- Federal Reserve issues its third extension of a rule designed to bolster the Paycheck Protection Program
- Rule continues a modification of rules allowing certain bank directors and shareholders to access loans for their own businesses
- PPP funding is largely depleted, although some money is still available for loans made through community financial institutions
Summary by Dirk Langeveld
The Federal Reserve Board has made a late extension of a rule designed to bolster the Paycheck Protection Program, even as the program enters its final weeks and is down to a fraction of its available funding.
For the third time, the Board has extended a temporary modification of its rules allowing certain bank directors and shareholders to apply for PPP loans for their own small businesses. Directors, officers, shareholders are typically limited in the type and quantity of loans they can receive for their businesses, but the U.S. Small Business Administration clarified that certain entities can receive PPP loans after it emerged that the restrictions were preventing some small business owners, especially those in rural areas, from accessing federal aid.
- The extension applies to loans made since March 31 and allows banks to continue making loans
- The SBA explicitly prohibits banks from prioritizing or providing favorable processing time to PPP loan applications to directors and shareholders, and also requires certain limits and a lack of favoritism
- The rule will continue to apply through March 31, 2022 if PPP is extended; the program is currently set to expire on May 31
- PPP funds are largely exhausted, although applications are still being accepted for about $8 billion remaining in a set-aside for loans made through community financial institutions
