Senate Passes Paycheck Protection Program and Health Care Enhancement Act to Add $310 Billion to Paycheck Protection Program

The legislation would add $50 billion to the Emergency Injury Disaster Loan (EIDL) Program, provide an additional $10 billion for EIDL grants, and make agricultural enterprises with no more than 500 employees eligible for the EIDL program. The House is anticipated to act on the legislation this week, and President Trump has indicated that he will sign the bill into law.
 
The legislation would require at least $30 billion in PPP loans to be made by insured depository institutions and credit unions with between $10 billion and $50 billion in assets, and another $30 billion to be made by insured depository institutions and credit unions with less than $10 billion in assets and community financial institutions.  A “community financial institution” includes:

1. a community development foundation as defined in the Riegle Community Development and Regulatory Improvement Act of 1994,
2. a minority depository institution as defined in the Financial Institutions Reform, Recovery, and Enforcement Act of 1989,
3. a development company certified under title V of the Small Business Investment Act of 1958, and
4. an intermediary, as defined in the Small Business Act, which makes loans of $50,000 or less to small business concerns. 

It is not at all clear how the legislation would guarantee that PPP loans are extended to rural, minority, and underserved communities, which Congressional leaders of both parties had identified as a key priority, given that the two $30 billion-set asides include (A) banks and credit unions with $10 billion to $50 billion in assets and (B) banks and credit unions with less than $10 billion in assets. If banks and credit unions with those asset levels make PPP loans totaling $30 billion or more, both requirements would be satisfied without regard to lending activity by community financial institutions. Further, the set-aside criteria impose no rules on what types of borrowers the eligible lenders must serve. According to data issued by USBankLocations.com as of December 31, 2019, 100 banks in the United States hold $10 billion to $50 billion in assets. The total assets of those banks is over $2.2 trillion. According to the same data, 5,043 banks in the United States hold less than $10 billion in assets, with those banks collectively accounting for over $2.9 trillion in assets. These figures do not even include credit unions, which are also eligible based on the same asset sizes. The SBA’s PPP report dated April 16, 2020 indicated that over 1.4 million PPP loans totaling over $108 billion were approved to date in amounts of $350,000 or less. Undoubtedly, many of those loans were extended by lenders that fit within the set-aside criteria above.
 
Aside from these changes, the legislation does not otherwise alter PPP eligibility criteria. President Trump and Secretary Mnuchin have suggested in public statements that forthcoming guidance may narrow the criteria and possibly require some borrowers to repay loans that have already been extended. We will monitor any such developments closely.
 
The legislation would also provide an additional $75 billion in funding for public health and social services relating to the COVID-19 response efforts, including reimbursement for eligible health care providers for COVID-related expenses or lost revenues, as well as an additional $25 billion in funding for research, development, manufacturing, and expansion of COVID testing (with at least $11 billion of the funding for state and local governments and tribal organizations to support testing efforts).
 
Please contact your HSB attorney or Will Johnson for additional information. 

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