The second iteration of the Paycheck Protection Program (PPP), though only active for a day so far, is turning out a lot like the first, as major demand for loans has crashed computer systems unable to handle the increased traffic, according to the New York Times. The Small Business Association (SBA), which has been tasked with overseeing the program, is unused to handling such large numbers of applicants: prior to the pandemic, the agency handled about $30 billion worth of small business loans per year. But since the CARES Act it was charged with administering $350 billion of loans during the first round, and now a further $310 billion. What's more, it is expected to do so within weeks.

Not helping matters was the government's antiquated technology. A GAO report from last year noted that many federal government agencies, including the SBA, rely on decades-old legacy systems with outdated languages, unsupported hardware and software, and known security vulnerabilities, and the report specifically identified the SBA as among the top 10 federal departments most in need of modernization. As a result, government systems were unable to handle the sudden rush of demand, leading to widespread system crashes, both then and now.

The Times said that banks, which need to send all applications to the SBA for ultimate approval, found that the agency's online portal had crashed within minutes of the program's start, and continued crashing throughout the day, stranding thousands of applicants in bureaucratic limbo. Many of them were small business owners that had already been waiting on line when the first round of funding went dry—a recent report found that 80 percent had been in the middle of the application process when the money ran out the first time. Many may still wind up stranded when this second round of funds is exhausted, as funds are expected to run out just as fast or even faster than before. Amanda Ballantyne, executive director of the Main Street Alliance, is quoted in the Washington Post  saying that she expects this latest round of funding to be gone in just 48 hours.

Predictions of a quick depletion of funds come despite recent guidance meant to head off a widespread problem with the program's first iteration: the large number of public companies that had availed themselves of the loans. 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.

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."

Adding further teeth to this guidance, Treasury Secretary Steven Mnuchin today said that any PPP loans over $2 million will come with a full government audit to ensure that the certification is true. Failing this audit will not outright prevent the business from taking the money, but it would make the loan non-forgivable.

Still, even if big companies stay away this time (and that's a big "if"), experts have said the funding still won't  be enough to meet the needs of the small business community. The Consumer Bankers Association, which represents the nation’s big retail banks, estimates it will take $1 trillion to meet the demand from small businesses. This has led lenders such as 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.