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What Will PPP Do To The SMB Loan Market?

About 13% Already Dispersed Of What Businesses Might Borrow

Keith Griffin

April 28, 2020

Loan agreement

The $670 billion Paycheck Protection Program administered by the Small Business Administration has been called out for its unwieldy application process. Going forward, though, community banks might be more concerned by the program’s effect on small- to medium-business lending.

With the new round of funding, loans provided by the Paycheck Protection Program will account for roughly half of what small businesses were planning to borrow in 2020 (assuming equal borrowing over the next two years).

A study conducted by Cornerstone Advisors and Autobooks sheds light on how much money small businesses need, according to a report in Forbes. The study focused on small- and medium-sized enterprises (SMEs) with $100,000 to $5 million in revenue, and who employ more than one person—in other words, the types of companies the PPP is supposed to support.

According to the study—conducted at the beginning of March—the six million small businesses with employees borrowed slightly more than $1.9 trillion in the past two years and expect to borrow nearly $2.6 trillion over the next two. With the first round of PPP funding, small businesses have already borrowed 13% of what they had expected to borrow over the next two years.

A few segments stand out—services companies (including restaurants) have borrowed a third of what they anticipated, and manufacturing and wholesale trade companies have borrowed about a fifth of their expected loan needs for the next two years.

Read more about PPP effect on lending.

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