Small businesses have 2 more months to apply

The Senate on Thursday passed the 2021 PPP Extension Act with overwhelming support, extending the deadline for the Wage Protection Program to May 31 from March 31.

The approval of the PPP extension came about a week after the House passed the bill, which will go on to be signed by President Joe Biden. In addition to reducing the deadline for submitting applications by two months, the measure gives the Small Business Administration an additional 30 days to process loans.

The extension was received with the support of lenders and small business groups.

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“This is definitely a win-win for smaller businesses,” said Alex Cohen, CEO of Liberty SBF Lender. He said he has seen a huge increase in application volumes, especially from sole proprietors and independent contractors who may not have applied in the first round of PPP or might not be able to get funding.

This is what small businesses need to know.

1. The program deadline is now May 31st and not March 31st

Small businesses have an additional two months to submit the application.

The extension will help lenders and companies that have found errors in the application process. In addition, in the current PPP round, the SBA increased security to deal with fraud. This meant that application times were much longer for some.

“I’ve noticed that over the last week, up to ten days, there’s definitely been a tone of panic coming back,” said Chris Hurn, chief executive of Fountainhead Commercial Capital, a non-bank lender. Now that the bill has passed, everyone will be able to breathe a sigh of relief, he said.

The SBA has said there are about $ 79 billion in funding left, which was restarted in January with $ 284 billion.

2. There may be more time to apply for loans for the second draw

The additional two months can also open the door for small businesses that got a first PPP loan this year to apply for a second.

Some small businesses that recently got a first draw previously didn’t have enough time to apply for a second one, as they usually have to spend eight weeks between loans, so there’s time to spend the money on payroll.

This mainly affected sole proprietors who did not know that they could get help through the program or who could not get funding in the previous round.

“They will definitely be a big beneficiary of this added time in 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 not have more than 300 employees and should be able to show at least a 25% reduction in gross revenue between comparable quarters between 2019 and 2020, according to the SBA.

3. Some providers still have different rules about PPP

Many non-bank lenders and smaller fintech technology companies kept their application portals open and intended to do so until the program’s expiration date, while many larger banks had stopped accepting new ones. applicants to finish everything on time.

Now, these banks are reopening their windows to help some borrowers, but some banks follow different rules.

For example, JP Morgan will resume the PPP loan application and update its loan calculation formula for homeowners or so-called C presenters. The new application with the updated formula should be available to borrowers. next week, a spokeswoman confirmed.

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.

Wells Fargo and Bank of America have been offering the new home loan calculation formula. In addition, both banks confirmed that they will reopen PPP applications due to the extension.

4. There are likely to be more SBA guidelines

Of course, questions remain about the program and the extra time could open the door to more SBA guidance.

On the one hand, sole proprietors who applied for loans before the updated calculation was announced are pushing for the rules to be applied retroactively. The difference in loan amounts would have meant thousands of dollars more in forgivable financing for some.

“It shouldn’t be to the detriment of those who were diligent and got their applications in the beginning,” said Keith Hall, president and CEO of the National Association of Self-Employed Workers.

Lenders have also questioned the eight-week period between the first and second draw for homeowner loans, which have no traditional payroll. For this reason, some argue that they should not wait eight weeks to apply for a second loan.

“[The extension] it will give the SBA enough time to do the right things on some of these issues, ”Hurn said.

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