If you applied for a PPP loan via a large bank, you may want to reapply

Important PPP update for 2021

On December 22, 2020, Congress passed a bill renewing funding under the CARES Act, including an additional $284 billion earmarked for America’s struggling small businesses. The rules and application process for PPP loans and forgiveness have been modified, with more businesses eligible for PPP loans, more expenses forgivable, and a simplified application process. Also there is provision for “second draw” PPP loans for businesses that received PPP funding in 2020.

In this 3 minute read:

  • Why should I consider reapplying for my PPP loan via a smaller lender?
  • Is there any risk to submitting duplicate PPP loan applications?
  • How you can improve your chances of your Paycheck Protection Program loan being funded

The COVID-19 crisis has brought to light multiple issues across nearly every industry. Supply chain problems, concerns about international travel, the lack of available hospital beds and supplies in some locations, the problematic fallout resulting from global pharmaceutical production, and the fragile nature of America’s small business infrastructure are but a few.

One thing that has come into clearer focus is that the incredible demand for SBA emergency funding has overwhelmed some larger banking institutions, who have elected to stop accepting PPP loan applications, or who are restricting applications to their current banking customers who meet certain criteria.

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If you submitted your PPP loan application through a large bank, you may want to re-apply via a smaller lender

On Sunday April 26, 2020, the SBA and Treasury announced new rules limiting the amount of PPP funding that can flow through any single lender for this round. In particular, this change affects large, nationally known banks and others whose cap will be 10% of the main pot, or about $25 billion. Additionally, for the renewal of the PPP program for 2021, smaller community lenders are given advanced access to the PPP application portal to help provide more support for lower income areas and businesses.

If you’ve applied for your PPP loan with a large bank, your application may be at risk of not being approved if you are lower in the queue to receive an E-Tran number and get funded. 

Once big lenders hit their cap of 10% of the available funding, any businesses that are still in line have the potential to not be funded during this round of the PPP.

More than 5,000 SBA-approved lenders are submitting millions of applications that will far exceed the ~$300 billion allocated to this phase of the PPP. If you’re desperate for these emergency business resources, it’s vital to increase your chances of being funded right now.

The first $349 billion in PPP funding quickly ran out, and was loaned to around 1.6 million businesses, including some publicly traded, larger businesses that have since decided to return their PPP money that some argued they didn’t desperately need.

angry mob PPP loans

In the second round of PPP funding, new rules favoring smaller lenders and smaller businesses stretched the timeline out a bit, but we still recommend that if you’re not getting the response you need from your bank, you should consider reapplying via a smaller lender.

If I submit two PPP loan applications, won’t I get in trouble?

Thanks to updates to the SBA / PPP loan process, you are now at almost no risk of receiving more than one loan per tax ID number. If you applied with a big bank and are near the bottom of their queue, we feel you are likely to miss out on funds this round. 

Given the volume of applications, we think it’s important that you take extra time to apply again with a smaller lender that meets the SBA’s intent to spread PPP loan funds further than during the first round. 

This could make the difference between getting approval in this round of funding and having to wait. Remember: you are not obligated to apply with your bank. PPP loan terms are identical, and it is always free to apply.

You might get more personal attention and better customer service from a smaller lender

Many small businesses have observed that the customer service and attention they have received from smaller lenders and loan agents during this confusing time were superior than what they got from giant banks, some of which stopped accepting applications altogether.

The reality is many banks and lenders have been put in the position where they can’t service all customers. And with new rules and directives from the SBA favoring smaller lenders, and frequent updates to federal guidelines that require interpretation by loan agents, facilitators, and lenders, small business owners can really benefit from partnering with an organization that can walk them through the application process, inform them on the necessary documentation, connect them with a responsive lender that is still accepting PPP loan applications, and smooth out any bumps that they may experience along the way.

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