Congress OKs $484B COVID-19 relief bill; PPP gets $321B more
More than half of new PPP funding claimed in five days;
Concerns about distribution, enforcement risks to firms
Congress on April 24 approved $484 billion in additional coronavirus relief, including $321 billion more for the Paycheck Protection Program (PPP) offering low-interest and forgivable loans to small businesses.
The bill also included $60 billion for the Small Business Administration’s depleted Economic Injury Disaster Loan program, $25 billion for coronavirus testing and $75 billion for hospitals treating patients fighting COVID-19.
On April 27, lenders began accepting applications for the additional PPP funding, and as of May 1, $175 billion had been obligated in 2.2 million loans in the so-called Round Two of the program, Treasury Secretary Steven Mnuchin and SBA Administrator Jovita Carranza announced.
“The average loan size in Round Two is $79,000, yet another indicator that the program is broadly based and assisting the smallest of small businesses,” Mnuchin and Carranza said in a statement.
The first round of PPP, which launched on April 3, depleted its $349 billion worth of taxpayer funding in 13 days.
Distribution complaints
Following the first round of the PPP, there were complaints that significant funding had been awarded to large firms and national chains, including PotBelly Corp. and Shake Shack. Both of those corporations later returned the loans after the backlash. Forbes reported that 71 publicly-traded companies received $300 million under the program.
In addition, a Bloomberg study also found geographic disparities, with applicants in some states, including Nebraska, North Dakota, South Dakota, Kansas and Maine, receiving loans that covered 75% of their eligible payroll.
In other states--including those hit especially hard by the pandemic--applicants received loans covering 45% or less of their eligible payroll, including the District of Columbia, California, New York, New Jersey, Nevada and Washington.
Those disparities might be easing in California and New York. In the first round, California small businesses got loans covering 38% of eligible payroll, while those in New York got 40%, according to estimates quoted by Bloomberg. For the country as a whole, firms got 54% covered on average. As of May 1, the percentage covered in second-round loans rose to 75% in California and New York, compared with 81% for the country as a whole, Bloomberg reported.
Meanwhile, Reps. Nydia Velazquez, D-NY, chair of the House Small Business Committee, and Raul Grijalva, D-AZ, chair of the House Natural Resources Committee, wrote to the Treasury and SBA with concerns about apparent unequal distributions of PPP funding to firms in the U.S. territories.
For example, Puerto Rico, with about 1% of the U.S. population, received only 0.19% of PPP loans by amount, they wrote. They said other U.S. territories are similarly affected.
“This situation is unacceptable, and the SBA must take immediate steps,” Velazquez said in a statement. SBA officials were not immediately available.
Attorneys highlight enforcement risks
Attorneys are warning PPP recipients that the large amounts of taxpayer funding involved and the government’s rapid distribution are likely to be closely scrutinized later. “Misrepresentations or even reckless conduct made in haste with respect to any of the requirements for CARES Act relief can lead to a number of unwanted outcomes,” including civil or criminal penalties, cautioned attorneys at SheppardMullin in a recent blog entry.
More Information:
Treas./SBA report on PPP: https://bit.ly/2SAe0Tb
Velazquez statement: https://bit.ly/3b3EL99
Bloomberg story: https://bloom.bg/2VYLs86
SheppardMullin blog: https://bit.ly/2z7TWRg
