Explainer: U.S. payroll protection program: What has changed in round two?

WASHINGTON (Reuters) – The Small Business Administration (SBA) on Monday will release $310 billion in funds for the second round of its program that aims to help small businesses hurt by the novel coronavirus disruption to cover their payroll costs.

After concerns that some of the first tranche of money bypassed small businesses in favor of Wall Street companies and big business, Congress, the SBA and the U.S. Treasury Department have made changes to program rules.

The second round will also include potentially hundreds of millions of dollars returned by big companies after the furor, on top of the $310 billion.


In this round, Congress has ring-fenced $60 billion for Community Development Financial Institutions (CDFIs), Minority Depository Institutions (MDIs), community banks, credit unions, and certified development companies and microlenders whose small business customers are often minority-owned businesses.

That includes $30 billion for institutions under $10 billion in assets and $30 billion for those with between $10 billion and $50 billion in assets.


In the first round, the SBA and the Treasury had to write the rules of the program on the fly, leading to confusion over its terms. In addition, thousands of lenders who were not signed-up with the SBA had to create new accounts, which took days. These bottlenecks slowed the program down initially.

While there are still some wrinkles with the rules and potential for the SBA’s system to struggle under the influx of applications, those teething problems have largely been addressed, lobbyists for the banking industry say.

That could mean the new funds are burnt through in roughly a week, bankers say.


With intensifying scrutiny of hedge funds, listed companies and big restaurant groups that sought loans, the Treasury has tightened up on who is eligible under the program.

On Friday, it said that publicly listed companies may apply, but firms must satisfy, in good faith, that the “current economic uncertainty makes the loan necessary to support … ongoing operations.”

Treasury Secretary Mnuchin warned this week that many public companies could not make such a certification in good faith, raising the prospect they could be probed for fraud.

The Treasury also said that hedge funds and privately equity firms are not eligible because they primarily engage in investment or speculation, businesses already banned from SBA borrowing.

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