The PPP lending program is reopening with revised rules to prevent fraud
The government was scheduled to reopen its signature pandemic small business aid program on Monday with $ 284 billion in new funding and revised rules aimed at getting cash to the businesses in need while fighting fraud and abuse.
The Small Business Administration announced on Friday that it would launch a third round of the paycheck protection program this week, starting with small municipal financial institutions on Monday and larger lenders in the coming days.
By prioritizing smaller lenders, the SBA hopes to address criticism from lawmakers that minority and female-owned companies did not receive enough cash compared to larger companies during the first two rounds of PPPs last year.
Government officials told reporters Friday that they expected the funds to be enough to meet demand.
Under the program, lenders make loans on behalf of the government that can be forgiving provided the money is spent on eligible costs such as payroll and rent. To date, the PPP has distributed $ 525 billion through more than 5 million loans.
Congress approved the new funds last month as part of another pandemic stimulus package that also relaxed PPP rules on who can get cash and what it can be spent on.
Among the key changes, companies that took cash in the first two rounds will be granted a second PPP loan, provided they have a 25 percent decline in sales. To address fraud concerns, the SBA is also introducing new due diligence reviews.
While lenders say the changes are positive, some fear they could cause some initial issues, especially since the updated application forms and SBA rules guidelines weren’t released until Friday.