In a vote that passed 388-5 in the House of Representatives and unanimously in the Senate, the US Congress approved a new COVID-19 stimulus package on April 21, 2020. President Trump signed the $484 billion bill in the government’s continued efforts to combat the economic ramifications of the coronavirus shutdown.
This newest bill, dubbed an “interim” measure by lawmakers, allocates funds to small business, hospitals, and COVID-19 testing.
$310 Billion For the Paycheck Protection Program
More than anything else, this new stimulus package is dedicated to replenishing funds for forgivable small business loans. Back in March, lawmakers allocated $350 billion to the Paycheck Protection Program, but the funds quickly ran dry, leaving hundreds of thousands of applicants without the money they needed to pay rent and employees.
Thanks to a fresh infusion of $310 billion, the Payroll Protection Program can once again accept and approve applicants. On Monday, April 27, the Small Business Administration (SBA) began allowing applications through existing SBA lenders.
The PPP is such a critical new program because it provides small businesses with forgivable loans to cover payroll costs. According to the Treasury Department, “The loan amounts will be forgiven as long as the loan proceeds are used to cover payroll costs, and most mortgage interest, rent, and utility costs over the 8 week period after the loan is made, and employee and compensation levels are maintained.”
Unlike the first round of funding, which was difficult for small businesses to obtain if they didn’t have existing relationships with larger banks, a chunk of the new round of funding is carved out for community-based lenders and mid-sized banks that serve smaller and minority-owned businesses.
Just five hours after the SBA began processing PPP loans using its new round of funds, SBA administrator Jovita Carranza tweeted that the agency “has processed more than 10,000 #PaycheckProtectionProgram loans submitted by more than 4,000 lenders.”
$60 Billion for the Economic Injury Disaster Loan Program
Small businesses, especially those who don’t qualify for the PPP, are looking to the Economic Injury Disaster Loan (EIDL) program as their only lifeline. Though this program isn’t new, the CARES Act expanded its use to cover the economic impacts of the coronavirus pandemic. It provides emergency grants and loans to expedite relief.
Companies with fewer than 500 employees, including gig-economy workers and self-employed individuals, are eligible for the EIDL program. The maximum loan amount is $2 million based on “actual economic injury,” but grants up to $10,000 are available and now highly sought. Congress originally stated that all small businesses who applied would receive the full $10,000 grant, but new guidelines now suggest that grants will be based on the number of employees instead.
According to the SBA, the additional $60 billion allocated to the EIDL by the government’s newest stimulus bill is expected to be exhausted by the current queue of applications. As a result, the SBA has announced it is “unable to accept new applications at this time for the EIDL-COVID-19 related assistance program (including EIDL Advances) based on available funding. Applicants who have already submitted their applications will continue to be processed on a first-come, first-serve basis.”