When the first round of forgivable Paycheck Protection Program (PPP) loans became available April 3, the funds ran out within days. When the second round was released on April 27, demand had fizzled to a point where there is still $150 billion up for grabs.
Demand has “just dried up,” Cindy Blankenship, president of Bank of the West in Grapevine, Texas, told Reuters in a report on Monday (May 26). She added that during the first round of funding, there were so many applications that loan officers worked all hours to process them.
And many of Bank of the West’s PPP borrowers haven’t used much of the $87 million that was distributed, Blankenship told Reuters: “I think it’s a mixture of uncertainty and anxiety and fear, and the uncontrollable factor about employment and rehiring.”
In order for the loans to be forgivable, SMBs must adhere to specific terms regarding rehiring laid-off employees and keeping them on the payroll for specific time periods. Some 75 percent of the funds had to be used for payroll. There are no estimates provided by the SBA regarding the number of jobs that were saved by the program.
Although the program is still available, there now seems to be little demand for the forgivable Small Business Administration (SBA) loans, with lending negative since mid-May, per Reuters data. Fewer businesses have put in applications and some borrowers have returned the money.
The Coronavirus Aid, Relief and Economic Security Act, also known as the CARES Act, was approved on March 27 with an initial $376 billion set aside in relief for small businesses and their employees. The second round of funds brought the total available for SBA loans to $659 billion. But as of May 21, just $512.2 billion in PPP loans have been approved.
There were numerous businesses that applied for PPP loans that later returned them because they had other means of getting funds. Treasury Secretary Steven Mnuchin said all businesses that borrow money through the program can expect to be audited before the loans are forgiven.