Extend PPP Deadline to Help Small Businesses Secure Access to Loans Under New Rules
For many of America’s smaller business owners, the March 31 deadline for filing Payroll Protection Program (P3) funding is looming.
Voices from all sectors, including American Institute of CPAs (AICPA), payroll giant Paychex, and trade associations are calling on Congress to extend the Paycheck Protection Program (P3) loan application deadline to March 31. Last week, more than 100 trade and commerce organizations sent a letter to federal lawmakers urging them to extend the PPP deadline to at least June 30, 2021.
The AICPA believes that the federal government can and should provide continued support to small businesses and nonprofits by agreeing to an extension of the PPP2 loan program. Since the program reopened in January (after the close of the first PPP round on August 8, 2020), more than 2 million loans have been approved for more than $ 156 billion in loans, financed by 5,185 banks and non-bank lenders. Overall, the Paycheck Protection Program has put nearly $ 680 billion in the hands of desperate business owners whose very survival depends on securing these government-guaranteed loans.
“We thank Congress for its continued bipartisan support for PPP, which is a valuable lifeline for millions of businesses. However, too many underserved and minority-owned small businesses continue to face serious challenges with the PPP application process, ”said Barry Melancon, CPA, CGAM, President and CEO of AICPA. “The accounting profession believes that congressional action to extend the deadline creates much needed leeway for Main Street America.”
“Since launching PPP last year, we have asked Congress and the SBA to ensure that the program reaches the small businesses that need it most, especially since too many small businesses owned by companies. people of color and self-employed people were left behind during the first rounds of funding, ”said Majority of small businesses founder and CEO John Arensmeyer.
“Few of the business owners of color who applied for the P3 last year received the full loan amount they requested, and only 7% of the self-employed even applied,” Arensmeyer added. “Additionally, a majority of entrepreneurs of color say they will need loans or grants this year to keep their businesses open.”
Currently, millions of companies are working on PPP applications that have not yet been submitted to the SBA. Smaller companies, often owned by minorities or immigrants, had the most difficulty in applying. Often times they do not have existing corporate checking accounts at banks or their accounts have been below the minimum balance due to the effects of government imposed closures or increased spending on things like PPE for their employees. Conditions like these have posed challenges for companies seeking PPP loans as they are often required by lenders before a borrower can obtain a loan from the program. Often these very small businesses do not have accountants or lawyers to help them overcome these barriers to P3s.
AICPA President Barry Melancon, whose 431,000 member organization is the world’s largest association representing the CPA profession, says many PPP issues need to be addressed.
“It is well documented that small businesses, nonprofits and CPAs who advise them encounter error codes when submitting a PPP loan application. We are continuing to discuss these issues with ASB and hope for a solution soon, ”added Melancon.
“When the Biden administration rightly created a two-week window to prioritize PPP loans for entities with less than 20 employees, other large companies weren’t sure how last-minute process changes might have. impact their applications that persist in the SBA system, ”he added. “An extension of the deadline would give the ASB more time to process these requests.”
President Biden’s two-week period for businesses with fewer than 20 employees to be allowed to apply for PPP loans helps ensure that true small businesses can get financial aid. Many of the smaller businesses that seek financing are businesses owned by Blacks, Browns, and women. Outreach efforts are underway to reach these business owners, especially those in low- and middle-income communities, and areas that have been underserved by the banking sector.
Lots of funding still available
Congress authorized additional funding of $ 284 billion for PPP2. Currently, after two months, just over half of that funding ($ 156,253,510,068) has been approved.
To help get things done, the SBA provides additional capabilities for lenders to resolve error codes. Unfortunately, many applications are delayed. From the start of the program, applicants should have been informed that validation checks would take time. The safeguards have been put in place by the government to prevent fraud this time around. Progress is being made, but unfortunately it takes longer than expected to resolve error codes.
“Almost 90% of error codes occur before claims are submitted to the SBA,” said Eric Asgeirsson, president and CEO of CPA.com. “Much of the progress is done manually. However, I hope we will catch up. ”
The first phase of the error codes is an API validation error code which in a way stops the submission of PPP loan requests into the SBA system. Unfortunately, the vast majority of error codes occur before the SBA even receives the applications.
Then there are compliance checks. Applications are validated for further consideration. In some cases, requests are stopped here and borrowers and lenders are asked to provide additional information. Sometimes the lender can erase the code, and sometimes not. A frequent delay is due to the fact that additional documents are needed to prove that a candidate was performing well on February 15, 2020.
In the third phase, the requester obtains an SBA (E-Tran) number or a “do not approve” category. Lenders can at this point work with borrowers to resolve error codes, often by collecting the unique and specific documentation required by the SBA for each type of error code. These error codes are unexpected and cause delays for many borrowers.
Sometimes it can take weeks to get approval because of these safeguards in place to prevent fraud. Progress is being made as lenders work with the SBA, but unfortunately the program is so popular that there is a deadlock. Resolving error codes takes time, and the SBA has yet to provide more definitive advice to lenders on how to resolve these errors more effectively. For this reason, Congress is expected to extend the PPP application deadline beyond March 31.
Smaller businesses and the self-employed need access to capital, but they might not get it without an extension of PPP2. There is simply not enough time until March 31 for the SBA and its 5,000 partner lenders to first implement the rule changes required by the administration, then resolve compliance issues and messaging. error, and of course, finalize the funding of all approved companies. The best way to ensure that the little guys get a piece of the P3 pie is to extend the deadline to give applications more time to be processed, approved and funded.