Small Businesses Suffer with SBA Out of Funds

Summary of Keywords

• PPP funding exhaustion: On April 16, the U.S. Small Business Administration announced that the $349 billion Paycheck Protection Program (PPP) funds authorized under the CARES Act were fully exhausted, halting acceptance of new applications after just 14 days.
• Application timing challenges: Several major banks, including Capital One and Wells Fargo, opened application portals after funds were depleted, leaving many small businesses unable to submit timely applications despite lender readiness issues.
• Interim lending alternatives: Some businesses may consider the Federal Reserve’s Main Street Lending Program, a traditional loan option processed by banks with favorable but higher variable interest rates than PPP loans.
• Program comparison: Unlike PPP loans, Main Street loans are not forgivable, have higher interest rates, longer repayment terms, and minimum loan amounts starting at $1 million, while PPP loans offer lower rates, shorter terms, and potential forgiveness.
• Recommended action: Businesses are encouraged to continue preparing and submitting PPP and EIDL applications promptly so they are ready if Congress approves additional funding.

On Thursday April 16th, just 14 days after small businesses across America were first able to apply for loans through the $349 billion Paycheck Protection Program, the U.S. Small Business Administration announced it had exhausted its allotted funds and stopped accepting applications.

Ironically, Capital One and Wells Fargo opened their application portals within the last two days – just after the SBA had processed loan volumes that reached the $349 billion level authorized by the CARES Act and stopped accepting applications – leaving many small business owners at risk and unfunded.

Many business owners are still looking for a bank to accept their applications (Intuit, Kabbage and Paypal are beginning to accept applications from small businesses). Others, are scrambling to apply – for instance Wells Fargo and Capital One customers, previously unable to apply because the banks weren’t ready to accept applications. Congress is in discussions over another $250 billion in funding, but what should business owners do in the meantime?

The Federal Reserve’s Main Street Lending Program may be an option for some. Similar to the EIDL loan through the SBA, the Main Street Lending Program is a traditional loan with favorable interest rates. The loans will be processed by banks, nor directly through the Federal Reserve.

Firms that have taken advantage of the PPP may also take out Main Street loans. But there are some important differences between the programs:

• The interest rates borrowers can expect to pay on Main Street loans are variable and right now range from 2.5 percent to 4 percent. The PPP loans offer a 1 percent fixed interest rate.
• The repayment term for Main Street loans is four years. PPP loans have two-year terms.
• The smallest loan amount for Main Street loans is $1 million. There’s no minimum loan amount for PPP loans. For PPP loans, the maximum loan amount is $10 million. Main Street loan sizes vary based on Lending facility.
• While PPP loans may be forgiven, Main Street loans may not be forgiven. 

In the meantime, keep working to apply as quickly as possible for the PPP and EIDL funds so that when (if) Congress approves the additional $250 billion in funding, your application is ready for consideration.