Customer Tamara Jenkins will try on a hat with Meeka Robinson Davis, owner of One-Of-A-Kind Hats, in the store in the Windsor Hills neighborhood of Los Angeles on November 24, 2020.
Small businesses are finding that they may not have much time to access the paycheck protection program as they thought.
That’s because the money is running out.
Legislators overwhelmingly supported the extension of the PPP last month, postponing the March 31 deadline to May 31. The program, established by the CARES Act last year to provide small business loans that are forgivable when used primarily on payroll, reopened in January for a second round of more than 284 Billion dollars.
More from Invest in You:
How Much Can You Expect From Social Security When You Make $ 40,000?
The scammer “Catch Me If You Can” says this scam is making a comeback
Avoid the fear of tax filing by following the steps below
The American rescue plan passed in March provided the PPP with an additional $ 7.25 billion, bringing the total to nearly $ 292 million.
As of April 5, the Small Business Administration, which oversees the program, has approved nearly 4 million PPP loans worth approximately $ 224 billion, according to the agency. That means there is roughly $ 68 billion left.
The idea of running out of money hadn’t crossed my mind, at least in this round of the program, until shortly before the extension. In a March 24 hearing before the Senate Committee on Small Business Entrepreneurship, Patrick Kelley, associate administrator at the SBA Office of Capital Access, noted that there is about $ 79 billion left on the PPP, which will be depleted by mid-April would pace if applications were continued with a similar company.
Additionally, at this point the SBA had around 190,000 loans held to fix pending application issues, which continued to draw on the remaining funds.
“This program, as you know, won’t resume until May 30th due to a tight budget,” said Erik Asgeirsson, president and CEO of CPA.com, the business and technology arm of the American Institute of CPAs. “I don’t think anyone knew the money was going to run out until the SBA made this announcement.”
The bumpy road of the PPP
Although the program has helped millions of companies keep employees on their payroll, the program has been plagued with problems from the start thanks to its rapid adoption. The first round ran out quickly, with the money going mostly to larger, more established companies, leaving out those most at risk.
When the second round opened in January, smaller businesses had better access to funding, but processing times took longer as the SBA introduced new anti-fraud rules.
Further changes created more confusion. In February, the Biden administration announced updates to program eligibility, a new credit calculation formula for sole proprietorships, and a two-week priority application window for companies with fewer than 20 employees.
The aim was to give the smallest companies, which are mostly owned by women and colored people, access to the forgivable means. However, the timing of the new rules left little time for companies to take advantage of them. Additionally, sole proprietorships who applied before the new loan calculation was announced were upset as the difference could be thousands of dollars in forgivable funding.
We have finally reached a point where we have some equity for our hardest-to-reach and most underserved businesses.