Struggling small businesses can begin applying for new and additional pandemic relief loans starting next week, the U.S. Small Business Administration announced Friday.
Many first-time applicants can apply for Paycheck Protection Program loans starting Monday, while those hoping for a second round of funding can apply starting Wednesday. New borrower forms will be released next week.
The administration said smaller community financial institutions will receive the first crack at the new capital, as they’ll be able to access the lending portal for two days before it opens to larger banks. That’s a departure from last spring, when the administration faced criticism that big lenders and well-resourced businesses got a heavier share of initial loans.
Community lenders — including community development financial institutions (or CDFIs) and minority depository institutions (or MDIs), which work with minority and low-income borrowers — processed 221,000 loans worth $16.4 billion the last time around. But many still declined to participate, even after the administration earmarked $10 billion for them to lend.
This time, the administration has set aside $15 billion for community financial institutions and $15 billion for credit unions, Farm Credit System lenders and similar institutions with smaller coffers.
The Small Business Administration did not specify which lending organizations would qualify to participate. But in an announcement, the agency said it would “strongly encourage” small lenders that sat out the last round to sign up this time, saying they would receive “full and prompt consideration” to be approved.
“They’re hoping that by doing this, this is a way to reach out to more small businesses … that may not be served by larger financial institutions,” said Chris Hurn, the CEO of Fountainhead Commercial Capital. “A lot of those folks have not had the type of access to capital that others had.”
For borrowers seeking second draw loans, there are some changes from the program’s early days.
Loans are available to businesses with 300 or fewer employees, and are capped at $2 million; and borrowers must show proof that their business declined by at least 25 percent from one quarter in 2019 to the same quarter in 2020. Restaurants and other hospitality entities will also be eligible for slightly more funding than other small businesses.
Information about this latest round of funding has trickled out in bits since President Donald Trump signed the government’s latest $900 billion relief and stimulus package into law on Dec. 29. The Small Business Administration didn’t provide detailed guidance until late Wednesday night, as Washington, D.C. was engulfed in chaos after Trump’s supporters mobbed the Capitol building.