On Friday, President Donald Trump signed legislation that replenished funding for the federal Paycheck Protection Program (PPP) and Economic Injury Disaster Loans (EIDL). The $484 billion aid package includes $310 billion for the PPP, $50 billion for EIDLs, and $10 billion for EIDL grants.
Many firms were caught in the middle of the loan application process when funding ran dry for the PPP program only 13 days after it was initially launched on April 3. The Small Business Administration (SBA) began accepting new applications for the PPP last week. Despite the additional funding for EIDLs, the SBA is not yet accepting new applications for the program. If companies were in the process of applying for an EIDL and have an application number beginning with the number “3,” the application remains in the queue and there is no need to reapply for a loan.
The PPP originally was allocated $349 billion as part of the Coronavirus Aid, Relief, and, Economic Security (CARES) Act. The construction industry led all other subsectors with nearly $40 billion in loan approvals across more than 114,000 applications in the first two weeks of the PPP.
Under the PPP, small businesses—companies with 500 employees or fewer—can apply for partially forgivable loans that can cover operating expenses. Borrowers can apply for loans up to 2.5 times the company's monthly payroll costs for the period between February 15, 2020, and June 30, 2020, or $10 million, whichever is smaller. The portion of a PPP loan used to cover the first eight weeks of payroll, interest on mortgages, rent, and utilities can be forgiven. Forgiveness is also contingent upon employers maintaining or quickly rehiring employees and maintaining salary levels.
According to the SBA, businesses can receive a $10,000 cash advance within three days of applying for an EIDL of up to $2 million. The advance under the program does not need to be repaid and may be used to keep employees on payroll, pay sick leave, meet increased production costs, or pay business obligations.
