COVID Loan Tracker, a digital community of small business owners across America who are passionate about supporting the capital and credit needs of small businesses during the coronavirus pandemic, applauded the addition of $310 billion into the federal Paycheck Protection Program (PPP), but cautioned that the new funding drastically underestimates the need among small businesses for financial help as they navigate the current crisis. COVID Loan Tracker encompasses 24,000 small businesses across the country.

“The second round of funding for the Paycheck Protection Program is a much needed boost for small businesses who have, with determination and perseverance, been shouldering the economic impact of the coronavirus epidemic for weeks,” said Duncan MacDonald-Korth, Co-founder of COVID Loan Tracker. “That said, it is clearly insufficient. The Small Business Administration’s funding amount is based on flawed assumptions of the demand for PPP loans remaining after its initial allocation in early April. The need among small businesses is much higher, and even with this relief, more funding will be needed in a matter of weeks, if not days.”

According to COVID Loan Tracker’s estimates, at least $400 billion, in addition to the funds just allocated and the $349 billion allocated on April 3, will be needed to satisfy the outstanding need. The government’s shortfall stems from its assumption that if the $349 billion allocation was sufficient to fund 1.7 million applications in the first round, that $310 billion should be enough for the estimated 1 million applications that were “stranded” in process when the funding ran out on April 16.

Yet this estimate does not account for as many as 4 million “shadow applications” – those in process with lenders that were never formally submitted to the SBA due to glitches with the lenders’ systems or because paperwork remained to be collected. According to COVID Loan Tracker’s survey of 24,000 small businesses that have applied for loans through the PPP, the latter factor hit the smallest businesses particularly hard because they are least likely to have had third-party assistance, such as from accountants and other small business service providers, in collecting necessary paperwork to apply.

Aside from the 5 million stranded applications, COVID Loan Tracker estimates that there are an untold additional number of small businesses that never started applications because funding ran out so quickly. A third round of PPP funding will clearly be needed almost immediately.

Beyond the total amount of funding, COVID Loan Tracker argues that the methodology by which loans are distributed must be improved to ensure that the flow of credit and capital to true small businesses is prioritized over larger and better-capitalized companies in less urgent need. The Treasury Department has warned big companies that they must clearly demonstrate their need for more liquidity to maintain operations. Nonetheless, the company proposes that the following rules be added to the PPP in any future rounds of loan funding:

• 50% of the total dollars funded through the program must go to businesses with 50 employees or less as of Feb. 15, 2020.
• 25% of the total dollars must go to businesses with 51 to 150 employees as of Feb. 15, 2020.
• 25% of the total dollars must go to businesses with 151 to 250 employees as of Feb. 15, 2020.
• Applications from businesses with 50 employees or less will be processed first, with applications for funding larger businesses only being approved once 50% has been allocated to those businesses with less than 50 employees.
• Any remaining funding that exists after these disbursements will be allocated to those businesses with 50 employees or less.
• No entity with any ownership association to any business with more than 250 employees may be given funding.
• Participating lenders must process all completed loan applications and disburse funds within 14 days of receipt. Lenders that fail to meet the deadline will face penalties.

Mr. MacDonald-Korth concluded, “Small business owners are steadfast patriots who pay taxes and contribute in countless ways to the fabric of our communities. The unprecedented onset of the coronavirus pandemic in recent weeks has knocked us down, but we are getting back on our feet and continuing to fight for our survival. But we need a strong partner to join the effort. Speaking for the thousands of entrepreneurs in our community, our message to federal officials is clear: The time for half measures is done. For the good of small businesses across the country and the good of the American economy, provide the help we need.”

COVID Loan Tracker was founded in Miami by entrepreneurs Duncan and Rita MacDonald-Korth. Its website, covidloantracker.com, is a free, crowdsourced data service aimed at providing transparency on when and how many loans the federal government is disbursing through its Small Business Administration (SBA) programs in response to the coronavirus pandemic.