Congress may have extended the Paycheck Protection Program through May, but with only $68 billion left in its coffers, the PPP may sunset well before then. That shouldn’t deter you.
Here are four reasons to apply for funds as soon as possible:
1. Funds could run out soon.
During a March 24 Senate hearing on the efficacy of Covid-19 relief initiatives, Patrick Kelley, of the Small Business Administration’s Office of Capital Access, noted that the PPP program could exhaust its funding as early as mid-April. At the time, there was just $79 billion left. Two weeks later, as of March 4, there’s just $68 billion left, out of a total of $291 billion.
After reopening for a third time to certain lenders on January 11 with $284.5 billion, the program was replenished with another $7.25 billion with the passage of the American Rescue Plan Act on March 11.
2. You can apply for a second-draw loan ASAP.
The SBA recently ruled that business owners may apply for a second-draw PPP loan, even if they don’t wait eight weeks after receiving their first-round checks. Previously, first-draw borrowers needed both to wait the requisite eight weeks–that is, the term for the minimum covered period–and to spend down most or all of their first-draw loan’s proceeds before they could access a second-draw loan. To qualify now, businesses with 300 or fewer employees must only spend down all (or most) of their first-draw funds, and they must have experienced a revenue reduction of at least 25 percent due to the Covid-19 pandemic.
3. Congress may appropriate more money to the PPP.
Although some business groups, including the U.S. Chamber of Commerce, suggest letting the PPP phase out either on May 31 or when funds run out–whichever comes first–many lawmakers have recently focused on fixing key problems with the PPP.
Many PPP stakeholders, including lawmakers, want to allow sole proprietors, independent contractors, and self-employed entrepreneurs to retroactively apply for more money. This follows the Biden administration’s February 22nd request that the SBA change the formula these borrowers use to calculate their PPP loan. Rather than using net income, which removes taxes and other expenses, these borrowers may now use gross income, which allows them to book higher loan amounts.
A March 3 notice from the SBA stated that this change would not be retroactive. However, several senators–including Ben Cardin (D-Md.), chair of the Senate Committee on Small Business & Entrepreneurship, and Joni Ernst (R-Iowa)–want to change this. The lawmakers say they support a legislative fix that would allow solopreneurs who’ve already received a PPP loan to retroactively apply for more money. And they’re not going to like it if the program runs out of cash before they’re able to do so. As such, Mark Peterson, executive vice president of advocacy at the American Institute of CPAs, said in a town hall session on Thursday that there’s a good chance Congress will appropriate more funds–and issue a retroactive fix–as early as mid-April. “We believe they’ll come back next week and focus on this,” he said.
4. SBA has an error-code resolution plan.
For many small businesses applying for a PPP loan this round, getting stuck on hold was common. Due to an increase in fraud checks and an automated system flummoxed by data cleanliness issues–say, mismatched revenue numbers or borrowers using EINs instead of SSNs–lenders reported seeing as many as 65 error codes. According to Lisa Simpson, vice president of firm services at the AICPA, the SBA is hoping to use “machine learning” tools to “magically lift the error codes”–that is, to engage in batch error code resolution. Simpson notes that this has yet to occur and she estimates that as many as 100,000 borrowers remain on hold, awaiting resolution. But if the plan works, it could reduce the timeframe for getting loan approval.