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April 23, 2020Publication

PPPHCEA Expands the PPP, EIDL and the Number of Acronyms We Need to Master

COVID-19 Resource

On April 22, the Senate approved a new stimulus bill and the House followed with their approval. On April 23, President Trump has indicated he will sign it immediately. The bill, titled the “Paycheck Protection Program and Health Care Enhancement Act” (PPPHCEA), adds funds to allow banks to make new Paycheck Protection Program (PPP) loans after borrowers exhausted the initial allocation of $349 billion within the program’s first few days. The PPPHCEA also provides additional funding for Economic Injury Disaster Loans (EIDL) and the related emergency EIDL grants.

The PPPHCEA allocates an additional $310 billion to PPP loans, for a total of $659 billion, taking into account the initial $349 billion. Demand for PPP loans remains high, and we expect that this new $310 billion will be exhausted quickly. For example, we do not know if the $310 billion is enough for pending loan applications submitted but not funded prior to the depletion of the initial $349 billion authorized under the CARES Act. Businesses that have not already submitted a PPP loan application should act fast.

While the new bill increases funding for the PPP, it does little to codify the SBA rules and guidance issued subsequent to the passage of the CARES Act, which in some instances conflicts with the statute, or clarifies the many open questions concerning, among other things, how the forgiveness provisions of the CARES Act work. For example, the SBA’s Interim Final Rule regarding the PPP provides that no more than 25 percent of the forgivable amount can be attributable to forgivable, non-payroll costs. Nevertheless, the PPPHCEA does make additional funds available to small businesses that were unable to access PPP loans in the first round. 

The new bill also increases the authorization for EIDL emergency grants made available through the CARES Act from $10 billion to $20 billion. These EIDL grants were initially expected to provide $10,000 to each business seeking an EIDL within three days of application. In practice, however, these grants have taken longer than three days to fund, and the SBA has scaled them back from the anticipated $10,000 lump sum to instead provide $1,000 per employee of each applicant business, up to a maximum of $10,000. In addition to increasing funds available for EIDL grants, the PPPHCEA also increases total funds available for EIDLs by $50 billion.

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