As expected, the Paycheck Protection Program (PPP) is likely to run out of its initial allocation of
$350 billion early today leaving millions of small businesses without relief from the growing
economic effects of COVID-19. The PPP has now become the focal point of Washington politics
and the center of a standoff between Republicans, administration officials, and congressional

The pressure on lawmakers is real and growing and negotiations resumed late Wednesday on
how to replenish the PPP and continue to support small businesses hit by the pandemic. Early
Thursday, the Small Business Administration (SBA) said that 1.5 million applications had been
approved, totaling more than $324 billion in loans. With approximately $10 billion needed for
processing and fees, the PPP is essentially out of funds.

The leading Republican on the House Financial Services Committee, Representative Patrick
McHenry (R-NC), was quoted yesterday saying … “The fund being exhausted clearly puts
pressure on Congress to act and come to a reasonable conclusion. Every day that passes that
we don’t fund this program, more pain is felt by small business folks and their employees.”
All sides agree on adding $250 billion to the PPP but differ over whether to add restrictions to
those funds. As NSA reported earlier, the central differences appear to be centered on where
the funds would be directed. Congressional Democrats are looking to increase access to the
loans to provide relief to underserved minority and veterans groups. Republicans maintain their
position of keeping the PPP focused on small businesses. Democrats also want to add aid for
hospitals, food assistance and state and local governments but Republicans are insisting that
this be deferred until the next phase of broader legislation is crafted.

House and Senate Democratic staff and Treasury officials met late Wednesday morning and a
resolution to the standoff is expected. Senate Minority Leader Chuck Schumer (D-NY) told
reporters he had spoken with Treasury Secretary Steven Mnuchin Wednesday morning and that
“We see no reason why we can’t come to an agreement,” he continued “We Democrats believe
we need more money for small businesses, but we need it to go to the people who are under
banked and underserved.”

As is common in Washington, both sides have accused the other of blocking progress in the
negotiations. However, the discussions Wednesday were the first signs of progress this week. It
remains uncertain whether congressional leaders and President Trump will be able to reach an
agreement by week’s end. Encouragingly, both chambers are now scheduled to hold brief
sessions later this week.

The PPP discussions are also complicated because the Economic Injury Disaster Loan (EIDL)
program is also suffering from depleted funding. Senator Ben Cardin (D-MD) introduced a
measure last week that would provide an additional $65 billion for this separate disaster loans
and grants program and appeared hopeful that both the PPP and EIDL additional funding could
pass. He told reporters yesterday, “I am convinced we could sign off as early as tomorrow on an
agreement if we just sit down and work.”

The EIDL Advance program had been intended to quickly deliver grants of up to $10,000 to EIDL
applicants, but overwhelming demand has caused delays and forced the SBA to change the
guidance on the program.

Senate Majority Leader Mitch McConnell (R-KY) reiterated the Republican position in a
statement Tuesday, saying that Democrats should wait to fund other programs as part of the
next relief package and make sure that the PPP relief for small-businesses was funded. The
statement read “There is no time to insist on sweeping renegotiations or ultimatums about
other policies that passed both houses unanimously”.

In anticipation of the PPP funds running out, however, some banks are reportedly no longer
accepting PPP applications from small businesses. The Wall Street Journal reported yesterday
that Arvest Bank, a regional lender based in Arkansas has made more than $1 billion in loans to
more than 7,000 borrowers, but as of Tuesday has now stopped taking new applications.
“We’re at a point now where we have so many [applications], we’re concerned that the
money’s going to run out,” Arvest Chief Executive Kevin Sabin was quoted. “We’re really
hopeful that…they can get another $250 billion allocated before this runs out, and then we’ll
open it wide open again.”

However, the sheer size of the small business community may be an important part of the
debate not yet being faced in Washington. With an estimated 30 million small businesses in the
United States and the effects of the COVID-19 economic downturn being felt in every corner of
that community, an additional $250 billion is likely not enough relief. With approximately 5% of
small businesses having now received around $334 billion in PPP loans there still remains an
overwhelming majority without relief and likely in need of it.

-April 16, 2020 John Rice NSA CEO