With so many loan applications already in the pipeline, the $310 billion allotted to the Small Business Administration to replenish its emergency loan program is expected to run out quickly, stakeholders said.

The new money was approved by the Senate on April 21 via unanimous consent as part of the Paycheck Protection Program and Health Care Enhancement Act, which is also expected to pass the House by roll-call vote April 23. The funds will replenish the SBA's Paycheck Protection Program, which was created to help small companies cope with economic damage caused by the coronavirus pandemic.

The initial $349 billion provided for the PPP in the Coronavirus Aid, Relief, and Economic Security Act ran out in less than two weeks on April 16. Under the program, small companies can apply for $10 million loans that will be forgiven if they use 75% of the money for payroll and 25% for rent, utilities, or mortgage interest.

Thousands of loans could not get processed before the original funding ran dry due to problems with the SBA portal, among other issues. Those loans are currently waiting in the system, banking groups said, and a huge wave of new applications is expected.

Paul Merski, vice president of congressional relations for the Independent Community Bankers of America, said he does not expect the $310 billion granted under the new legislation to last 14 days. "There are so many applications already in the pipeline," he said in an interview.

Jeffrey Paravano, a partner at BakerHostetler in Washington, D.C., called the new PPP money "a compromise."

"What is most interesting about the Paycheck Protection Program's additional $310 billion of funding is that the number, while very large, is a compromise number, not a number based on any data about what demand is expected to be," Paravano told S&P Global Market Intelligence. "Many expect the funding to run out fairly quickly."

Merski praised the measure because within the PPP's $310 billion, $60 billion is designated for loans by smaller lenders, something his group had lobbied for. Of that $60 billion, $30 billion will go to loans made by insured depository institutions and credit unions that have assets between $10 billion and $50 billion, while the remaining $30 billion will be set aside for loans made by community banks, small insured depository institutions and credit unions with assets less than $10 billion.

The ICBA official said those allocations would prevent big banks from "gobbling up" the loans. But he said more guidance is needed from the SBA on loan forgiveness, a process that is still murky for many lenders.

To that point, Paravano said many of his firm's clients have already received funding, but "their current challenge is to make sure they will qualify for loan forgiveness, and there are a number of uncertainties regarding how loan forgiveness will be calculated."

"Even the question of how to calculate full-time employees is not entirely clear," Paravano added, saying he is unsure whether the administration will use an existing tax definition.

The economic relief package approved April 21 will also give the SBA $50 billion for disaster relief loans, $10 billion for emergency Economic Injury Disaster Loan grants, and it clarifies that agricultural enterprises are eligible for PPP loans.

In addition to funds for small businesses, the measure provides $75 billion for hospitals and $25 billion for coronavirus testing. House Speaker Nancy Pelosi, D-N.Y., told reporters April 21 that Democrats would continue to press for funding for state and local governments in the next round of COVID-19 relief funding.

Looking ahead, the American Bankers Association urged the House in an April 22 letter to approve the Senate-passed legislation. The group said although the PPP has been a success so far, "millions of other small businesses desperate for assistance were still waiting for help when the SBA funds ran dry. That is why this legislation is so critical."

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