Phase 3.5 Offers Additional Funding for Business Loans, Hospitals, and Testing

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Congress and the President Respond to the Coronavirus

Congressional leaders and the Administration reached an agreement this week on the latest piece of legislation dealing with the Coronavirus (COVID-19). This is Congress’ fourth bill in the last month and a half. The Paycheck Protection Program and Health Care Enhancement Act (“PPPHCEA”) is being dubbed “Phase 3.5,” as it is essentially an extension of the much larger recent CARES Act (“Phase 3”). This bill passed Congress on April 23, 2020 and was signed into law by the President on April 24, 2020. 


Coronavirus warning sign in digital electronic letters advising to wash hands and avoid COVID-19To reiterate, this is the fourth bill dealing with the Coronavirus. Here is a breakdown of what Congress has passed since early March this year:  

  • $8.3 billion for the Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020 enacted on March 6, 2020 as Public Law No. 116-123. This bill provides emergency funding for federal agencies to respond to the Coronavirus outbreak, including amounts for research, diagnosis, and vaccines.
  • $110 billion for the Families First Coronavirus Response Act (“FFCRA”) enacted on March 18, 2020 as Public Law No. 116-127. This bill responds to the COVID-19 outbreak by providing paid sick leave, tax credits, and free COVID-19 testing; expanding food assistance and unemployment benefits; and increasing Medicaid funding.
  • $2.2 trillion for the Coronavirus Aid, Relief, and Economic Security Act (“CARES”) enacted on March 27, 2020 as Public Law No. 116-136. This bill responds to the COVID-19 outbreak and its impact on the economy, public health, state and local governments, individuals, and businesses.
  • $484 billion for the Paycheck Protection Program and Health Care Enhancement Act (“PPPHCEA”) enacted on April 23, 2020 (R. 266). This bill provides additional CARES funding for businesses impacted by COVID-19, as well as more funding for hospitals and testing.


The Phase 3.5 legislation is just under $500 billion and includes:

  • $310 billion of additional funding to replenish the Paycheck Protection Program (“PPP”) loans that were part of the CARES Act. The initial $350 billion of funding in CARES was fully allocated and disbursed as of April 16, 2020 in PPP loans to businesses and other organizations. This latest bill further states that $60 billion of this $310 billion is to be set aside for small community banks and credit unions to serve minority businesses.

It is anticipated this second round of funding for the PPP loan could move quickly. Businesses and other organizations interested in applying for a PPP loan should gather their information and promptly submit their applications.

  • $50 billion is designated for disaster loans (Disaster Loans Program Account for direct loans authorized by Section 7(b) of the Small Business Act). These emergency loans are designed for businesses and handled by the SBA.
  • $20 billion targeted at “emergency EIDL grants” of $10,000 that was provided in CARES and administered by the SBA. In addition, this latest legislation made a change that now permits EIDL grants and the above-mentioned disaster loans to be available to “agricultural enterprises” (under SBA rules) with not more than 500 employees.
  • $75 billion in this latest legislation is for hospitals and health care providers. The bill indicates the funds are directed to “eligible health care providers for health care related expenses or lost revenues that are attributable to Coronavirus.” The bill further explains how this amount is allocated to the health care providers, and this will be determined by the HHS Secretary.   
  • $30 billion is for various Coronavirus testing programs.
  • Phase 3.5 is a much smaller bill than the CARES legislation. The CARES Act was nearly 900 pages, while Phase 3.5 is covered in only 25 pages. In addition, there were several significant tax provisions for businesses and individuals contained in the CARES bill, but there are no tax provisions in Phase 3.5.

Next Steps

Now that Phase 3.5 has been signed into law, the SBA will begin working with the additional loan and grant amounts authorized in this legislation. In case you are wondering, a fifth bill (Phase 4 or 5?) is already being discussed by members of Congress. It is uncertain at this point what may be contained in such further legislation, what its timetable will look like, and whether there will be bi-partisan support for another measure. Stay tuned for further developments. Please contact your Sikich advisor with any questions.

About our authors

Jim Brandenburg

Jim Brandenburg

Jim Brandenburg, CPA, has extensive experience and knowledge in corporate and partnership tax law, mergers and acquisitions and tax legislation. His expertise includes working with owners of closely held businesses to identify tax planning opportunities and assist them in implementing these strategies.

Tom Bayer

Tom Bayer

Thomas E. Bayer, CPA, CExP, has more than 25 years of experience providing a broad range of accounting, tax, and business advisory services to commercial clients across various industries and Sikich offices. Tom has specialized expertise in the areas of business succession planning, tax planning and compliance, and business advisory. He puts his business succession planning abilities and knowledge to work firm-wide, serving clients in advisory services across the country.

This publication contains general information only and Sikich is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or any other professional advice or services. This publication is not a substitute for such professional advice or services, nor should you use it as a basis for any decision, action or omission that may affect you or your business. Before making any decision, taking any action or omitting an action that may affect you or your business, you should consult a qualified professional advisor. In addition, this publication may contain certain content generated by an artificial intelligence (AI) language model. You acknowledge that Sikich shall not be responsible for any loss sustained by you or any person who relies on this publication.


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