What to Expect from the Second Round of the Federal Stimulus Package Funding?

The first round of the $350 billion opened for application on April 3 and in less than 2 weeks, the SBA announced that it was unable to process additional applications from small businesses because funding has lapsed. The second round of the PPP funding of $484 billion is expected to hit the President’s desk for his signature this week. This second round of funding is expected to replenish the PPP and the EIDL loans. After the first round of funding, here is what we heard and what we can expect from the second round.

What Happened in Round 1?

  1. 74.03% of all approved PPP loans in the US were $150k and Under

2. 0.27% of all approved PPP loans in the US were over $5M

3. Over 95% of all loans approved under the PPP loan program were $1M and less

Despite the statistics, some large companies with liquidity also received the PPP loan and a few had to return the loan amid public pressure, such as the fast food hamburger joint Shake Shack.

Community banks came through for small businesses during the first round of the PPP funding since they are a bit smaller but more nimble. Large financial institutions such as Bank of America, Wells Fargo, JP Morgan, among others, have been accused of prioritizing larger loans and shutting out smaller businesses from getting the much needed financial relief.

When it came to processing PPP loan applications, banks were making their own rules, with some accepting the standard SBA application form and the certifications on the form, some required additional certifications from business owners, some wanted owners to certify that they did not or would not apply for the EIDL loans, etc. Some not only required businesses to be existing clients, but also added requirements such as certain types of accounts or a credit relationship.

The SBA originally set out to provide a maximum $50,000 EIDL loan with a $10,000 immediate advance to small businesses but due to funding drying up faster than expected, it revised its approach to providing only a $15,000 EIDL loan with a $1,000 advance.

What to Expect from Round 2?

Round 2 will allocate around $60 billion of PPP funds to smaller financial institutions which is good news for smaller businesses. We expect to see banks continue to supplement the standard application and required documentations with their own required certifications or require additional documents, depending on each of their own risk evaluation.

Since the first round of funding has been exhausted, small businesses who submitted their applications but did not receive funding from the first round should contact their banks to understand whether their application will be put in a queue for the second round of funding. This does not necessary mean though you are guaranteed funding by your bank. It all depends on how quickly your application is being submitted. It is estimated that the second round of funding could run out in 48 hours once the application process opens. If you are one of those businesses, our recommendation is to stay in close contact with your banks. Since bankers are busy processing applications, most of them are not answering their phones. E-mails would be the best way to communicate.

For independent contractors and self-employed individuals – you also qualify for PPP if you meet the requirement. The recommendation for these individuals would be in line with those for small businesses – continue to stay in contact with your banks and inquire about the status of your application.

If you’ve already applied for the SBA’s EIDL loan during the first round and did not receive funding, you should not need to reapply since the SBA will continue to process applications that are already in its system.

CFO Connections success stories: Clients who sought our help in preparing their PPP applications, computing the amount of the loan, and receiving advice on the appropriate documents to include with their applications, were able to secure the funding they needed during the first round with no adjustment by their banks on the requested loan amounts. We have a 100% success rate. Contact us for assistance with your funding needs.

Leave a Reply

Your email address will not be published. Required fields are marked *