PPP Funds Running Out

April 7, 2021

The U.S. Small Business Administration (SBA) is warning policymakers that funds for the Paycheck Protection Program (PPP) are likely to dry up in April, weeks before the May 31 deadline. Last week, there was about $66 billion remaining out of the nearly $292 billion which Congress appropriated in December. 

The Biden administration and Congress have just agreed to extend the PPP deadline from March 31 to May 31. This extension did not include any additional funds for the program.

The funding lapse could leave thousands of small businesses without aid. New funds are needed to help especially those who were set to benefit from Biden’s new rules announced last month, aiming to ensure that loans reached the smallest, hardest hit businesses that had long strained to gain access to the program, including the self-employed.

Moving the deadline back two months, together with the expanded access, means that the plans Congress made last year for how long the remaining PPP funding would be available are no longer accurate. The money could be exhausted as early as next week, before Congress comes back to Washington with the ability to discuss adding more funds.

Additionally, some lawmakers have been considering making additional changes to the PPP, key among those would allow self-employed business owners to retroactively increase the size of their existing PPP loans if they received them before the rules were changed last month. Such a change would further increase demand for PPP funds.

The PPP running out of funds also creates a problem for banks and other lenders –– they need to decide whether to stop taking applications early or keep giving out loans with the hope that the government will appropriate more funding. Last month, banks also faced a dilemma of whether to keep applications open with the hope that the government will extend the deadline or close early to ensure enough time to process applications before the original March 31 deadline.

Banks, lenders, and small businesses all need clear guidance from the government to know what they should expect, allowing them to plan accordingly.