August 12, 2020
Authored by: Robert Klingler
Barring further legislative action, the approval window for new Paycheck Protection Program Loans came to a close on August 8, 2020. Since the original launch on April 3rd following the CARES Act, 5,212,128 small businesses have borrowed $525 billion under the Paycheck Protection Program. On August 11th, the SBA published a Paycheck Protection Program Report with additional details.
The overall average loan size under the Paycheck Protection Program was $101 thousand, and this average steadily fell during the lifetime of the Paycheck Protection Program. But even that average number emphasizes the statistical differences between median and mean. While the average loan was just over $100 thousand, over 68% of the loans were for $50 thousand or less (and over 81% of PPP loans were smaller than the average PPP loan).
Looking back at the Paycheck Protection Program, I think it can be useful to look at four separate time periods.
Round 1 was the initial round of PPP loans, as made under the original CARES Act, which authorized $349 billion under the program. These loans were made between April 3, 2020 and April 16th, when the funds were exhausted.
Round 2 commenced on April 27th, following the adoption of the Paycheck Protection Program and Health Care Enhancement Act on April 24, 2020, which added $310 billion in funding to the Paycheck Protection Program.
Round 3 commenced on June 5th, with the adoption of the Paycheck Protection Program Flexibility Act. While no additional funding or eligibility requirements were changed, the Flexibility Act extended the maturity date of PPP loans and provided for an extended covered period for measuring forgivable expenses. Round 3 finished on June 30th, consistent with the original deadline for PPP loans under the CARES Act.
In early July, Congress revitalized the Paycheck Protection Program, and Round 4 then ran through August 8th, the revised deadline for PPP loans.
Because of loan returns in subsequent periods, the following analysis likely overstates lending in the earliest rounds and understates lending in the subsequent rounds, and provides some obviously incorrect results. For example, I’m pretty sure that 106 small businesses didn’t turn around and lend money to the SBA in Round 4 in amounts of between $5 and $10 million. Instead, this almost certainly reflects an additional 106 PPP borrowers who ultimately decided to return funds rather than seek loan forgiveness (perhaps following negative publicility following the SBA announcement of individual borrowers). Regardless, I think the data shows both the continued importance of the Paycheck Protection Program to small businesses and the declining interest over time, particularly from larger borrowers.
|Round 1||Round 2||Round 3||Round 4|
|Total Dollars||$342 billion||$169 billion||$10 billion||$4 billion|
|Average Loan Size||$206,000||$59,000||$29,000||$11,000|
|>$1 million Loans||67,216||14,967||525||-508|
|>$5 million Loans||4,412||405||23||-106|
This chart also emphasizes the importance of potential legislative action to provide a simpler forgiveness process for PPP loans of $150,000 or less. Such action would provide significant administrative relief to the over 4.5 million small businesses with such PPP loans, but also for the lenders responsible for reviewing over 4.5 million loan forgiveness applications.