While the federal government recently enacted a new round of funding for the Paycheck Protection Program (PPP), lenders are expecting that, amid massive demand, this money will likely run out within days, said CNBC.

The initial round of funding enacted through the CARES Act was $350 billion, but this funding lasted only about two weeks, leaving thousands of other applicants twisting in the wind as they waited on line for loans of their own. A big reason behind this outcome, it was later revealed, was that while the loans were intended for mom-and-pop type establishment such as hairdressers and landscapers, much of the money actually went to big public companies worth billions of dollars, such as Shake Shack, as well as financial firms, such as venture capital firms and hedge funds. This result was because of several quirks of the actual legislation: for example, while the loans ostensibly were intended only for those with fewer than 500 employees, this was calculated on a per-location basis, which was how companies such as Ruth's Chris Steak House, which has multiple locations, were able to get $20 million in loans, as it had two subsidiaries which got $10 million each.

Further, according to Bloomberg, many other companies took advantage of a 2016 rule change that defined small businesses by industry, meaning that the criteria of what counts as a small business in, say, the restaurant industry are different from those applied to the mining industry. For example, bituminous coal companies with as many as 1,500 employees or steel manufacturers with as many as 1,000 employees both count as small businesses and could therefore also avail themselves of PPP loans.

Another factor was the fact that banks were the ones expected to dole out this aid, according to the New York Times. While Democrats initially wanted the funds to be distributed through the government, in partnership with payroll processing companies, the ultimately victorious Republicans wanted to outsource the job to private-sector banks. The banks, in turn, prioritized their already existing clients, which were mostly large corporations. Banks fast-tracked their applications, while other small business clients were largely ignored. Exacerbating matters more, these same corporations had large staffs of lawyers and accountants who could navigate the application process better than, say, a small neighborhood bakery.    

All told, according to CNBC, more than 220 public companies applied for at least $870 million worth of PPP loans. Overall, while the SBA reported that more than 1.2 million loans were for $150,000 or less, these loans accounted for only 17 percent of the $342.3 billion processed. And while fewer than 2 percent of the approved applications sought loans for more than $2 million, they accounted for 28 percent of the total funding. Further evidencing that it was mainly larger companies that benefited from the small business program, SBA data indicated that loans for more than $1 million made up 4 percent of the applications but nearly 45 percent of total approved dollars. Meanwhile, self-reported data from small business owners shows that most got nothing at all. In fact, a recent economic analysis detailed in Bloomberg found that, among the companies in regions with the biggest declines in hours worked and most business shutdowns, only 15 percent actually received any PPP loans at all. Conversely, companies least affected by the pandemic received double this amount.

Given this situation, the SBA, in consultation with the Treasury Department, last week released guidance that warned public companies to stay away from the next round of funding, as it noted that PPP loan applicants, under the CARES Act, must certify in good faith that the loan is necessary for continued operations, taking into account current business activity as well as their ability to access other sources of liquidity. With this in mind, the guidance said, "It is unlikely that a public company with substantial market value and access to capital markets will be able to make the required certification in good faith, and such a company should be prepared to demonstrate to the SBA, upon request, the basis for its certification."

Despite this guidance, CNBC said that demand is still so intense that even if the big companies stay away, the funds will still likely run out within days. CNN says that the money could be gone in even less time than before, as there now even more companies waiting on line for a loan than during the previous round of funding. The Consumer Bankers Association said that for the program to truly meet the needs of small businesses, it would need about $1 trillion, far more than the $310 appropriated in this latest round. This has led lenders like JPMorgan Chase to advise their customers that, if they are seeking a new PPP loan, they might be better of applying elsewhere, as the huge number of applicants mean that, inevitably, some will be left still waiting on line when the latest funds finally run out.

Already, thousands of businesses have lined up for the next round of funding. Under the weight of this new demand, the Small Business Association website crashed within minutes of the program reopening, recreating a problem the agency experienced the first time it launched the program, as its antiquated technology was yet again unable to keep up with the traffic.