The Small Business Administration has officially shut off the Paycheck Protection Program spigot.
With approximately three weeks left before the PPP is scheduled to sunset, the agency in charge of disbursing $292 billion in forgivable loans this round, notified lenders on Tuesday evening that it will stop accepting most new applications. The SBA told lenders that general funds devoted to the program had run out.
Chase, the biggest PPP lender, shortly thereafter updated its website with the following note: "We aren't accepting new PPP applications because SBA PPP funds have run out. If your application is in progress, we'll email you with an update when we know more."
Anne Pace, a Chase spokesperson, noted that the lender is still waiting for the SBA to provide lenders with direction on pending applications. In other words, if you have an outstanding application that hasn't yet been approved, it's unclear if lenders will be able to process the application.
Approved loans that have yet to get funded should still proceed, however, says David Patti, a spokesperson for the Wyomissing, Pennsylvania-based Customers Bank. "If you have an approved PLP number, those monies are set aside for you," he says. "How much cash is available is not the same as no money left." The SBA did not immediately respond to a request for clarification regarding how much funds are left for business owners. As of a May 2nd program update, the SBA noted that $258 billion in loans had been approved in this latest round, which means that $34 billion was left.
Last week, it was widely reported that the program had around $24 billion left. It's possible that lenders canceled $10 billion worth of potentially fraudulent loans over the period, but it's also possible there was confusion at the SBA itself. In a tweet on May 4, the SBA noted the program's end date--May 31--and encouraged those interested to utilize its list of potential first- and second-draw lenders. Later that day--and also on Wednesday morning--the agency notified lenders that the program's funds were exhausted.
In a statement, the SBA confirmed that it would continue funding "outstanding approved" PPP applications. It noted further that borrowers with loans outstanding--and new applicants--may still apply for PPP funding through community financial institutions. This group includes lenders like community development financial institutions, microlender intermediaries, and minority depository institutions, which tend to work with smaller borrowers and those from underrepresented groups. There's reportedly around $8 billion left for borrowers accessing these institutions.
The early end to the program, while expected, seemed to catch lenders off guard. "It had to happen sometime," says Patti, who noted that Customers notified borrowers of the program's ending this morning. "I don't know that there ever would have been a way to have a gentle landing. But it was more abrupt than I expected."
It will no doubt come as a shock for borrowers, too. "We've seen steady demand from businesses for PPP loans over the past month," says Dan O'Malley, CEO of Numerated. The Boston-based digital lending platform for banks says it currently has $1.4 billion in outstanding applications from more than 33,000 businesses that have been started but not yet approved by the SBA.
Since the start of the landmark program last April, the SBA has helped more than eight million small businesses access more than $780 billion. As of May 2nd, more than 10.7 million first- and second-draw PPP loans had been approved.