Last week, the SBA exhausted the $350 billion in Paycheck Protection Program (PPP) funding established under the CARES Act. It’s become obvious to everyone involved in the program that $350 billion was never close to the amount needed to alleviate the burden placed on the 30.2 million US small businesses as a result of the coronavirus pandemic.
More funding is expected to be injected into the program this week. On Sunday, Treasury Secretary Steve Mnuchin said he expected successful congressional negotiations that would result in replenished funds for the PPP by Wednesday.
The first $350 billion in PPP funding granted loans to 1.6 million small businesses. The national average loan size for PPP loans was $240,000. At Lendio, our average loan size for PPP loans was $110,000.
Given the way that the first round of funding was initially limited to larger small businesses like franchises, construction companies, and manufacturing firms that bank at a previously approved SBA lender, it doesn’t represent many of the Main Street businesses that were blocked from accessing capital. We’ll use both the national average and the smaller Lendio average loan size to calculate potential costs to give a broader sense of what the potential costs for the business could be once smaller small businesses gain increased access to PPP loans.
What an Additional $250 Billion Could Do for the PPP Program
- 2,272,727 businesses fundable based on Lendio’s average loan size
- 1,041,667 businesses fundable based on the national average loan size
If Congress passes the $250 billion sum currently being debated, the additional funds could provide loans to 1–2.3 million businesses and nonprofits. That’s only 3–8% of US small businesses. Given that the first $350 billion only resulted in loans to 1.6 million small businesses, $250 billion won’t be nearly enough to provide a PPP loan to every American small business that needs one.
What an Additional $500 Billion Could Do for the PPP Program
- 4,545,455 businesses fundable based on Lendio’s average loan size
- 2,083,333 businesses fundable based on the national average loan size
Doubling the $250 billion could have double the impact (thank you, simple math). An additional allocation of $500 billion for the PPP program could fund 2–4.5 million businesses or 7–15% of the US’s small businesses. It’s enough to get lenders back to work funding PPP loans, but we will likely need another additional allocation down the line.
What an Additional $750 Billion Could Do for the PPP Program
- 6,818,182 businesses fundable based on Lendio’s average loan size
- 3,125,000 businesses fundable based on the national average loan size
An additional $750 billion in funding would bring the total budget for PPP loans to $1.1 trillion. With the additional $750 billion, PPP loans could be funded to somewhere between 3.1–6.8 million more small businesses. That’s 10–23% of the total number of US small businesses.
What an Additional $1 Trillion Could Do for the PPP Program
- 9,090,909 businesses fundable based on Lendio’s average loan size
- 4,166,667 businesses fundable based on the national average loan size
Okay, now we’re really hitting the big bucks. Early on, economists warned that it might take trillions of dollars to bail out US small businesses, so let’s do the math. If Congress funded the PPP program by an additional $1 trillion, that would provide loans for 4.1–9 million small businesses, somewhere between 14% and 20% of US small businesses.
What an Additional $2 Trillion Could Do for the PPP Program
- 18,181,818 businesses fundable based on Lendio’s average loan size
- 8,333,333 businesses fundable based on the national average loan size
Putting an additional $2 trillion into the PPP program would make the program larger than the rest of the $2.2 trillion stimulus bill combined. With that additional funding, PPP loans could be granted to between 8.3 and 18.1 million small businesses. That’s between 28% and 60% of US small businesses, depending on how large the PPP loans are.
How Much It Would Cost to Grant a PPP Loan to Every US Small Business
You might have noticed that none of those scenarios resulted in 30.2 million, or 100% of US small businesses receiving a loan (based on the average loan size). At this point, almost every US small business has been affected negatively by the coronavirus pandemic. So how much would the PPP program cost if we budgeted for every small business in the country? Based on Lendio’s average loan size, it would take around $3.3 trillion. Based on the national average PPP loan size, it would take $7.2 trillion.
It’s a hefty sum but well worth doing. Small businesses are the backbone of the economy. They employ nearly 59 million citizens. Based on the staggering surge in unemployment numbers, that’s something that should concern all of us.
Unlike recessions of the past, coronavirus isn’t anyone’s “fault.” It wasn’t poor judgment on the part of business owners that led them into dire financial straits. It was a public health crisis that demanded citizens stay home—because it’s the right thing to do and it saves lives.
Funding the PPP to ensure that every small business that needs a loan can get one is a massive undertaking. It’s also the right thing to do, so we should do it.