Four weeks before its scheduled end, the federal government’s signature aid effort for small businesses ravaged by the pandemic — the Paycheck Protection Program — ran out of funding on Tuesday afternoon and stopped accepting most new applications.
Congress allocated $292 billion to fund the program’s most recent round of loans. Nearly all of that money has now been exhausted, the Small Business Administration, which runs the program, told lenders and their trade groups on Tuesday.
While many had predicted that the program would run out of funds before its May 31 application deadline, the exact timing was a surprise to many lenders.
“It is our understanding that lenders are now getting a message through the portal that loans cannot be originated,” the National Association of Government Guaranteed Lenders, a trade group, wrote in an alert to its members Tuesday evening. “The PPP general fund is closed to new applications.”
Some money — around $8 billion — is still available through a set-aside for community financial institutions, which generally focus on lending to businesses run by women, members of minority groups and other underserved communities. Those lenders will be allowed to process applications until that money runs out, according to the trade group’s alert.
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Representatives from the Small Business Administration did not immediately respond to a request for comment.
Some money also remains available for lenders to finish processing pending applications, according to a lender who was on a call with agency officials Tuesday.
Since its creation last year, the Paycheck Protection Program has disbursed $780 billion in forgivable loans to fund 10.7 million applications, according to the latest government data. Congress renewed the program in December’s relief bill, expanding the pool of eligible applicants and allowing the hardest-hit businesses to return for a second loan.
Lawmakers in March extended the program’s deadline to May, but they have shown little enthusiasm for adding significantly more money to its coffers. With vaccination rates increasing and pandemic restrictions easing, Congress’ focus on large-scale relief effort for small businesses has waned.
More than half the loans and nearly a third of the loan money were distributed this year. The average loan size was $46,000, less than half the $101,000 average loan in 2020. That is a sign that smaller companies unable to get loans last year were now getting funding. Companies have been drawn to the loans because they promised forgiveness if the money is used for payroll and other essentials.
More aid is still available to small businesses through the Small Business Administration’s Economic Injury Disaster Loans, and restaurants with no more than 20 locations can apply for grants through the Restaurant Revitalization Fund that began accepting applications on Monday. The White House said that 186,200 restaurants, bars and other eligible businesses had applied for the program over its first two days.
Help is also available to owners of theaters and other entertainment companies under the Shuttered Venue Operator Grants.
The program has been criticized because many very small companies, including those owned by members of minority groups, struggled to have their applications accepted by banks. Many of these companies had to wait weeks or months until community banks, credit unions and online lenders were added to the Small Business Administration’s roster of financial institutions.
“The program was always fundamentally flawed as it was based on an unequal traditional banking system,” said John Arensmeyer, chief executive officer of Small Business Majority, an advocacy group. Congress should consider more grants to help companies still struggling as a result of the pandemic, he said.
Karen Kerrigan, president of the Small Business & Entrepreneur Council, said she was “getting a sense from conversations on Capitol Hill that PPP has run its course.” She said private-sector investment and lending is needed to help small businesses recover, and to help new companies open.
The program also was criticized because it imposed restrictions on sole proprietors without employees. For example, they could not apply for loans until a week after the program began on April 4, 2020. Many also found it difficult to meet the paperwork requirements for loans.
Keith Hall, president of the advocacy group National Association for the Self-Employed, said any companies whose applications were delayed because of restrictions should still get their loans, even if it means Congress needs to allocate more funds to the program.
Information for this article was contributed by Stacy Cowley of The New York Times and by Joyce M. Rosenberg, Josh Boak and Alexandra Jaffe of The Associated Press.