Small businesses still have 2 months to apply
A small business owner in Chinatown, San Francisco
The Senate on Thursday adopted the law on the extension of PPP of 2021 with unwavering support, extending the deadline for the Paycheck Protection Program to May 31st from March 31st.
Passage of the PPP extension came about a week after the House approved the bill, which will then be signed by President Joe Biden. In addition to extending the application deadline by two months, the measure gives the Small Business Administration an additional 30 days to process loans.
The extension has received support from lenders and small business groups.
“This is definitely a win for the smallest of small businesses,” said Alex Cohen, CEO of lender Liberty SBF. He said he saw a sharp increase in application volumes, especially from sole proprietors and independent contractors who might not have applied in the first PPP cycle or were unable to obtain a funding.
Here’s what small businesses need to know.
1. The program deadline is now May 31st, not March 31st
Small businesses have two additional months to apply.
The extension will help lenders and businesses who have encountered errors in the application process. Additionally, in the current PPP cycle, the SBA has tightened security to fight fraud. This meant that the application deadlines were much longer for some.
“I noticed that over the last week to 10 days there was definitely a tone of panic coming back,” said Chris Hurn, managing director of Fountainhead Commercial Capital, a non-bank lender. Now that the bill is passed, everyone can breathe a big sigh of relief, he said.
The SBA said there was about $ 79 billion in funding left, which restarted in January with $ 284 billion.
2. There may be more time to apply for a second draw loan.
The extra two months can also open the door for small businesses that got their first PPP loan this year to apply for a second.
Some small businesses that recently got a first draw before did not have enough time to apply for a second, as typically eight weeks must elapse between loans, leaving time to spend money on the mass salary.
This mostly affected sole proprietorships who were unaware they were eligible for program assistance or were unable to secure funding in the previous cycle.
“They are certainly going to be a big beneficiary of this extra time on the application process,” said Patrick Ryan, President and CEO of First Bank.
Of course, there are additional qualifications for a second draw loan beyond the eight week period. Small businesses should have no more than 300 employees and be able to show a reduction of at least 25% in gross revenue between comparable quarters in 2019 and 2020, according to the SBA.
3. Some lenders still have different rules regarding PPP
Many non-bank lenders and small fintech companies kept their application portals open and intended to do so until the program expiration date, while many large banks had stopped taking new applicants. to get everything done on time.
Now these banks are reopening their windows to help some borrowers, but some banks are following different rules.
For example, JP Morgan will resume accepting PPP loan applications and update its loan calculation formula for sole proprietorships or so-called Schedule C filers. The new app with the updated formula should be available for borrowers next week , confirmed a spokesperson.
Previously, the bank only allowed sole proprietors to use net profit instead of gross income to calculate loan amounts, which would likely result in less money.
4. More likely SBA advice
To be sure, questions remain about the program, and the extra time could open the door to further advice from the SBA.
On the one hand, sole proprietors who applied for loans before the announcement of the updated calculation lobby for the rules to be applied retroactively. The difference between the loan amounts would have meant thousands of dollars more in forgivable funding for some.
“This should not come at the expense of those who were diligent and got their candidacy early,” said Keith Hall, president and CEO of the National Association of Self-Employed Workers.
Lenders have also questioned the eight-week delay between the first and second drawdowns of loans for sole proprietorships, who do not have a traditional payroll. For this reason, some argue that they shouldn’t have to wait eight weeks to apply for a second loan.
“[The extension] will give the ASB enough time to do the right thing on a number of these issues, ”Hurn said.
Disclosure: NBCUniversal and Comcast Ventures Invest in Tassels.