The $1.9 trillion American Rescue Plan Act that U.S. President Joe Biden will sign into law on Friday offers a number of provisions to support small businesses.
Significantly, it authorizes another $7.25 billion for the Paycheck Protection Program. It offers loan annulments to small businesses and other organizations hardly affected by the coronavirus pandemic. However, the loans will only be forgiven if at least 60% of the money is used to support payroll expenses.
However, the program will expire at the end of March. Business groups and the lending community are pressing the Biden administration for an extension.
That’s a problem as there is already a backlog of applications still pending approval by the Small Business Administration. For now, any loan that doesn’t have approval by March 31 will not be funded.
It suggests banks must decide how much longer they want to receive new applications as it needs 24 to 48 hours for a bank to hear back from the SBA on whether a submitted loan application has been approved.
Some associations and have been calling on Congress to extend the Paycheck Protection program
If applications don’t get approval, the SBA may request more information or flag a business owner as ineligible. That can takes days or weeks.
For example, Bank of America stopped receiving new applications on Tuesday. According to a bank spokesman, they have 30,000 applications in process and want to allow enough time to finish the work and get each client’s application through the SBA process by the end of March.
Furthermore, Banking associations, the American Institute of CPAs, and others have been calling on Congress to extend the program beyond March 31 or to at least allow the SBA to resume processing loan approvals for applications submitted before March 31.
Based on data from the federal agency, as of March 7, the SBA has made 7.6 million PPP loans equaling $678.4 billion since Congress created the program last spring.