Banks Warn Replenished PPP Loan Funds May Already Be Spoken For

Banks are sounding the alarm that the upcoming funding round for the federal Paycheck Protection Program (PPP) is likely already tapped.

“The majority if not all of the funding Congress is considering right now is already exhausted,” Nick Simpson, a spokesman with the Consumer Bankers Association told the Associated Press (AP) on Thursday (April 23).

Because there is a large backlog of applications from the first funding round, it’s likely that few if any new applicants will get the forgivable loans from the Small Business Administration (SBA). The initial $349 billion funding round ran out on April 16 after more than 1.7 million loans were approved.

Bankers said there are hundreds of thousands of pending applications — and with a daily burn rate of $50 billion, the PPP would need about $1 trillion to satisfy the demand, according to a Politico report.

About a third of the new funding is being allocated for small banks, but even they are backed up with applications. Some have said they did a year’s worth of applications in one weekend.

JPMorgan Chase said it started warning customers ahead of the new funding approval that the money will be gone fast. The bank told CNBC last week that it still had to fund $26 billion in loans from hundreds of thousands of customers.

The loans can be as high as $10 million and are based on a company’s payroll size. The loans are forgivable if the money is spent to retain or rehire workers.

The program was criticized after it was revealed that big loans were extended to public companies and nationwide chains worth millions. Harvard, rated as the world’s wealthiest university with a $40 billion endowment fund, was approved for an $8 million loan but decided to turn it down. Hamburger chain Shake Shack said it is returning the $10 million it received through the program.

The SBA has issued new rules it says will make it unlikely that publicly traded companies will receive money from the next round of coronavirus rescue funding.