The U.S. Small Business Administration launched a third round of the Paycheck Protection Program on Monday morning, making the rules more flexible and using a staggered rollout to avoid the Black Friday doorbuster sale vibe that reigned last April.
“Since over 109,000 PPP loans were approved in Colorado during the first and second PPP allocations, there is potential for a similar volume of Coloradan applicants for second-draw PPP loans,” predicted Frances Padilla, director of the SBA’s Colorado District Office, in an email.
Congress approved $935 billion in federal aid last month, directing $284.5 billion to help small businesses stay afloat during the pandemic. Loans, which are available through March 31, include a $35 billion set-aside for first-time borrowers and $50 billion for small businesses with fewer than 10 employees.
One criticism of the first PPP round was that larger borrowers crowded ahead of smaller ones. In Colorado, borrowers taking a loan of $1 million or more were approved on average a month ahead of borrowers with loans of under $10,0000.
To rectify that, the SBA opened up the loan program at 7 a.m. Monday only to community-based lenders that work with the smallest and most underserved of businesses: Community Development Financial Institutions (CDFIs), minority depository institutions, certified development companies and microloan intermediaries.
“It has been really busy, with a lot of phone calls and a lot of inquiries,” said Laurel Walk, chief lending officer at the Colorado Lending Source, which has partnered with Lendio, an online small-business lending platform, to make PPP loans.
First-time borrowers have exclusive access on Monday and Tuesday, and the program will open up to “second draw” borrowers using community lenders on Wednesday.
To qualify, repeat borrowers must have 300 or fewer employees, must have suffered at least a 25% reduction in sales between comparable quarters in 2019 and 2020, and must have spent down all the money from the first round for authorized uses, primarily payroll expenses.
Banks, credit unions and other conventional lenders are expected to start taking applications on Wednesday, said Jenifer Waller, president of the Colorado Bankers Association.
The new PPP rules dropped Sunday night, providing banks two full days to digest them, which should make for a smoother opening than last year, when lenders only had 24 hours to launch. Some chose to delay accepting loans, which created confusion.
“Having the two-day lead time is beneficial. It will be a smoother process, knock on wood, than what it was last time,” she said.
One concern among bankers is that the SBA is replacing its old E-Tran system, which bogged down last year under the crushing volume of applications, with a new platform, Waller said. With any new rollout, there is always a risk.
Padilla said she couldn’t offer specific information yet on how the new platform is performing. But it will be familiar to lenders who worked on the PPP Forgiveness Platform and it “will enable expeditious processing,” she said.
Borrowers are advised to contact their current financial institution first for assistance with a PPP loan. The Office of Economic Development and International Trade also has a COVID-19 Business Resource Center to help businesses and nonprofits with information on the PPP, as well as Economic Injury Disaster Loans and Express Bridge Loans. The number there is 303-860-5881.
The third round was expanded to cover more nonprofits, including 501(c)(6)s, housing cooperatives, and destination marketing organizations.
This time around, borrowers are being given greater flexibility to cover expenses beyond payroll, including operating costs, property damage, supplier costs and equipment purchased to protect workers. Borrowers can choose a time frame to spend the money of either eight or 24 weeks. And loan forgiveness is expected to be more streamlined this go-around, especially for borrowers taking out loans of under $150,000.
