The second round of the PPP program was intended to help those small businesses who missed out on the first round of funding. Though some lessons were learned from the initial phase, with a program of this size there are bound to be challenges. And there have been…
The U.S. Government and lending institutions aren’t set up to process applications and fund hundreds of billions of dollars in such a short period of time. Banks and borrowers have had logistical issues getting applications through the system, between lockouts and login issues, the structure is sluggish at best. Reportedly, each bank has been unable to submit more than a few hundred applications, with one bank being locked out after merely 60 applications. Additionally, new guidelines also outline that lenders will not be able to originate more than $60 billion in loans.
If locked out this time, business owners should continue to apply for the loans in the event additional funding is approved or some borrowers decide to repay loans received, thereby increasing the pool of available funds.
The program is not intended for publicly traded companies, although some have received funding. The Secretary of the Treasury, Steven Mnuchin, warned that these companies who have received funds would be penalized unless they were returned.
Significant issues are also popping up post-funding. Businesses with operations that have been shuttered are in a bind and often faced with a Hobson’s choice – pay employees who aren’t working, preserve the funds for re-opening, or pay outstanding creditors (the latter two could potentially result in surrendering forgiveness of the loan). Some businesses may seek bankruptcy protection and use the funds to help restructure debts.
While the roll-out may not have been smooth (it was never going to be), the government needs to focus on guidelines post-funding that will really help small businesses survive and thrive – whether that’s expanding the period of time to spend the money or allocation of the funds for loan forgiveness.
If you have questions about options available to your business during this time, please contact one of Bast Amron’s Insolvency Litigators.