Thousands of small businesses could soon get additional time to apply for low-interest loans as part of the government’s Paycheck Protection Program.
Just days before it was scheduled to expire, the Senate voted 92 to 7 to pass the PPP Extension Act of 2021, which would extend the program to May 31 from the current deadline of March 31. It would also give the Small Business Administration, which manages the PPP, another 30 days to process those loans.
The bill now heads to the desk of President Joe Biden, who is expected to sign the measure into law. Last week, the House of Representatives approved the extension with broad bipartisan support.
The PPP, which was created as a component of the CARES Act passed in March last year, offers low-interest loans of up to $10 million to companies and nonprofits that employ 500 workers or fewer. A large majority of the funds are not required to be paid back so long as businesses comply with the terms, including a requirement that 60% of the total amount is used for payroll.
Since it was established, the SBA has approved 8.25 million loans totaling $718 billion. In 2021 alone, 3.1 million loans worth nearly $196 billion have received approval. The overall average loan size, according to the SBA, is $63,000.
Currently, there remains about $50 billion in unclaimed PPP funds, and roughly 190,000 small businesses have pending PPP applications.
Last month, Biden announced that the SBA would implement a revised formula based on gross income to calculate maximum loan size for sole proprietors, independent contractors and self-employed individuals who filed Schedule C tax forms. (Calculations were previously based on net profit.) This new method allows businesses to potentially qualify for PPP loans even without showing any net profits in 2020.
According to a survey conducted by the National Federation of Independent Businesses, about one in five of small business owners reported that they will have to shutter their doors if current economic conditions do not improve in the short term.
“The health crisis is not impacting small businesses equally,” NFIB director of research and policy analysis Holly Wade said in a statement. “Small businesses are adapting to the abrupt shifts in consumer spending; managing customer and employees’ health and safety; and complying with state and local mandates — which are all creating additional stress for small business owners. Many of them still need more financial assistance just to keep their doors open and staff on payroll.”