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Say Good Bye to the PPP and Hello to PPPP!

Loan submissions under the Paycheck Protection Program (the “PPP”) officially came to an end on June 30th, but in reality submissions had all but dried up weeks ago.  When the final numbers are crunched, over 4.7 million businesses availed themselves of the program borrowing in excess of $500 billion.  The average loan was just over $106,000.  However, there remains over $130 billion left in the program and many existing borrowers are clamoring for access to these additional funds.  Enter the Prioritized Paycheck Protection Program or what you will soon be called the “P4.”  The P4 is a bipartisan bill introduced a few weeks back which has been receiving growing support in Washington.  The idea is to extend the deadline for PPP loans and offer additional PPP type loans to a subset of existing small PPP borrowers hardest hit by COVID-19.

The need for P4 is becoming apparent as 48 of 50 states face increases in COVID-19 cases causing twelve states to press pause on reopening plans and an additional five states to actually take a step back with their reopening initiatives.

Get to know the P4

Under currently proposed P4 legislation, the deadline for new PPP loans would be extended to December 31, 2020, and certain prior small PPP borrowers who are hardest hit by COVID would be eligible to receive additional funds.

The P4 is not yet law and remains subject to change as it goes through the legislative process of both the House and Senate before receiving presidential approval; however, here is what we now know:

  • New P4 loans are available to only smaller businesses with 100 or fewer employees (the original PPP permitted companies with fewer than 500 employees to participate).
  • No public companies (the original PPP allowed publicly traded companies to participate).
  • Borrowers must be able to show they have exhausted their initial PPP loan or are on track to do so.
  • Borrowers must be able to show COVID-19 caused lost revenue of 50 percent or more (the original PPP only required borrowers show they expected their business to be harmed by COVID-19). 
  • Up to $25 billion being earmarked for businesses with 10 or fewer employees.
  • Borrowing amounts would be capped at $2 million (the original PPP permitted borrowings up to $10 million).
  • Borrowing amounts would be capped at 250 percent of monthly payroll costs (about the same limit as under PPP).

When can we expect passage of the P4? 

Many Washington insiders believe the P4 will be wrapped into a fourth stimulus package.  This package is currently under consideration but no vote is expected until after Congress returns from its summer recess in late July. 

In the background of all of this is a possible interim step.  Last week the Senate passed a proposed extension to the PPP, which would extend the deadline for filing an initial loan application from June 30th to August 8th, presumably this extension is designed to cover any gap that will exist while P4 is pending.  This proposed extension is itself still pending approval from the House and the President.

The more targeted approach of the P4 is designed to help the most needy businesses and is what main street businesses need in Q3 to help see them through to the other side of the pandemic.  Brody and Associates will continue to monitor the P4 legislation and keep our clients updated.