First Round of PPP Loan Funds Allocated: What it Means for Businesses

The SBA indicated yesterday that all Congressionally appropriated funds for the Paycheck Protection Program loans (“PPP Loans”) have now been allocated.

What does this mean for me?

Even if you have not yet received your funding, you might still have your place in line for this first round of PPP Loans. If your bank has indicated that your application was registered with the SBA or accepted by the SBA, or if you have been given an SBA loan number, you should still be in line to receive funding under this first round of PPP Loans. Please check with your bank if you have questions. The final step in the process is that you will receive loan documents to sign, including a promissory note. The bank is supposed to fund within 10 days after approving your loan, although often funding is deposited more quickly than 10 days.

What do I need to know about spending the funds if my application was approved?

We’ll be sending more information early next week with suggested best practices on tracking and spending the funds and on the process of applying for loan forgiveness. We also expect there will be additional guidance from the SBA in the coming weeks detailing loan forgiveness, and we’ll monitor and send updates as that guidance is released.

What if I submitted an application but didn’t get an SBA loan number?

If your bank was still in the initial underwriting process and did not submit your application to the SBA before the allocated funds were exhausted, then you will not be eligible for this first round of PPP Loans. However, it is possible that Congress will appropriate additional funds for this program, and if that occurs, most banks will first process their application backlog before processing new applications.

If your bank has requested additional documentation on your application, we recommend continuing to get that information to your bank as quickly as possible to best position yourself for the second round of PPP Loans upon congressional authorization.

What if I haven’t submitted an application yet?

Some banks have shut down their online application portals and will not reopen them until additional congressional appropriations are made; however, some banks are continuing to accept applications to help you get positioned to quickly move on the second round of PPP Loans if made available. Ask your bank, and if your bank is not accepting applications at this time, consider looking for a bank that will accept applications, including smaller, local banks.

The one caveat is that if you have an existing line of credit or term loan with your bank, you may need your bank’s permission to take a loan with a different bank. Check your loan documents for prohibitions on additional indebtedness and whether a PPP Loan may constitute “permitted indebtedness” under your loan documents. If you are having trouble finding a bank that can help, feel free to reach out to us, and we will do our best to put you in touch with a banker that can help.

Should I explore other relief programs?

If you are not in line to receive a PPP Loan in this first round of funding, you might consider instead exploring other relief in the CARES Act, such as the payroll tax credit, but note that taking advantage of one form of relief might preclude you from taking advantage of another. For example, you can’t receive a PPP Loan and also take the payroll tax credit. We recommend you consult your tax advisor regarding the tax relief programs in the CARES Act.

Read all the latest updates on the PPP loan program and other CARES Act items.

If you have questions about how to navigate COVID-19 related impacts pertaining to the Paycheck Protection Program or any other business matters or contractual commitments, please don’t hesitate to contact us.