On Saturday, July 4, 2020, following a surprise vote by the U.S. Senate earlier in the week and quick passage in the House of Representatives, a bill extending the Paycheck Protection Program (“PPP”) loan application deadline from June 30, 2020 to August 8, 2020 was signed into law by the President. However, with a recently reported $130 billion out of the $669 billion in total funding allocated to this stimulus program still unspent, policymakers in Washington are considering whether these monies should be repurposed.

Lenders were overrun by unprecedented borrower demand when the PPP commenced in April 2020. In a period of approximately two weeks, the entire $349 billion that was approved initially for PPP funding under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was fully committed, and the U.S. Small Business Administration (“SBA”) announced that no more new loan applications would be accepted. The CARES Act was then amended to provide for a second wave of PPP funding. Through June 27, 2020, the SBA had approved 4.8 million PPP loans for a total amount of $519 billion under this program, which has been popular with small businesses yet marked by a chaotic rollout, changes in material terms and ongoing uncertainty regarding SBA guidance and interpretive questions.

Upon returning to Washington following the July 4th recess, members of Congress are expected to continue negotiations over a broad range of stimulus measures, including how to deal with any unused PPP funds. U.S. Treasury Secretary Steven Mnuchin has stated that the White House would support the repurposing of PPP funding, such as directing funds toward businesses whose revenues have fallen. U.S. Senator Marco Rubio, who chairs the Small Business Committee, has expressed the desire to focus attention on businesses in underserved communities. There does not appear to be bipartisan consensus on a specific proposal that would redirect the use of unspent PPP funds, and the outcome of this policy debate is difficult to handicap.

We will continue to monitor developments.