Senate Approves $380 Billion Expansion of CARES Act Small Business Loan Programs

April 22, 2020
Firm Publication

In an effort to dramatically expand the amount of aid made available to small businesses under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the U.S. Senate yesterday approved over $320 billion in additional funding for the popular Paycheck Protection Program (PPP), as well as $60 billion in additional funding for Economic Injury Disaster Loans (EIDLs). The Senate bill, which is titled the Paycheck Protection Program and Health Care Enhancement Act (PPPHCE Act), is expected to be approved by the House of Representatives and signed by President Trump later this week.

In addition to increasing appropriations for the PPP and EIDL program, the PPPHCE Act would amend Title I of the CARES Act to earmark $60 billion for PPP loans to be obtained through certain smaller community lenders and expand EIDL eligibility to certain farming and other agricultural businesses that are generally precluded from participating in the Small Business Administration’s (SBA) EIDL program.

Below is a summary of the amendments to the small business loan provisions of the CARES Act included in the PPPHCE Act approved by the Senate.

Changes to the Paycheck Protection Program

  • The PPPHCE Act would increase the maximum amount of SBA loan guarantees under the PPP by $310 billion and also appropriate an additional $11.3 billion for costs associated with the PPP.
  • With respect to PPP loans made after the passage of the PPPHCE Act, the following stipulations apply:
    • At least $30 billion must be reserved for loans made by lenders that are either (1) insured depository institutions with consolidated assets of between $10 billion and $50 billion or (2) credit unions with consolidated assets of between $10 billion and $50 billion.
    • At least $30 billion must be reserved for loans made by lenders that are either (1) insured depository institutions with consolidated assets of less than $10 billion; (2) credit unions with consolidated assets of less than $10 billion; (3) community development financial institutions (as defined in the Riegle Community Development and Regulatory Improvement Act of 1994); (4) minority depository institutions (as defined in the Financial Institutions Reform, Recovery, and Enforcement Act of 1989); (5) development companies certified under Title V of the Small Business Investment Act of 1958; or (6) intermediaries (as defined in the Small Business Act).
  • Notably, despite recent comments from several policymakers suggesting that additional PPP appropriations could be subject to additional restrictions on borrower eligibility, the PPPHCE Act, as passed by the Senate, does not impose any such additional restrictions. However, Treasury Secretary Steve Mnuchin indicated yesterday that additional guidance would be forthcoming regarding the administration’s interpretation of existing eligibility requirements and that such guidance may impact borrowers who have already applied for and received PPP loans as part of the initial $349 billion allocations.
  • In addition, this new legislation does not relax the PPP’s existing size standards or expand eligibility through additional affiliation waivers, as a significant number of small business owners (particularly in the private equity and venture capital communities) had hoped it would.

Changes to the Economic Injury Disaster Loan Program

  • The PPPHCE Act would make (1) an additional $10 billion available for emergency grants to EIDL borrowers under Section 1110(e) of the CARES Act and (2) another $50 billion available for EIDL loans under Section 7(b)(2) of the Small Business Act and Section 1110 of the CARES Act.
  • The PPPHCE Act would also make the EIDL program accessible to “agricultural enterprises” under the expanded eligibility provision of Section 1110(b) of the CARES Act. The Small Business Act defines “agricultural enterprises” as “businesses engaged in the production of food and fiber, ranching, and raising of livestock, aquaculture, and all other farming and agricultural related industries.”

The Bass, Berry & Sims CARES Act Task Force has been closely monitoring developments related to the unprecedented governmental assistance programs enacted in response to the COVID-19 pandemic. If you have questions about the PPP or EIDL program, please contact the authors or your relationship partner at the firm.