Last updated Friday, April 24 at 3:10 p.m. ET
After the $349 billion allocated to small-business Covid-19-relief loans lasted all of two weeks, the program is getting an additional $320 billion in funding. The House approved the bill Thursday, two days after the Senate. President Trump signed the bill Friday.
The $320 billion will go to the Paycheck Protection Program (PPP), which provides government-guaranteed loans to small businesses. If, after eight weeks, the businesses show that they used at least 75 percent of the loan for payroll, the loan can be forgiven.
The new relief package guarantees that at least $30 billion of the new funds will be designated for community banks so that they don't have to compete with larger institutions. Because lenders now have a backlog of applications, this money is expected to go quickly too.
Congress also allocated $60 billion for the Economic Injury Disaster Loan program. That money is supposed to be used for working capital. Businesses were able to ask for the first $10,000 of any loan as an advance, which would not have to be paid back if the loan was denied. Because of the demand for the loans, that advance quickly dropped to a maximum of $1,000 per employee. The SBA received loan requests worth more than $400 billion through the program, which had only $10 billion in funding initially, according to Ami Kassar, the founder and CEO of MultiFunding, a small-business loan adviser in Pennsylvania.
The PPP has come under intense criticism, first for the chaotic nature of the rollout, and more recently because many struggling small businesses have been unable to get funding. Loans first became available to most small businesses on April 3, but many large banks were unprepared to accept applications when the program went live. Banks that did accept applications quickly found themselves overwhelmed and said they would only work with existing customers--often those who already had loans with the banks. Some frustrated small-business owners found loans through community banks.
It wasn't until April 10 that independent contractors and other self-employed people were able to apply for the loans, and the Treasury Department didn't release guidance on how their payroll should be calculated until April 14. By April 16, all the money was spoken for--while precious few business owners had actually seen anything in their bank accounts.
Once signed into law, the relief package will add a total of $484 billion in funding, including $75 billion for hospitals and $25 billion for expanded testing.
Correction: A previous version of this story misstated the total amount of new funding in the bill for the Paycheck Protection Program--the legislation would add another $320 billion to the program.