The Small Business Administration said Tuesday that it has approved more than 400,000 loans worth about $35 billion through the Paycheck Protection Program, a vital lifeline for pandemic-ravaged small businesses.
The figures are the first released by the SBA since the program reopened earlier this month. Roughly 66% of loans were for $60,000 or less, with the average loan size worth about $87,000.
Congress established the rescue fund earlier this year with the passage of the March CARES Act and authorized another $284 billion to provide a second round of forgivable loans to small businesses as part of its more comprehensive $900 billion COVID relief plan, bringing the program's total funding value to $806 billion.
In an attempt to rectify past criticisms that the program favored larger borrowers, the SBA adopted a phased-out approach, initially only offering the forgivable loans to first-time borrowers and giving priority to certain lenders that focus on underserved communities in an effort to help minority-owned businesses. The agency opened the program more broadly last week.
At least $40 billion has been set aside for businesses with 10 or fewer employees and for loans under $250,000 in low-income areas.
Acting SBA Administrator Tami Perriello said the agency wants to work to iron out previous program kinks and "swiftly" deliver the loans to ailing businesses while keeping checks in place.
“The agency is committed to making sure compliance checks are executed on the front-end,” Perriello said in a statement, adding that the SBA is also "committed to addressing issues more efficiently moving forward, to ensure fair and equitable access to small businesses in every community."
The relaunched program is expected to inject much-needed relief into the U.S. economy after employers unexpectedly cut 140,000 jobs in December amid a nationwide surge in COVID-19 cases.
While the eligibility formula is the same for first-time applicants, only businesses with 300 employees or fewer are eligible to receive a second loan, which will be capped at $2 million. Borrowers seeking a second forgivable loan also need to prove that they saw a 25% reduction in gross receipts during a quarter in 2020 compared with the same quarter in 2019.
Second-time borrowers that are taking loans of $150,000 or less will not have to immediately provide documentation proving a 25% reduction in receipts and can do so before they apply for forgiveness, according to the rules.
During the first round, businesses with fewer than 500 employees could receive as much as $10 million. Businesses will still be required to spend at least 60% of the money on maintaining payroll in order for the government to forgive the full loan. The remaining 40% can be spent on operating costs such as mortgages, rent and utilities.
Over the course of roughly four months, the PPP distributed about $525 billion in forgivable loans to 5.2 million companies, saving an estimated 50 million jobs, according to the SBA. The program closed to new applicants at the end of July with roughly $38 billion remaining in the fund.
The program is expected to close to all borrowers on March 31.