Dive Brief:

• Republicans and Democrats in Congress appeared closer to a deal Sunday night to replenish funding in the Paycheck Protection Program (PPP) with $300 billion, The New York Times reported. The agreement would also include $50 billion for the Small Business Administration’s (SBA) disaster relief fund, $75 billion for hospitals and $25 billion for testing.
• More than 1.6 million small businesses were approved for funding in the nearly two weeks between the program’s launch and when funding dried up Thursday, according to an SBA report seen by Banking Dive on Friday. The loans, by design, have a cap of $10 million, but nearly three-quarters of applications (74%) were for loans of 150,000 or less. The average loan amount processed was $206,000, the SBA report showed.
• JPMorgan Chase shepherded more than $14 billion in loan money to its clients — the biggest share of the original $350 billion, it told Bloomberg. PNC arranged roughly $9 billion in loans, a person with knowledge of the matter said. And KeyCorp said it arranged about $7.8 billion. But several smaller banks did more business than expected.

Dive Insight:

Any infusion of new PPP funds may not last long. The program has a burn rate of $50 billion per day and needs closer to $1 trillion to meet demand, industry representatives told Politico.

"This is going to go within, at most, 72 hours," said Richard Hunt, president of the Consumer Bankers Association. "But the odds are more like 48 hours."

Funds are likely to dry up faster in the second round of PPP because banks have winnowed down their backlog while Congress has been stuck in a stalemate, James Ballentine, executive vice president of congressional relations and political affairs at the American Bankers Association​, told Politico.

The congressional stalemate has stretched more than a week, prolonged by Democrats' insistence — and Republicans' reluctance — to include hospital funding and aid to state and local governments. Treasury Secretary Steven Mnuchin said he hoped the Senate could vote on the latest compromise Monday, with the House following suit Tuesday.

However, several details need to be worked out in legislative text, and the first part of Mnuchin’s timeline would only work if no senator objects to the bill, in a pro forma session Monday. The House could take up the bill as soon as Wednesday, "pending agreement," Rep. Steny Hoyer, D-MD, said in a note Sunday evening, according to CNBC.

Senate Majority Leader Mitch McConnell, R-KY, and Mnuchin said the PPP deal won't include aid for state and local governments, a Republican aide told Bloomberg. Sens. Bob Menendez, D-NJ, and Bill Cassidy, R-LA, on Sunday proposed creating a separate $500 billion fund for state and local governments for inclusion in Congress' next relief package.

Small banks may have come out big winners in accessing the first round of SBA loans. Almost 20% of the original PPP money was processed by lenders with less than $1 billion in assets, and about 60% from banks with $10 billion or less in assets, Bloomberg reported.

Hundreds of employees at Cullen/Frost Bankers in Texas, for example, volunteered to fill out forms manually, to set up $3 billion in loans. "We have processed more applications than we take in in a year-and-a-half — and we’ve done it in 10 days," Cullen/Frost CEO Phil Green told Bloomberg. By contrast, Wells Fargo arranged about $120 million.

Some of that disparity stems from caution on the part of big banks — particularly those dinged by sanctions after the 2008 financial crisis over flaws or omissions in mortgage loan applications — trying to ensure the paperwork they sent to the SBA was above reproach. Some big banks spent days trying to get more guidance, Bloomberg reported, while others told employees to make sure the loan packets contained validated financial information. However, the SBA on Tuesday posted a notice on its website confirming that, although that’s necessary, "lenders who did not understand that these steps are required" didn’t need to withdraw applications already submitted.

"A lot of independent community banks did jump on the program very quickly — just took on the risk without having all the guidance," Paul Merski, an executive vice president at the Independent Community Bankers of America, told Bloomberg. "Banks have to judge their own risk tolerance for these loans and the liability of getting stuck with bad loans if they didn’t do the paperwork properly."

When the second round of funds becomes available, smaller banks, without doubt, will face stiffer competition. A spokeswoman for JPMorgan Chase told the Financial Times on Saturday that the bank had "hundreds of thousands" of outstanding applications for the program, including 30,000 that were "fully processed and verified" that would give clients another $5.5 billion.

Wells Fargo, meanwhile, has sent application invitations to more than 450,000 customers for a loan amount nearing $50 billion, the bank told Bloomberg.

Fintechs, too, stand to fare better in the second round. They were looped into the program when it had six days’ worth of funding left. OnDeck estimated that 93% of U.S. small businesses did not have the chance to be funded through the PPP, according to American Banker.

"For the very smallest businesses, who unfortunately are also the ones who are most severely impacted by this, the fintech lenders are their go-to," said John Pitts, policy lead at Plaid, who noted that several small businesses said some banks were reluctant to originate loans of less than $15,000.

Kabbage co-founder Kathryn Petralia backed up that sentiment, saying 90% of small businesses have fewer than 20 employees. "These small businesses are looking for very small amounts," she told American Banker. "The problem is, it's the long tail that's going to be left behind. The larger businesses that already have lines of credit with the top banks will eat up the money."

Still, other businesses, including chain restaurants Shake Shack and Ruth’s Chris Steak House, have drawn heat for applying for PPP loans. More than a dozen companies with revenue topping $100 million received PPP funds, a Bloomberg review found. Shake Shack said Sunday that it would return its $10 million loan.