On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Securities (CARES) Act, a $2.3 trillion relief package designed to help individuals and businesses weather the economic damage caused by the COVID-19 pandemic.
The headliner of the CARES Act was the creation of the Paycheck Protection Program (PPP), a new loan package designed to put $350 billion into the hands of small businesses for use in paying employee wages and other critical expenses over the coming weeks and months. As of the morning of April 15 , nearly $250 billion in cash had made its way to over one million small businesses, and Congress had already begun negotiations on a second round of PPP funding.
Getting a quarter of a trillion dollars to small businesses in less than two weeks is no small feat, and predictably, borrowers have encountered no shortage of procedural challenges along the way. When the program initially opened on April 3 , many banks, including large national institutions like Wells Fargo, were not prepared to accept applications. Among those banks that were ready to go, many shut the door on any applicant with whom they didn’t have an existing banking relationship. And when applicants could find a willing lender, they quickly learned that small ambiguities in the legislative text of the CARES Act led to BIG problems in computing the maximum loan proceeds.
You can read about those problems here, but by the time you’re finished with that article, it’s likely that nearly all of the first round of PPP funding will be committed. As a result, it’s time to turn our attention to the next round of potential problems—problems that promise to be far more painful for borrowers than any headaches they endured throughout the application process.