The federal Paycheck Protection Program (PPP) reopened Monday, Jan. 11, with businesses and nonprofits serviced by small and minority-owned lenders getting the first chance to apply for loans, according to the U.S. Small Business Administration (SBA), which administers the program.
Starting Monday, community financial institutions will offer PPP loans to businesses who have not yet received assistance under the program. On Wednesday, the same small lenders will offer "second draw" loans to businesses who have already received a previous PPP loan.
David Latona is president of the Milwaukee Economic Development Corporation, a small not-for-profit lender. Latona said they are working through some of the latest guidance from SBA but expect to be able to start processing PPP loan applications from clients by the end of the week.
Latona said it's difficult to estimate how high demand will be for loans this time around, but he said it's been really challenging for businesses to not know when they won't need aid anymore.
"You're taking on debt in some way shape or form and that's always, for any business owner, that's something to be nervous about," Latona said. "You can't borrow yourself out of a bad situation."
SBA Regional Administrator Robert Scott estimated the program would be open to all other businesses by January 18-19. He said he expects demand will continue to be high for loans, but he doesn't think the application process will be the "mad dash to cash" it was when the program first launched.
"There will be more than enough monies available for businesses," Scott said. "I'm not saying (businesses) should just sit on their hands and wait. Certainly work with your lender, work with your financial institution and begin that process now. But there isn't this ... 'we're going to run out of money' — that's not an issue."
The program has $284 billion available for loans this time around and runs through March 31.
The first iteration of the program, created under the first round of federal coronavirus relief in March, was criticized for favoring large businesses with pre-existing banking relationships and leaving out many small, minority-owned businesses.
A September report from the Brookings Institution found businesses in majority-Black neighborhoods across the United States had to wait days and sometimes weeks longer to receive PPP loans than their counterparts in majority-white neighborhoods.
SBA said Friday that allowing small and minority-owned lenders to be the first to offer loans under the program was in an effort to provide greater access to the funds this time around.
The agency also detailed rules for all businesses looking to take out a second PPP loan. To do so, a business needs to have used or plan to use its initial PPP loan for only authorized uses, the business must have 300 or fewer employees, and would need to show that business has declined at least 25% in one quarter of 2020 compared to 2019.
Congress also made several changes to the program when it passed new funding for it in the second round of coronavirus aid in December. That includes letting businesses decide the length of their loan period up to 24 weeks, allowing businesses to use funds for more expenses like operating expenses and property damage costs, and expanding the kinds of organizations that can apply for PPP loans.
The program was created by Congress in March to keep workers on the payroll during the unprecedented economic tumult that occurred early on during the coronavirus pandemic. The federal government issued loans to small businesses to help cover the cost of payroll and other expenses. In general, if those businesses were able to keep workers employed and maintain salary levels, the federal government would forgive the loans.
As of mid-August, nearly 90,000 small businesses and nonprofits in Wisconsin received PPP loans worth about $9.9 billion, according to SBA.