Just hours before the June 30 window for Paycheck Protection Program (PPP) loans was set to close, and $130 billion left to use, the Senate passed a bill, S. 4116, extending the Small Business Administration’s (SBA) authority to approve PPP loans through August 8. With the passage by the House the following day, the measure extending the program is on the President’s desk for signature and expected to become law.
This bill amends Section 1102(b)(1) of the CARES Act to allow the PPP loan window to remain open for another five weeks — until August 8. Congress chose that date for the extended deadline because it is the end of the Senate’s next work period, and there is hope that another round of aid might be finalized by then.
In the meantime, around $130 billion of funds allocated to the PPP remain unused. You will recall that the initial $350 billion allocation was exhausted in less than two weeks, so lawmakers recapitalized the program with a further $300+ billion in late April. Originations slowed substantially during May and June. Extended access to the remaining funds is certainly helpful, but the size of the unused portion suggests that most eligible businesses have applied already and can’t go back to the PPP well as it now exists. Further relief for small businesses will be a likely focus of the next round of negotiations.
The deadline extension is welcome by many, especially lenders who are being sued for favoring their own or larger clients in the first round since any such lender policies arguably did not prevent any eligible borrow from ultimately securing a loan.
As we described here and here, new loans have a 24-week covered period for purposes of computing forgiveness; any unforgiven amounts can be repaid over five years at one percent.
Obviously, this extension helps any business that qualifies for a PPP loan that has not already received one. That said, if a business has qualified for a PPP loan since the CARES Act was passed in March, but has not already applied for or received a PPP loan, an extension likely does not help. After all, such a business either does not know about PPP loans (and thus presumably will not know about the extension) or made the decision not to obtain a PPP loan.
On the other hand, the extension could prove valuable to businesses that did not qualify for a PPP loan before June 30 but do between July 1 and August 8. For example, many businesses qualified for a PPP loan on a stand-alone basis, but were ineligible because they were part of a large affiliated group. We described the PPP loan affiliation rules here. A PPP loan may be available to such a business if it were acquired out of the large affiliated group before August 8.