More small businesses are getting relief funds

SBA reports that average loan is smaller in second round than in first

Fresh figures from a government coronavirus relief program for small businesses that’s been criticized for giving loans to large companies suggest more smaller firms are getting loans.

The U.S. Small Business Administration released updated data Sunday for the second round of funding for its Paycheck Protection Program, which offers loans of as much as $10 million that can become grants.

The average loan size in the second round through May 1 dropped to $79,000 from $206,000 in the first round, the data shows. That suggests more mom-and-pop shops with smaller payrolls are getting loans approved than in the initial round. Just over half of the $320 billion authorized for the program’s second round have been processed so far.

“The program is broadly based and assisting the smallest of small businesses,” Treasury Secretary Steven Mnuchin and SBA Administrator Jovita Carranza said in a joint statement Sunday.

Still, questions remain about how big banks are faring versus small lenders, as well as other concerns including borrowers and lenders wanting more guidance about how loans will be forgiven. The SBA missed an April 26 deadline to provide the guidance.

There are also concerns that the second round of funding won’t be enough, and Congress may need to provide more, White House economic adviser Larry Kudlow said on CNN on Sunday.

“I don’t want to rule it out,” Kudlow said. “We waited a little bit too long, I thought, when the last tranche ran out. Let’s not make the same mistake again. We will be looking at that.”

The program launched April 3 and was billed as a way to help small businesses devastated by the outbreak keep workers employed and be ready to reopen. An initial $349 billion ran out after 13 days with 1.66 million firms getting loan approvals, and a second round with $320 billion started April 27. Through Friday, 2.2 million applications worth $175.7 billion had been processed, the SBA said.

Reports of big restaurant chains and hotel groups getting loans through a provision in the law, and other large firms getting millions of dollars while smaller firms were shut out in the first round sparked outrage.

The data released Sunday shows that lenders with less than $10 billion in assets accounted for 32% of the approved loan amount in the second round so far, and the percentage of loans of more than $5 million decreased after the SBA and Treasury took steps to ensure more small firms got their applications through.

The agencies issued a new rule April 30 that limited to $20 million the value of loans that corporate groups can get, and the SBA changed how it accepted applications from lenders — even setting aside eight hours on Wednesday only for banks with less than $1 billion in assets to submit applications.

The SBA and Treasury have said the program wasn’t intended for large companies with access to other capital, and urged such firms to return their loans by May 7 without penalty. Mnuchin also said on April 28 that the SBA will review all loans of more than $2 million before they are forgiven, for criminal liability.

Almost 320 loans were received by made to public companies totaling $1.12 billion as of May 1, and 29 had been returned worth $183 million, according to data compiled by FactSquared.

There were more than twice as many loans to hard-hit states such as New York and New Jersey in the second round than in the first, suggesting strong demand.