The House officially passes the second round of Paycheck Protection Program funding on Thursday. Yahoo Finance’s Brian Cheung breaks down the PPP’s loan initiative and more.

Video Transcript

ADAM SHAPIRO: Brian Cheung is here with the latest installment of Yahoo U for a deep dive into the PPP. Brian.

BRIAN CHEUNG: Well, Adam, Yahoo U is in session and-- virtually, of course. But today, we're going to focus on that Paycheck Protection Program, which has generated a lot of controversy over the past few days. But with a re-up of about $310 billion coming very soon, it's worth probably diving into the intricacies of this program and explaining a little bit about exactly how it works.

So I'm going to bring up a few slides here just to kind of illustrate the mechanics of how all of this works. So to kind of start off with the terms and conditions, first of all, it's a two-year loan, and it does have a 1% fixed rate. Now, payments are deferred for six months, and the actual principal amount of the loan itself is up to two months of payroll costs plus another 25% to cover other non-payroll expenses like mortgage payments, utility bills, things like that. But what's really important to notice here is that the most that any single PPP application can get is $10 million.

So what about forgiveness, right? Because yes, it's a loan, but in some cases, it can convert over to a grant. Well, this is where things get a little bit complicated, and I want to show you guys a little bit of these bullet points here. I actually have a laser pointer now, so I'll play around with a little bit of that.

But 75% is critical-- that's the critical number for the forgiveness aspect of the PPP money. And again, as a reminder, 75% of the loan has to be specifically for payrolls over the eight-week period. Anything less than that and the money will have to be paid back.

So again, the critical idea here is to keep employees on payroll while the COVID-19-related shutdowns are ongoing. So you have to maintain your staffing levels and wages count as well. So if wages decrease by more than 25%, the business will have to pay the money back.

Now, these stipulations here have generated a lot of confusion over how lenders should be interpreting this, right? So for example, what if you laid people off before you took the PPP loan? Do you have to rehire the exact same person? Or maybe do you rehire someone else in the exact same role? Regardless, these are all types of things that haven't necessarily stopped people from trying to get a PPP loan, right?

The money dried up relatively quickly, and as of last week, all the money was gone. And the SBA has a breakdown of what types of businesses got the money. Now, keep in mind that all of the businesses that were eligible for the PPP program, barring some exceptions that I'll explain later, have to have less than 500 employees.

Now, the maximum-- or the most volume that we saw for loans was in this region, the $350,000 to $1 million range. But the average loan size was actually in this range here, in the $150 to $350. The average loan size was actually about $206,000, according to the SBA.

There's also an industry-based breakdown, so these are the top five industries that received help. And even though we like to talk a lot about restaurants, right, the restaurant down the street and food services, the number one receiver of the money for the PPP was actually construction. They got $45 billion which was about 13% of the whole pot.

Manufacturing got a lot as well. Health care, understandably, getting a lot of money, about $40 billion. That was about 12% of the total pot. And then there's also other, and other was the 41% of other types of PPP loans. This would cover things like agriculture, real estate, mining, arts, many different types of industries.

Now, here's the fly, though, that's got people's blood boiling. These are six companies that were among the highest receivers of PPP money. And you see, Ruth's Chris got $20 million. They got Ashford Hospitality Trust, the operator of Ritz Carlton hotels, that got $29 million.

And the question here is, I thought the maximum was supposed to be $10 million, right, what Shake Shack, Taco Cabana, Potbelly got. Well, these guys here, J. Alexander, Ashford, and Ruth's Chris we're actually able to apply for multiple PPP loans. But now you probably have people saying, Brian, wait. I thought 500 employees was the maximum amount for eligibility under the PPP program. So was there some sort of loophole in the CARES Act that allowed these companies to get some money?

Well, here's the important part is that it actually wasn't a loophole. So here I've got pulled up the actual text of the Small Business Act as amended by the CARES Act, Section 36, subsection D, sub subsection 3, and what it says here is that "any business that employs not more than 500 employees per physical location," which means per Ruth's Chris Steakhouse location, per Ritz Carlton location, per Potbelly location, and that has a NAICS code beginning with 72 which, by the way, covers accommodation and food services, these types of companies will still be eligible for the program.

So again, this isn't a loophole. This was actually written into the CARES Act that says these types of businesses would get the exemption. Now, if it's controversial to you that's because it's controversial to most people. And what's important here to note, though, is that they are-- there is some acknowledgment among the Treasury that they really need to renege on this.

So you actually have the Treasury saying-- clarifying yesterday that when the next $310 billion of money will be released, companies that are publicly traded, like those six that I just showed you, will likely not be eligible for the program. And actually, anyone that received the money should be paying it back by May 7 unless they want more scrutiny from the US Treasury. But regardless, as the next re-up of money comes, likely over the weekend or the beginning of next week, it's the type of program and who is receiving it should definitely be under scrutiny. But that in a nutshell is kind of the basics, if you will, of the PPP program. Adam. Julie.