U.S. payroll protection program: What has changed in round two?

WASHINGTON (Reuters) – The Small Business Administration on Monday began to allow lenders to process $310 billion in funds for the second round of its program that aims to help small businesses, hurt by the novel coronavirus disruption, to cover their payroll costs.

After concerns that some of the first tranche of money bypassed small businesses in favor of Wall Street companies and big business, Congress, the SBA and the U.S. Treasury Department have made changes to program rules.

The second round will also include potentially hundreds of millions of dollars returned by big companies after the furor, on top of the $310 billion.


In this round, Congress has ring-fenced $60 billion for Community Development Financial Institutions (CDFIs), Minority Depository Institutions (MDIs), community banks, credit unions, and certified development companies and microlenders whose small business customers are often minority-owned businesses.

That includes $30 billion for institutions with under $10 billion in assets and $30 billion for those with between $10 billion and $50 billion in assets.

On Sunday, the SBA also said in a memo it is setting a maximum dollar amount for individual lenders at 10% of Paycheck Protection Program funding, or $60 billion per lender, in this round to prevent any single bank with back-logged applications dominating this round of funding. While it appears no single bank has hit the cap, “it seems a politically astute move,” said Jaret Seiberg, an analyst at Cowen Washington Research Group.


In the first round, the SBA and the Treasury had to write the rules of the program on the fly, leading to confusion over its terms. In addition, thousands of lenders who were not signed up with the SBA had to create new accounts, which took days. These bottlenecks slowed the program down initially.

While there are still some wrinkles with the rules and potential for the SBA’s system to struggle under the influx of applications, those teething problems have largely been addressed, lobbyists for the banking industry say.

The SBA will also take applications in one bulk submission for lenders submitting a minimum of 15,000 loans. This should help those financial institutions that already had a significant back-log of applications pending before money ran out in the first round.

It could, however, also mean the new funds are depleted in roughly a week, bankers say.


With intensifying scrutiny of hedge funds, listed companies and big restaurant groups that sought loans, the Treasury has tightened up on what businesses are eligible under the program.

On Friday, it said that publicly listed companies may apply, but firms must satisfy, in good faith, that the “current economic uncertainty makes the loan necessary to support … ongoing operations.”

Treasury Secretary Steven Mnuchin warned this week that many public companies could not make such a certification in good faith, raising the prospect they could be probed for fraud.

The Treasury also said that hedge funds and privately equity firms are not eligible because they primarily engage in investment or speculation, businesses already banned from SBA borrowing.

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