By Michelle Price and Pete Schroeder
WASHINGTON (Reuters) - The U.S. government on Monday was set to re-open its signature small business pandemic aid program with $284 billion in new funds and revamped rules that aim to get cash to the most needy businesses while stamping out fraud and abuse.
The Small Business Administration (SBA) announced on Friday that it would launch a third round of the Paycheck Protection Program (PPP) this week, starting with small community financial institutions on Monday, and larger lenders in coming days.
By prioritizing smaller lenders, the SBA hopes to address criticism from lawmakers that minority and women-owned businesses did not get enough money during the first two PPP rounds last year compared with bigger businesses.
Administration officials told reporters on Friday they expected the funds would be sufficient to meet demand.
Under the program, lenders on behalf of the government distribute loans that can be forgiven provided the cash is spent on eligible costs, such as payroll and rent. To date, the PPP has distributed $525 billion through more than 5 million loans.
Congress authorized the new funds last month as part of another pandemic stimulus package which also loosened PPP rules on who can get cash and what it can be spent on.
Among the key changes, companies which took cash during the first two rounds will be allowed a second PPP loan provided they can show a 25% hit to their revenues. To address worries over fraud, the SBA is also introducing new due diligence checks.
For more details on program changes see FACTBOX [L1N2JJ2XB].
While lenders say the changes are positive, some are worried they may cause some initial snags, especially as the updated application forms and SBA rule guidance were only released on Friday.
"It's all great but it's really complicated," said Dan O'Malley, CEO of Numerated which provides PPP loan processing software.
(Reporting by Michelle Price; editing by Diane Craft)