UPDATE: June 29, 2021: The Federal Reserve Board said Friday it would extend "for a final time" its Paycheck Protection Program (PPP) Liquidity Facility through July 30 "to allow additional processing time for banks, community development financial institutions, and other financial institutions."

UPDATE: March 8, 2021: The Federal Reserve Board is extending through June 30 the Paycheck Protection Program (PPP) Liquidity Facility, the central bank said in a press release Monday.

The program was infused with $284 billion before it relaunched Jan. 11. Roughly $128 billion was still unclaimed as of Feb. 28, according to Small Business Administration data.

The Fed and Treasury Department in November extended the PPP facility through March 31, along with the Commercial Paper Funding Facility, the Money Market Mutual Fund Liquidity Facility and the Primary Dealer Credit Facility. The other three facilities will expire March 31 as scheduled, the Fed said Monday.

Dive Brief:

• The Small Business Administration (SBA) released new guidance Wednesday allowing sole proprietors, independent contractors and the self-employed to use gross income rather than net profit to calculate the amount of Paycheck Protection Program (PPP) funding they should receive.
• The changes come during a two-week window in which the PPP portal — until March 9 — is still accepting applications only from businesses with fewer than 20 employees. However, the portal is slated to stop taking applications March 31.
• The SBA approved nearly 2.2 million loans worth $156.2 billion between PPP's January relaunch and Feb. 28, according to agency data. That accounts for just more than half of the $284 billion a December bill earmarked for the program. The new guidance, combined with the prospect of leftover funds, has some bankers lobbying for PPP to extend beyond March.

Dive Insight:

Wednesday's final rule codifies changes the Biden administration teased last week, when it announced it was giving the smallest businesses exclusive access to the portal for two weeks.

Borrowers whose PPP loans have already been approved can't increase their loan amounts using the new formula, the SBA said, adding it may review first-time PPP borrowers who calculate their loan amounts using a gross income of more than $150,000.

However, Sen. Ben Cardin, for one, said Tuesday he aims to garner bipartisan support for applicants to use the gross income formula to recalculate pre-existing PPP loans. Cardin, D-MD, wants to hold a hearing this month exploring the formula debate, he said. But time for lawmakers to intervene is running short.

Cardin said Tuesday he supported extending the PPP deadline — a prospect echoed by a number of bankers.

"Let's get the rules out, advocate for an extension and then lobby" for revised guidance, Jill Castilla, president and CEO of Citizens Bank of Edmond in Oklahoma, told American Banker. "As long as the crisis continues, this program needs to continue."

David Becker, chairman, president and CEO of Indiana-based First Internet Bancorp said letting borrowers bolster their existing loans "is by far the smartest way to do it," but that requires more time.

"If they extended it 30 to 45 days" after new rules are issued, Becker told American Banker, "I think it would give everybody an opportunity to reach the businesses that really need the help."

Matt Raker, executive director of the Asheville, North Carolina-based community development financial institution Mountain BizWorks, told The Wall Street Journal that Wednesday's changes could double loan amounts for applicants with no employees.

The new guidance has changed other potential applicants' perspective. Justin Burgess, a Dallas-based furniture maker and dealer told the Journal he thought he wouldn't apply for a second PPP loan. His first, last year, amounted to $3,000.

"It was just a pittance," Burgess told the publication. "It was a lot of work for very little return." He called the new formula "much more advantageous," adding he plans to apply for a second loan.

Don't wait until the deadline

The head of one trade group would advise applicants not to wait until last minute, however.

Tony Wilkinson, chief executive of the National Association of Government Guaranteed Lenders, told the Journal he had heard some lenders were planning to stop accepting applications before the March 31 deadline to leave adequate time for processing.

It can take up to 10 days to process a loan "depending on the codes being thrown at us," Nimi Natan, president and CEO of Gulf Coast Small Business Lending, told American Banker. "I'd hate to have to stop accepting applications on March 25."

An early cutoff would not be unprecedented. Some lenders in last year's Main Street program stopped taking applications Dec. 14 ahead of the program's expected Dec. 31 end.

"We could work in a more relaxed manner, make fewer mistakes, spend more time making sure documentation was in place and work through all the [error] codes" if the deadline were extended, Natan said.