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Entrepreneurs can still apply for federal small business loans. Here are 3 reasons you may get funding before the PPP runs out of money.

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  • The US has granted a total of $670 billion in loan relief to small businesses struggling during the coronavirus pandemic. 
  • While the first round of funding ran out in just 12 days, this investment could last for the next 10 weeks.
  • The funding is lasting longer because many large firms already received relief in the first round.
  • Additionally, the SBA stopped allowing banks to use an automated process to upload applications in bulk because the volume was overwhelming its technology. 
  • Visit Business Insider's homepage for more stories.
Despite a rocky start, the federal small business loan program meant to save Main Street from drowning during the pandemic still has funds to allocate to business owners across the country.
When the US allocated the first round of $350 billion, chaos ensued. Last minute changes from the Treasury left banks confused and created a haphazard system that denied many founders relief while allowing publicly traded companies to access funds through a loophole in the application.
Now, the federal Small Business Administration has a chance to learn from its mistakes with a second round of nearly $320 billion in additional aid that launched on April 20.
Initial stats indicate the SBA has slowed the amount of loans allocated to businesses in the second go-around. Approving $12 billion the first full week of May, about 40% of the initial amount remains to be claimed. If that rate remains the same, PPP funds could last another 10 weeks, compared to the 12 days it took the initial $350 billion investment to run dry.
Here are three lessons the SBA may have learned that's keeping them from running out of funds as quickly (and problematically):

1. The largest firms already got their loans.

During the initial rollout of the PPP loans, banks favored working with businesses they had a prior relationships with — typically large firms that can afford personal, on-demand service to troubleshoot issues.
Small businesses, however, got stuck with dealing with the confusing, archaic loan system with little help from banks, Business Insider previously reported.
Big companies ended up getting access to more of the first $320 billion funding faster than mom-and-pops, which is why the money dried up so quickly.
With fewer large companies in need of funding this time around, the second investment could be lasting longer due to less-hefty loans being granted to smaller companies.

2. New technology rules from the SBA limit how many applications banks can push through at a time.

The SBA's loan processing tool, called E-Tran, was not designed to handle the massive influx of applications that came in for PPP, which resulted in initial crashes and delays.
E-Tran normally processes $20 billion in loans from fewer than 1,800 lenders each year. When PPP is over, the outdated technology will have doled out more than $1 trillion in loans from over 5,400 lenders in just a few months.
To process the tidal wave of demand, banks used algorithms to automate loan requests, which flooded the E-Tran systems with thousands of applications. The deluge of applications caused the E-Tran system to time out and then crash entirely.
On April 29, the SBA told banks it would no longer accept loan applications submitted using these automated processes in hope of reducing site crashes.

3. Many business owners are still reluctant to take on new debt without clarity on how to pay it back. 

The rate at which small businesses have requested loans has slowed compared to the initial PPP investment, according to Business Insider Intelligence.
The PPP provides up to $10 million to help firms pay employee salaries, taxes, rent, and more, and the law states banks can forgive the debt as long as companies use the money to pay workers within eight weeks.
But some small business founders remain uncertain about how to qualify for forgiveness, and the SBA and Treasury Department have yet to release formal guidance on forgiveness aside from a Frequently Asked Questions document. 
The lack of clarity around PPP may account for the lag in requests as mom and pops weigh their options instead of jumping on a potentially risky loan.
SEE ALSO: The best sources of emergency funding for small businesses available right now if you missed out on federal loans
SEE ALSO: Bank robots have been fighting a secret war with outdated government tech to decide who gets $670 billion in small business bailouts. Here's the inside story.
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