Could the SBA run out of money?
How far will $350B in SBA loans go?
The CARES Act approved up to $350,000,000,000, thats 350 billion dollars, in funding for small businesses that have been impacted by the coronavirus. That sounds like an awful lot of money, especially considering that the SBA approved less than 10% of that amount, or less than $27B, through all of its loan programs in 2019.
SBA loan approvals by guarantee program
So, could the SBA run out of cash?
The new SBA Paycheck Protection Program (with $350B in funding) is by far the most popular of the two programs, the other is the Economic Injury Disaster Loan (EIDL) program (with only $10B in funding), that are in play for small business owners. The PPP actually went live on Friday, April 3rd. Even with all of the confusion around the program, small businesses have already submitted what appears to be a staggering amount of applications. According to an article I found published this morning on Quartz, two of the larger U.S. banks, BoA and Wells Fargo, have already seen upwards of $30,000,0000,000 in applications. That would account for roughly 10% of the total PPP fund within the very first day of the program being live.
If we simply assumed that a few of the other larger banks are seeing the same amount of volume then it isn’t a stretch to imagine that the SBA will run out of funds for the PPP program.
What happens if the SBA funs out of funding?
Since the CARES Act was approved by Congress they will be the ones you have to act if the program runs out of capital. If my crystal ball is working today then I would tell you that I fully expect the government to announce both an extension and an increase to the program. I mention an extension because the forgiveness portion of the PPP loan program is only for funds that are used during the eight (8) weeks following your loan approval. Since the turnaround for application approval is proving challenging I expect that timeframe to be extend.
I also expect Congress to announce an increase to the total amount of available funds. Based on early demand I suspect we will see that announcement either this week or early next week.
By the way…
The Paycheck Protection Program is facilitated through financial institutions. Meaning you apply for the program through those banks and credit unions. The same is not true for the EIDL.
I am hearing that some banks and credit unions are not participating in the program or they are not processing PPP loans for non-clients.
If you need help finding a lender to work with reach out to me jmp@jonathanmillspatrick.com. I have a vast network of lenders that are taking PPP applications that I would be happy to put you in touch with.
