The amount of money being lent to coronavirus-damaged small businesses through the federal Payroll Protection Program has declined, in part because publicly traded companies have returned a reported $500 million in loans.
Financial institutions nationwide had approved $4.2 million loans totaling $531 billion through May 8, including 71,614 loans for $9.66 billion in Indiana.
Data released by the U.S. Treasury Department showed that although the number of loans increased last week, the amount of money lent had shrunk to $513 billion nationally and $9.44 billion in Indiana as of Friday.
The program website states that the cumulative totals reflect cancellations of “duplicative loans, loans not closed for any reason, and loans that have been paid off.” Loan cancellations had not been factored into previous data releases, according to the Indiana district of the Small Business Administration.
The Paycheck Protection Program is a $660 billion loan fund for businesses and nonprofits with fewer than 500 employees. Loans can be forgiven if borrowers maintain or restore their workforces at pre-pandemic levels.
But after the first round of loans quickly drained in April, news media reported that hundreds of publicly traded companies had been approved for funds, causing Treasury and the SBA to revise program guidance.
Dax Denton, senior vice president of government relations for the Indiana Bankers Association, said Wednesday that the state and national decreases in loan amounts coincide with the SBA's “safe harbor” rule issued in late April.
The rule considers loan applications of less than $2 million to have certified the necessity of the request. Applications for $2 million or more are subject to government audits, but borrowers who repaid their loans in full before Monday were considered to have made the required certification of economic need.
Analytics firm FactSquared reported this week that regulatory filings showed 62 public companies had returned $425 million to the loan fund. Most of those companies had received loans for at least $2 million.
Additionally, a national chain of auto dealers returned $77 million that was not included in the FactSquared roundup, according to media reports.
Sen. Mike Braun, R-Ind., said Wednesday that “the guidance and rules have really been ratcheted down to make sure” that larger businesses with cash reserves and lines of credit “were not there at the trough.”
“I all along wanted to make sure that the smallest businesses first would get served. That didn't happen in the first round. That's why you're seeing a different dynamic now,” Braun said during a conference call with Indiana news media.
The Paycheck Protection Program was created by the Coronavirus Aid, Relief and Economic Security Act approved by Congress in March.
Congress spent $310 billion more on the program in April after the original $350 billion loan fund was depleted.