Billions more for small business not available immediately, will likely run out quickly: Lender
As Congress rushes to pump another $310 billion into the popular Paycheck Protection Program, designed to help small businesses retain their workers for two months, experts say to expect a delay in the money being available and that it's likely to quickly run out of cash once again.
The demand - before PPP ran out of funds last Thursday - was extremely high -- with 1.6 million loans approved as small business owners struggled to hold on to companies and restaurants as a crushing economic wave caused by the pandemic swept the country and unemployment claims pushed past an historic 26 million people.
And another one million loan applications were pending, according to a key Senate committee chairman.
The House is expected to approve the new infusion of PPP funds Thursday, and soon after the President Donald Trump is expected to sign the legislation, called the Paycheck Protection Program and Health Care Enhancement Act.
Tune into ABC at 1 p.m. ET and ABC News Live at 4 p.m. ET every weekday for special coverage of the novel coronavirus with the full ABC News team, including the latest news, context and analysis.
But experts warn not to expect a “light switch” moment where the his signature triggers a reopening of the program. One banking industry source with knowledge of small business lending told ABC News that the process could take a week or more.
A spokesman for the Office of Management and Budget (OMB) told ABC News that there would be no delay in funds being released to the Small Business Administration (SBA), once the President signed the bill. OMB has "been working with them to make sure the apportionment is correct, once it’s live we can sign it in minutes. There will be no delay."
But the SBA, which administers the government-backed loans, must retool its online loan application system, which experienced repeated problems and outages over the two weeks the plan operated, to accommodate PPP changes that the administration and Congress approved.
The new legislation sets aside $60 billion for smaller lending institutions whose customers include minority-owned and woman-owned small businesses.
The SBA and Treasury Department announced Friday that the program would reopen at 10:30am eastern on Monday.
Once it reopens, the special pandemic loan program -- which has already experienced controversy as larger companies like Ruth’s Chris Steakhouse and the umbrella company that owns luxury hotel chain Ritz Carlton secured multi-millions in PPP loans using a special carveout in the law -- is expected to run out of money very quickly.
One SBA lender, who services minority and woman-owned businesses under PPP, told ABC News, "We are very concerned that the funding will run out quickly. Most lenders have continued processing applications during the gap in funding, so they will be prepared to send in a batch of applications when the program re-opens. Our fear is that the funding will run out in the first day or two."
Nick Simpson, a spokesman for Consumer Bankers Association echoed those concerns in an interview with ABC News, saying, "We believe banks have as many applications pending as have already been approved" before the original $349 billion program ran dry. "We believe this program will go very quickly."
Senate Small Business Committee Chairman Marco Rubio, R-Fla., noted that the sheer volume of lenders now approved to make PPP loans, coupled with applications already pending, would mean a swift depletion of funds.
“Now have almost 5000 lenders with experience with #PPPloans & with 1 million applications ready to file. That’s good news, but it also means $310B in new funds will be tapped at a MUCH faster rate than 1st time,” Sen. Rubio tweeted Thursday morning.
Under a best case scenario, sources said the program could reopen Friday, although the weekend was potentially a more realistic possibility, with PPP out of money within a week.
On Tuesday, Treasury Secretary Steven Mnuchin warned large companies against taking advantage of PPP, saying that they could be investigated for falsely certifying that they experienced damage from the novel coronavirus and needed federal assistance.
The administration was expected to issue new guidance soon to PPP-approved lenders in order to hopefully clear the way for more desperate mom and pop businesses to get loans, as was the intent of the law.
With the expected approval of the $484 billion rescue package by Congress, the majority of which will go to PPP, the small business loan program total will stand at $660 billion.
It is unclear if Congress will approve more funding for the historic small business relief program. Congress could return as early as May 4, and negotiations are already underway for a fifth stimulus package.
*ABC News' Sarah Kolinovsky contributed to this report.
What to know about coronavirus:
- How it started and how to protect yourself: coronavirus explained
- What to do if you have symptoms: coronavirus symptoms
- Tracking the spread in the US and Worldwide: coronavirus map
