PPP Loan Programs Run Out of Funds: Why You Should Still Apply

PPP Loan Programs Run Out of Funds: Why You Should Still Apply

The CARES Act funding of the SBA Paycheck Protection Loan Program (PPP Loan) ran out last week. While the news was spreading about the millions scooped up by Shake Shack and Ruth Chris Steak House chains, some small business owners were uploading loan applications to their banks they were suddenly met with pop-up messages and web banners stating that funding had run out.  <insert sad business owner image here>  But here is why small business owners should still apply.

Hope of Additional Funding of PPP Loan Program is On the Horizon

Currently, Congress is working to fund an additional $450Billion in relief funding and a portion of that will likely go to the SBA PPP Loan program again. The additional funding will be distributed more quickly with systems already in place and the loan program already underway.  Should the democrats and republicans both agree in the next few days this funding may be available as early as the end of the week according to various political news sources.  What this will mean to PPP Loan applicants is that the well will be replenished but only temporarily.

Act Fast or Be Prepared To Miss Out Again

When the new funds hit the coffers they won’t last long.  In theory, the bank loan application line should work like any other line; first come first serve.  Now, while there is evidence to the contrary we need to move forward based on this assumption.  This means that you probably want your application submitted BEFORE the new round of funds hit the banks.  In theory, the first funding will go to those with applications already completed. Those who wait will find that the funds are fully earmarked before they even get their application in.  While this approach is no guarantee of funding having your application in line surely lends itself to having a better shot at funds.

Choose Your Bank Wisely

Picking the right bank to work with has proven to be key throughout the PPP Loan application process.  Smaller community banks have proven to have much higher application approval percentages.  In our firm’s experience, this holds true.  Most firms we spoke with saw very few loans approved through larger banks.  Many of the larger banks were ill-prepared to process these kinds of loans.  Additionally, initial reports from the wider accounting community show that larger banks shuffled the line and cherry-picked larger loan applications.  Banks likely selected those loans that would most benefit them based on the lender fee payouts.

What this means for your small business is that you should work with lenders you know if and when you can. For the best shot at success work with a community bank you already have a relationship with, and if necessary consider changing to a community bank.  Seek out banks that have a track record or successfully funding loans in your area.  Your bookkeeper or accountant should have a sense of who is funding and who is not.

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