The Paycheck Protection Program ran out of funds on April 16, and is now being replenished.

By Kristen Hawley
Updated August 05, 2020
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The next round of funding for the CARES Act is set to pass through Congress this week after Senate approval on Tuesday. It includes $310 billion to replenish Paycheck Protection Program (PPP) funds, which ran out on April 16, and an additional $60 billion to fund more low-interest Economic Injury Disaster Loans (EIDL) through the Small Business Administration (SBA). Both programs have been paused until new funding is allocated.

The PPP has faced much criticism as it ran out of money. A provision in the law allowed large restaurant companies to apply for funds. Shake Shack returned its $10 million loan after many smaller businesses reported being shut out of the program. Shake Shack founder Danny Meyer and current CEO Randy Garutti said in an open letter that they were able to find funds elsewhere. (The company sold several million new shares of its stock.)

In the latest round of funding, $60 billion of new PPP funds are allocated specifically to smaller lenders, like community banks. Lawmakers say this will make it easier for smaller businesses without existing bank relationships to apply for the loans.

Access to funds was just one of the problems with the initial rollout of the PPP. Some businesses reported trouble with applications, others say their banks held off on offering the loans for so long that funds were depleted before they had a chance to complete their applications.

Banks are already accused of prioritizing applications for larger loans, even though guidance from the SBA states that applications are to be processed on a first-come, first-served basis. Bank of America, Wells Fargo, JPMorgan Chase, and U.S. Bank face class-action lawsuits filed on behalf of California small businesses, including restaurants. Banks have so far received a 1 to 5 percent processing fee on PPP loans.

Additionally, critics say that as written, the PPP isn’t as helpful to restaurant businesses as it should be. PPP loans are only forgivable under certain circumstances, including a timeline for recipients to re-hire workers. Currently, a business must be at or close to full payroll by June 30 to receive loan forgiveness. With no real timeline for a full reopening, restaurants are wary to commit to such terms. If it’s not forgiven, the loan must be repaid over two years at a 1 percent interest rate.

Meanwhile, payment technology companies are hoping to make it easier for small businesses to apply. Paypal, Quickbooks, and Square have all been approved as PPP lenders. A representative for Square, which shared it had been approved just as funds ran out, said the company would pivot its efforts “toward enabling sellers to be ready when PPP receives additional funding from Congress.”

According to the National Restaurant Association, two-thirds of American restaurant workers have lost their jobs due to COVID-19.

As of April 16, the SBA reported that the accommodations and food services sector had received about 9 percent of PPP loan funds, for a total of around $30 billion. Construction topped the list, with 13 percent of the total, or $45 billion.

President Trump said that he wants the next round of relief to contain tax breaks for restaurants. Senate Majority Leader Mitch McConnell has said the Senate won't take up a new bill until it's back in session on May 4.