The US government has added $320 billion to the popular Paycheck Protection Program. The SBA announced they will begin accepting new applications for loans Monday, April 27th at 10:30am EDT. To take advantage of this, you'll need to have your application ready to be transmitted by your bank to the SBA via its E-Tran system. Act fast - some speculate this funding can run out in a matter of days.
Many small businesses failed to get funding the first time around. We are understandably anxious over whether we'll get funded this time as well as what happens if we can't get funding before it runs out again.
I've been doing a lot of research as well as speaking with business owners and bankers. There are three recurring themes I'll address in this post:
How do I improve my odds of getting my application submitted and approved by the SBA?
Can I submit more than one application?
What happens if the funding runs out and I don't get a loan?
How To Improve Your Chance of Getting a PPP Loan
Most business owners who want to apply for a PPP loan have already submitted an application. If you haven't yet and want a loan, find an SBA lender and file an application immediately.
Banks are claiming that they are honoring submissions on a "first-come first-served" basis. I am skeptical about this after I learned nearly all 8,500 JPMorgan Chase commercial and private clients received a PPP loan while over 282,000 of their small business banking customers did not. Even though we applied, too many small business owners have no idea where they stand in the queue.
Know Exactly Where You Are In The Process
The first thing you can do to improve your chances is to know exactly where you are in the application process. Don't rely on generic messages from your bank - get specific information about your application.
After filing your application, you go through your bank's underwriting process. Only after you have been approved by the bank can they transmit your application to the SBA.
You want to know that you have completed underwriting and all that is left is for your bank to transmit your application to the SBA.
If you discover your bank needs more information from you, they'll contact you (usually by email). Check your email and spam folder often. Address any additional requests immediately and stay on top of your bank to make sure they transmit your application. You don't want any delays to hurt your chances of getting funding before it runs out. The race starts Monday 4/24 at 10:30am EDT so make sure you are prepared.
The best way to find out where you are in the process is to speak or email someone at your bank and have them look up your application. This has proven impossible for many folks. If you are unsure of where you stand and cannot get any answers, consider applying somewhere else in addition to your current application.
Can I Submit More Than One Application?
When the program was first announced, many people were advised to apply through only one institution. This is due to SBA anti-fraud rules where multiple applications were automatically rejected. That has changed now due to the volume of applications and the difficulties small businesses are having getting serviced from their bank. Submitting multiple applications will not automatically reject you.
SBA's Position on Multiple Applications
SBA Regional Administrator Robert Scott spoke to the media after the latest funding was approved. He made two key points.
There is nothing under the law forbidding a borrower from submitting multiple applications. Only one application per borrower can be processed by the SBA's E-Tran system so whoever arrives first will get processed.
Businesses could shop around for different lenders to see which lending institutions “may be able to provide better customer service."
If you applied to one of the big banks and are unable to get any information about your application status, consider filing applications with a local lender and a fintech company.
The SBA is already overwhelmed with applications and certainly does not want to invite duplicates, which is why you don't hear much about multiple applications. Now that an SBA administrator has said there is no penalty, consider applying to a local community bank and a fintech firm to improve your odds.
Applying to a Local Bank and a Fintech Company
I singled out a fintech and a community bank as they operate differently than larger banks. Fintechs such as PayPal just received approval to be an SBA lender. They have a fully automated process that can get you an underwriting decision in a few hours. Their portal keeps you updated on your progress. When you are done you'll know they are ready to transmit to the SBA. You can apply here.
Small, local community banks specialize in customer service and are more likely to connect you with a person you can speak with. There are a lot of reasons applying through a community bank could work for you:
They have longstanding relationships with the SBA as they embrace this business
You'll speak with a live person
Your banker will be able to shepherd you through the underwriting process and advise you when your application is ready to be transmitted.
Community banks are not dealing with the same volume of applications as other banks.
Since the government set aside $60 billion exclusively for smaller banks, your chances of funding increase when you apply through them. You can lookup local community banks here or create an account at Lendio to be matched up with a lender. Make sure they have less than $50 billion in assets before applying so you know you'll be part of the set-aside.
I do not believe anyone should file more than 2 or 3 applications total. I also believe that if you are certain your application has gone through underwriting that you should remain with that application only. I think banks will adhere more to the "first-come first-served" process this time and an earlier filing date may benefit you more. Completing multiple applications could take away from your fellow business owners. I also believe that a slew of applications from a single tax ID number may invite more scrutiny from the SBA.
What Happens if the Funding Runs Out and I Don't Get a Loan?
In an earlier blog post I speculated that everyone who wanted a PPP loan would get one. I assumed the total need would be about $550 billion net of forgiveness. There is now $670 billion authorized.
I re-ran the numbers based on what we know today and came up with $730 billion as the needed amount. I looked at US Census Bureau data for 2017 and ran a calculation based upon total annual payroll size of $3.5 trillion. It appears we are at least $60 billion short this round. I've seen other estimates of $720 billion to $1 trillion required.
My hope is that Congress will add enough so everyone who needs this loan gets it. The problem is that we are competing for federal dollars with other areas of our economy that also need it: state and local governments, healthcare organizations and larger organizations in impacted industries (energy, hospitality, etc.) It doesn't appear that additional aid for anyone is coming anytime soon... Sen. Mitch McConnell said that it is time to start worrying about our national debt.
Companies that cannot take advantage of PPP loans have several alternatives. Many states and local governments are offering loans and grants. There are additional SBA programs such as the Economic Injury Disaster Loan (EIDL) which just received additional funding and should begin accepting applications soon.
What To Do Next
Contact your bank and make sure they have all that you need to submit your application to the SBA.
If you are unable to get that information before funding restarts, consider applying to other institutions such as fintechs and community banks.
If you are unable to get a loan, consider programs offered by your state/local government or the SBA.