WASHINGTON—Demand for funds from the second round of Paycheck Protection Program (PPP) loans appears to have slowed considerably.
As CUToday.info reported earlier, when Congress provided an additional $310 billion in funds on April 27 it was expected to be depleted as quickly as the $349-billion in the original round of PPP loans. Indeed, many in Washington and elsewhere fully expected additional money would need to be allocated to help small and medium-sized business.
But two weeks after that $310 billion became available, approximately 40% of the money was still available, according to data released late Friday by the Small Business Administration, which is administering the program.
Numerous reasons and theories have been put forward for the dramatic tailing off of interest in the program, including reports and resulting criticisms of public companies receiving funds in round one, and the fact some borrowers had sought duplicate loans from several lenders as a backstop against loan denials or delays, according to bankers and small business advisers, who spoke with the Wall Street Journal.
The Journal noted bigger banks found more than 10% of their applications were duplicates, and some smaller lenders reported that half their applications were rejected because the applicant had gotten a loan elsewhere.
‘Doesn’t Meet Their Needs’
“But the likely biggest reason for the slowdown is that many business owners have concluded that the SBA’s Paycheck Protection Program simply doesn’t meet their needs, lenders and others say, or they are waiting for the government to clarify the terms under which loans can be forgiven,” the Journal reported.
As CUToday.info reported here, the SBA has provided updated FAQs aimed at clarifying how forgiveness of the PPP loans will work, even as others have expressed worries that businesses not qualifying for loan forgiveness will be the “next shoe to drop.”
Increasingly, many small businesses, such as restaurants and salons, are saying their biggest financial challenge isn’t payroll, since their places of business are closed.
Another factor being cited: many larger businesses have turned to the $600-billion Main Street Lending Program being prepared by the Federal Reserve for funds.
According to figures released by the SBA last week, the average PPP loan size was $79,000 between April 27 and May 1, compared with $206,000 during the first phase that ended April 16. Loans smaller than $50,000 made up 71% of all loans issued, it said.