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Round Three of PPP Lending Arrives at the Height of The Winter Surge

Patrick True
Dec 22, 2020

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The first two rounds of emergency PPP funding were a critical component of the CARES Act and helped preserve employment for millions of Americans through the spring and summer months at the height of the economic shutdown. During the first two rounds of funding, 5.2 million loans were funded totaling more than $525 billion in relief to small businesses. Of these, more than 87% involved loans of $150,000 or less. The significance of PPP and its contribution to our main street economy cannot be overstated. But the newest round of stimulus, including $300 billion more in PPP appropriations and simplified loan forgiveness measures could prove to be even more significant. The following graphic from Opportunity Insights reveals the history of virus cases from the beginning of this health crisis through mid-December, with cases continuing to rise thereafter. The current winter surge is expected to peak, or possibly plateau, in mid-January.

Daily Reported COVID-19 Cases

When you look at the case load today versus that of late April and early May, it is easy to see how the current numbers could dampen economic activity, as they have in recent weeks. That is why the timing of this new stimulus plan is so important. As evidence of the need, this next graphic shows the estimated impacts on small business revenues through the same time period. Notice how the re-emergence of the virus during the summer months curtails the economic recovery as well as the declining revenue trend coinciding with the virus surge from October 1 onward.

Percent Changes in Small Business Revenue

Not all small businesses have seen severe economic impacts from the COVID-19 pandemic. Like the virus itself, symptoms vary widely among those impacted. While more than one million businesses could fail in 2020 and 2021 (out of 31 million nationwide) as a direct result of the pandemic, most will survive, and some will see increased opportunity for new business. The latest round of PPP funding is targeted toward the most vulnerable businesses – those that have the fewest employees and have seen the most significant revenue reductions in 2020. Participation in this round will likely be heavy among restaurants and other personal service firms, especially since many of these are now seeing decreased business as new stay-at-home mandates are issued in key states such as California, the fifth largest economy in the world at over $3.1 trillion annually.

The remaining question is whether small business owners will take advantage of this newest offering. Throughout the summer months, the ICBA and other groups have been lobbying for a simplified process, especially regarding PPP forgiveness and treatment of Economic Injury Disaster Loans (EIDL) in relation to the program. The new bill does in fact attempt to streamline the forgiveness process, which could significantly increase business participation is this newest round of funding. These simplified forgiveness measures impact loans of $150,000 and less, which as mentioned earlier represent 87% of all loans in the first two rounds of funding.

Given the timing, the third round of PPP could have a measurable impact on our economic recovery, helping more businesses to survive the winter months. This effort could go a long way toward bridging the gap between the winter spike and the widespread availability vaccines, likely in the March and April timeframe. One thing is certain, the revival of PPP means that community banks and credit unions will once again be called to serve their small business markets. If you are one of those lenders, we thank you for the incredible role you continue to play in this process.

Jack Henry is here to assist you with the latest technology needs that may come your way. Visit our CARES Act website for website for ongoing updates.

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