Small business owners who aren’t sure if they have time to apply for a PPP loan – should. With the extension of the Paycheck Protection Program (PPP) through the end of May, some small biz owners may be concerned if there’s enough time to do so. Another concern is if there’s enough money in the program? The last thing any owner wants to do is apply for a loan and find out the program ran out of money or processing took too long. Currently, there’s approximately $68 billion left in the program out of the initial $291 billion.
These are valid concerns, but if you’re on the fence about applying, here are a few reasons why you should!
Simplified loan process.
In its first go-round, the loan process did take quite a long time. Many applicants were either placed on hold or required to amend applications for information that was either missing or incorrect. The process this time around is easier with newly revised forms that speed up the process. Previously, lenders reported up to 65 error codes stemming from mismatched revenue numbers and borrowers using EINs instead of SSNs. According to Lisa Simpson, vice president of firm services at The American Institute of Certified Public Accountants (AICPA), the SBA is hoping to implement “machine learning” tools to “magically lift the error codes”, in the hopes of reducing the amount of time it takes to get approved for a loan.
No wait time for second-draw loans.
Previously, the Small Business Administration’s (SBA) rule was that first-draw borrowers needed to wait eight weeks and to spend most (or all) of their first-draw loan funds before accessing a second-draw loan. Now, that’s changed. The SBA decided that business owners can apply for a second-draw PPP loan, without waiting eight weeks after receiving their first-round checks. However, to qualify, a business needs to meet some requirements. It must have 300 or fewer employees and must only spend all (or most) of its first-draw funds. The business also needs to prove they have seen at least a 25% reduction in revenue caused by the COVID-19 pandemic.
More funding to come?
Some lawmakers want to allow sole proprietors, independent contractors, and self-employed entrepreneurs to retroactively apply for more loan money. This comes after the Biden administration’s request in February, which requested the SBA to change the formula small business owners use to calculate their PPP loan. Instead of using net income, which removes taxes and other expenses, borrowers can now use gross income that helps them to secure higher loan amount.
Last month, the Small Business Administration announced this change would not be retroactive. However, several senators are hoping to change that. Lawmakers say they support legislation that would allow business owners who have already received a PPP loan to retroactively apply for more money. That said, the program can’t run out of money before then.
So, take all this into consideration if you’re deciding to apply for a PPP loan before the May 31st deadline. It might be worth the effort and help your business.