professionals are ready to help you navigate the intricacies of these relief options, in order to make them work best for you and your organization.