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The $484B Interim Coronavirus Funding Bill - What's in the Bill, What's Not, and When Will PPP Funds Run Out Again?

Client Updates

On Tuesday, April 21, 2020, the White House and Congressional leaders reached agreement on, and the Senate passed, a $484 billion interim coronavirus funding bill, titled the Paycheck Protection Program and Health Care Enhancement Act (the “Interim Funding Bill”). The House of Representatives is expected to take action on the Interim Funding Bill this week. The Interim Funding Bill would amend the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) that became law on March 27, 2020. See our alerts on the CARES Act here and related Treasury Department guidance here and here.

Among other things, the Interim Funding Bill would:

  • Replenish the Paycheck Protection Program (PPP), the CARES Act’s emergency loan guaranty program to support payroll and other approved expenses for small businesses and other eligible businesses;

  • Add funding for the Economic Injury Disaster Loan (“EIDL”) Program, the Small Business Administration’s (“SBA’s”) loan program for disaster relief for small businesses and other eligible businesses;

  • Add funding for EIDL Grants, the SBA’s emergency grant program under the EIDL Program; and

  • Provide new funding for hospitals and expanded coronavirus testing.

The Interim Funding Bill is a bridge to a fourth stimulus package that is beginning to be considered and is scheduled to be discussed when Congress reconvenes. This update outlines some of the main provisions of the Interim Funding Bill.

Allocation of Interim Funding Bill Amounts:

  • $310 billion for guarantees for loans under the PPP, including $60 billion for smaller lenders, with:

    • $30 billion for lenders with less than $10 billion in assets and

    • $30 billion for lenders with between $10 and $50 billion in assets;

  • $10 billion in administrative costs;

  • $50 billion for loans under the EIDL Program;

  • $10 billion for Emergency EIDL Grants;

  • $2.1 billion for the SBA for salaries and expenses;

  • $75 billion for hospitals; and

  • $25 billion for testing (including funds earmarked for state and local governments to expand testing capacity) and a “national testing strategy.”

Expansion of Eligible Lenders and Set Aside of Funding for Smaller Lenders under the PPP:

Of the $310 billion for the PPP, $60 billion will be set aside specifically for community-based lenders, credit unions, and small to mid-sized banks to support newer businesses, who may not have bank accounts with major banks or bank accounts at all, or that are located in underserved communities, economically distressed or rural areas, to give them a better opportunity to obtain loans under the PPP. This is intended to respond to complaints from some small businesses, especially those in such communities, that were not able to obtain loans under the PPP because they could not compete with larger businesses that had existing relationships with major banks. This set-aside is divided as follows:

  • $30 billion to guarantee loans made by insured depository institutions and credit unions that have assets between $10 billion and $50 billion; and

  • $30 billion to guarantee loans made by community financial institutions, and insured depository institutions and credit unions with assets less than $10 billion.

Set-Aside for Regional Insured Depository Institutions and Credit Unions

The lenders eligible for this $30 billion set-aside fit a common profile of regional banking which has a more identifiable community/local lending focus than the banks in larger asset classes. Accordingly, these institutions serve many regional, community and locally-owned and managed businesses, which are the intended target of this portion of the Interim Funding Bill.

Set-Aside for Community Financial Institutions and Smaller Insured Depository Institutions and Credit Unions

The lenders eligible for this $30 billion set-aside consist of the following:

  • Community financial institutions, composed of:

    • Community development financial institutions, which serve individuals and businesses located in underserved markets, including minority and low-income communities and economically distressed areas;

    • Minority depository institutions (banks whose voting equity is 51% owned by minority individuals or a majority of the board of the bank is minority and the community that the bank serves is predominantly minority);

    • Certified SBA development companies; and

    • Lenders (known as “intermediaries”) in the SBA’s microloan programs (loans of less than $50,000 with particular credit profiles);

  • Insured depository institutions with assets of less than $10 billion (often referred to as “community banks”); and

  • Credit unions with assets of less than $10 billion.

These lenders serve even smaller businesses than the regional banks and support underserved communities and underbanked and unbanked businesses and individuals. This portion of the set-aside would be used for such businesses and individuals to access PPP loans from these lenders whether through their existing relationships or new accounts with these lenders.

How Long will the $310 Billion Replenishment of the PPP Last?

The original PPP was officially open less than three weeks before the $349 billion available to eligible borrowers was oversubscribed and completely depleted, even with some lenders taking weeks to get their systems in full working order. Therefore, despite the influx of new funds into the PPP from the Interim Funding Bill, the new funds will likely run out quickly again, with much of the new funds being used to fund loans for borrowers who have previously been approved but are still awaiting their funds. A representative of the Consumer Bankers Association stated that the new funding is likely to run out within 48-72 hours of becoming available to lenders.1 Even though more funds may become available under a future “Phase IV” bill, qualifying companies should still apply for funding as soon as possible.

Expansion of Eligible Borrowers under the EIDL Program: The Interim Funding Bill will make farms, ranches and other agricultural enterprises (as defined by section 18(b) of the Small Business Act (15 U.S.C. 647(b))) with not more than 500 employees eligible to receive EIDL grants and loans.

What’s Notably Not in the Interim Funding Bill:

  • Funding for state, local or tribal governments.

  • Changes to the affiliation rules for the PPP and EIDL Program.

  • Changes to the rules that allowed larger entities, including public companies, to apply for and receive loans under the PPP.

  • Expansion of tax-exempt entities that may apply for funding, other than 501(c)(3) non-profit entities and 501(c)(19) veterans’ organizations that are specifically referenced in the CARES Act.

  • Expansion of the coverage period for PPP funds beyond 8 weeks.

The text of the Interim Funding Bill can be found here.

Next Steps:

The House of Representatives is planning to vote on the Interim Funding Bill as early as this Thursday. Congressional lawmakers have already begun issuing proposals for a potential “Phase IV” bill for the next round of funding. However, a Phase IV bill is unlikely to be taken up until Congress reconvenes, if at all, which is not expected to be before early May, and the types and amounts of assistance and stimulus, if any, are still to be determined.

1See https://www.politico.com/news/2020/04/20/bank-small-business-funding-coronavirus-197372

 

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