Congress' new stimulus bill will funnel $280 billion to extend PPP

  • Congress' $900 billion stimulus bill includes more than $280 billion to revive the Paycheck Protection Program (PPP).
  • The newest iteration of the PPP includes a number of stipulations that aim to correct previous distribution problems.
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The $900 billion stimulus bill will extend another round of aid to consumers and businesses as the pandemic drags on, The Wall Street Journal reports. That includes more than $280 billion to revive the Paycheck Protection Program (PPP), which provides small businesses with forgivable loans to cover payroll costs, on behalf of the Small Business Administration (SBA).

The PPP was first passed under the $2.2 trillion CARES Act in March, and its initial $349 billion in funds were exhausted within two weeks. It received an additional $310 billion in April, but closed in August with $134 billion in unused funds.

The newest iteration of the PPP includes a number of stipulations that aim to correct previous problems. Early in the program, banks were criticized for prioritizing larger loans to secure higher fees, and a number of large companies caught flak for taking loans, while the smallest businesses were left in the cold.

The new bill caps loans at $2 million, down from $10 million in the first round. It also sets aside $15 billion for community lenders, along with dedicated funds for borrowers with 10 or fewer employees and loans below $250,000 in low-income areas. The bill also requires the SBA to set regulations on small business support within 10 days of the legislation being signed into law—likely to avoid the confusing guidelines that stymied the previous round.

Banks' handling of the PPP process heavily influenced small business banking customer satisfaction—and another round will test their effectiveness in helping businesses that need it most. Besides prioritizing large loans and existing clients, banks faced backlash from the public and from regulators for being slow to process applications during the PPP's first round.

But they were more effective in handling applications during round two, successfully distributing aid to smaller businesses that needed the funds most: By the PPP's expiration on August 8, the average loan size was $101,000, versus $239,152 at the initial round's end. This contributed to small business banking customer satisfaction reaching a record high, according to a June–August J.D. Power study.

Another PPP round ultimately gives banks another chance to do right by their customers. Banks will once again be in the spotlight of regulators and the public, and they'll need to avoid their earlier missteps. Distributing aid where it's needed most—particularly given the program's new guidelines and emphasis on micro-businesses—could help them build long-term goodwill.

And banks should be prepared to jump into action once the bill is signed into law: Demand will likely be high, as an estimated 90% of small businesses have exhausted their PPP funds, according to a Goldman Sachs report from earlier this month.

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