Small businesses still have 2 months to apply

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

The PPP extension’s transition came about a week after the House passed the bill, which will then go to President Joe Biden to sign. 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 renewal was received with support from both lenders and small business groups.

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“This is definitely a win for the smallest of small businesses,” said Alex Cohen, CEO of lender Liberty SBF. He said he has seen a large increase in applications, especially from sole proprietorships and independent contractors who may not have applied in the first round of PPS or could not obtain funding.

Here’s what small businesses need to know.

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

Small businesses have an additional two months to apply.

The renewal is for lenders and businesses that have encountered errors during the application process. In addition, in the current PPP round, the SBA has increased security to tackle fraud. That meant application times were much longer for some.

“I’ve noticed in the past week to 10 days that a tone of panic has definitely returned,” said Chris Hurn, CEO of Fountainhead Commercial Capital, a non-bank lender. Now that the bill has passed, everyone can breathe a sigh of relief, he said.

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

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

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 previously did not have enough time to request a second one, as there is usually eight weeks between loans, so there is time to spend the money on payroll.

This mainly affected sole proprietorships who were unaware of their eligibility for assistance through the program or who were unable to obtain funding in the previous round.

“They will certainly benefit from this extra time in the application process,” said Patrick Ryan, President and CEO of First Bank.

Of course, there are additional qualifications for a second drawing loan after the eight-week period. Small businesses should have no more than 300 employees and, according to the SBA, show at least 25% less gross revenue between comparable quarters in 2019 and 2020.

3. Some lenders still have different rules around PPP

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

Now those banks are opening their windows to help some borrowers, but some banks follow different rules.

For example, JP Morgan will again start processing applications for PPP loans and will update the formula for calculating loans for sole proprietorships or so-called Schedule C filers. The new application with the updated formula should be available to borrowers next week, a spokeswoman confirmed.

Previously, the bank only allowed sole proprietorships to use net profit instead of gross income to calculate loan amounts, which will likely result in less money.

Wells Fargo and Bank of America offer the new formula for calculating loans for sole proprietorships. In addition, both banks have confirmed that they will reopen applications for PPP due to the extension.

4. Probably more SBA guidance

To be on the safe side, questions remain about the program, and the extra time could open the door for further guidance from the SBA.

First, sole proprietorships who applied for loans before the updated calculation was announced are insisting that the rules be applied retroactively. The difference in loan amounts would have meant thousands of dollars more in pardonable funding for some.

“It shouldn’t be at the expense of those who were diligent and got their applications early,” said Keith Hall, president and CEO of the National Self-Employed Association.

Lenders have also questioned the eight-week time frame between first and second drawing loans for sole proprietorships, which don’t have traditional payrolls. That’s why some feel they shouldn’t have to wait eight weeks to apply for a second loan.

[The extension] will allow sufficient time for the SBA to do the right thing on some of these issues, “said Hurn.

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