If you were standing by an open window when the U.S. Senate agreed to provide an additional $310 billion in funding for the Paycheck Protection Program on Tuesday, you may have heard small business owners and lenders across the country coming together to welcome the news with a collective sigh.
What that sigh represents – relief or frustration – will be revealed in the coming days.
The first batch of PPP funds, $350 billion worth, was released on April 3. By April 16, they were gone.
According to AK Patel, CEO of Lendsmart AI, of the 30 million small businesses in the country, only 1.3 million were able to access funds – approximately five percent of the outfits that make up the economy’s most vulnerable sector.
“As soon as the funding was released, everyone was scrambling to apply,” Patel says.
Once the additional $310 billion is up for grabs, the situation is likely to be little improved. After speaking with his bank clients, Patel says most are anticipating another hectic run on the government’s funds. The situation will be further complicated by the Everest of backlogged applications sitting on virtually every SBA-approved lender’s desk.
New applicants for the PPP funds will have to wait for the backlog to clear. By then, there is unlikely to be any cash left for them.
“Rumours are that that $310 billion will be gone within the first few days of the release date,” says Patel.
A shortage of funds is not the only reason why small businesses have so far failed to get the help they need. Many struggled with the SBA’s application process, which Patel says was unclear to both lenders and small business owners. Owners didn’t know what documentation to provide with their applications and lenders had little time to prep themselves or their websites for the onslaught of client requests.
Other businesses had their initial attempts to secure PPP funding shut down, as they took for granted that all lenders are issuing SBA PPP loans. That turned out not to be the case; only SBA-approved lenders can divvy out PPP funds. Patel says the distinction was not made clear to borrowers, who were then forced to find an SBA-approved lender on their own.
There is no chance that all small businesses will receive the funding they require from PPP V.2, but Patel feels the process this time will be somewhat improved. He says the banks he has been in contact with have dedicated significant resources to improving their SBA-related workflows.
“I think the lenders have a grip on it,” he says, adding that interested lenders have the option of applying for temporary SBA-approved lender status to assist in distributing the second round of government funds.
“And I’m sure there’s going to be a third and a fourth.”
For smaller institutions struggling to help their clients access the SBA’s emergency loans, there’s only so much that can be done. The process can be streamlined by apps like Patel’s Lendsmart, which has proven highly effective in reducing the processing time of SBA PPP loan applications, but if there’s no money left to apply for, there’s not much left to do but sit and sigh.