The second round of funding for the Payment Protection Program provides $310 billion in government backed loans to small businesses. The funding pool reopened for applications on April 27th. By the end of the May 1st, the SBA had backed 2.2 million loans accounting for $175.7 billion of the program’s funding, according to Newsday. The average loan amount during this second round of loan distribution has dropped to $79,457.
In an effort to ensure that small businesses received aid from the Payment Protection Program, the SBA, on April 27th between 4p.m. and 11:59 p.m., only processed loan applications from small lenders with assets under $1 billion, according to NPR. Additionally, Congress added the condition that $60 billion worth of second round loans be distributed by small lenders, which include community development institutions, according to Newsday.
The move comes after some scrutinized lack of oversight during the first round of loan distributions, which prioritized large loans from large banks. According to NPR, over 25,000 loans approved by the SBA were at sums of $2 million or larger. These efforts have led to 15% of approved loans being issued by small lenders.
"This has been an extremely popular and effective program, no question about it," Larry Kudlow, White House economic adviser, said. "Keeping folks on the payroll is so important. And even if they are furloughed for a while, they'll be picked up by the unemployment compensation. That suggests, I might add, potential strong spring back once the states gradually phase in their reopenings in the transition months of May and June."
The process by which lenders submit applications for government backed loans was also redesigned to be more equitable. E-TRAN is the system through which lenders submit loans applications that they have processed for approval by the SBA. During the first round of distribution, lenders could submit as many applications as they could per hour. This meant that larger lenders with more manpower, could submit larger numbers of applications at a faster rate than small lenders, leading to prioritization of large lenders’ applications during the approval process. During this second round, all lenders will be able to submit at the same rate per hour, according to CNN.
Large lenders have complained that they have processed thousands of loans that have yet to be approved by the SBA. JPMorgan Chase and Bank of America have aggregately processed nearly 500,000 applications totaling $46 billion, but only 30,000 of those loans have been approved by the SBA, according to PYMNTS. Additionally, Bank of America has emphasized that 75% of their processed loan applications are for sums under $100,000 and from small businesses that hire less than 10 employees.