SBA Update

April 20, 2020

PPP Runs Out of Funds; Congress Negotiating Additional Funding

The Paycheck Protection Program (“PPP”) authorized up to $349 billion in SBA guaranteed forgivable loans to small businesses to pay their employees during the COVID-19 crisis.  The PPP funds were exhausted last week. According to a report from the SBA, 1.661 million PPP loans were made by 4,975 lenders.  The average PPP loan size was $206K.

Congress is negotiating a $370 billion deal that would reportedly allocate $310 billion more into the Paycheck Protection Program, setting aside $60 billion of that sum for rural and minority groups. Another $60 billion would go to the Economic Injury Disaster Loan program, a separate program offering loans for small businesses administered by the SBA.

Paycheck Protection Program Liquidity Facility

On April 9th the Fed announced The Paycheck Protection Program Liquidity Facility (PPPLF) which extends credit to eligible financial institutions that originate SBA guaranteed PPP loans, taking the loans as collateral at face value. Extensions of credit under the PPPLF will be at a rate of 35 bps. The maturity date of an extension of credit under the PPPLF will equal the maturity date of the PPP loan pledged to secure the extension of credit. Importantly, PPP loans will be assigned a weight of zero percent under the risk-based capital rules. Federal Banking Regulators also issued an interim final rule that will allow financial institutions to neutralize the effect of PPP loans financed under the PPPLF on regulatory capital ratios. This relief applies to both risk-based and leverage capital ratios, including the Community Bank Leverage Ratio. The capital relief is effective immediately.

Paycheck Protection Program Lending Facility Term Sheet

These efforts by the Fed and Federal Banking Regulators should speed up the flow of funds to small businesses and alleviate fears from financial institutions concerning potential liquidity pressure and capital constraints in connection with extending financing under the PPP.


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Dan Stimpson, CPA

Senior Vice President, Investment Strategies

Vining Sparks IBG, LP

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