Update: Legislation authorizing an extension of the Paycheck Protection Program was signed into law on July 4. Borrowers now have until August 8 to apply.
Time is almost out to apply for a loan under the Paycheck Protection Program, the $650 billion forgivable loan program aimed at small businesses harmed by the pandemic. If you've been turned down for a loan--or you've simply opted out for one reason or another--here are seven reasons you should still apply.
1. There's still money left.
The deadline to apply for a PPP loan is June 30. And billions are still up for grabs. According to the U.S. Small Business Administration's latest data, released on June 25, roughly 4.7 million loans have been processed, totaling more than $517 billion. There is about $125 billion of loan money still available.
2. The program has changed.
The PPP has received lots of pushback over the past few months from small-business owners who've had difficulty getting banks to approve their loans. It was also knocked for prioritizing more substantial loans from larger companies as opposed to main street businesses.
But since the program was first announced in March, the SBA has made many updates to it, including shepherding in the changes authorized by the Paycheck Protection Program Flexibility Act. That reform effort, which was signed into law on June 5, extends the amount of time in which businesses can use their loans and offers more leeway on how to spend funds.
Specifically, the law allows business owners to spend as little as 60 percent of their loan proceeds on payroll expenses like salary and benefits. Formerly, businesses needed to spend 75 of their proceeds on payroll. The law also extends the repayment period to five years from two years previously.
3. There are alternative lending options.
If you've been turned down for a loan at a traditional bank, you may still be able to get a loan through a non-traditional lender. In April, the SBA approved a number of fintechs, including PayPal, Intuit Quickbooks, Square, and Funding Circle, to directly offer borrowers the loans. For the smallest businesses and sole proprietors, a fintech company may be the quickest and most efficient option.
4. Getting the loan forgiven may not be that bad.
Since the PPP was announced, there has been speculation around the rather vague notions about how loan forgiveness was to be calculated. Well, the good news is that many small businesses will have a much easier time with the SBA's new "EZ" application, which was announced last week and applies to those who took a loan for $150,000 or less.
Self-employed borrowers or independent contractors are automatically eligible for the EZ application. Companies with employees can also use the EZ application if they didn't reduce the salaries of anyone earning $100,000 or less by more than 25 percent. Employers need to have maintained their previous staffing levels and the average paid hours of employee work. There's an exception for employers who tried, but were ultimately unable, to rehire candidates for a role and can prove that the employee won't return.
5. You have longer to use it.
As part of the Flexibility Act, borrowers can choose to extend the amount of time they have to use the loan to 24 weeks. Originally borrowers had just eight weeks. This flexibility is designed to make it easier for more borrowers to reach full, or almost full, forgiveness.
6. You can't count on a Round 4.
Lawmakers have indicated a willingness to consider a fourth round of stimulus. However, it will take much wrangling before anything is agreed upon. And even if some new program does come out of those negotiations for small businesses, it's unlikely that it will be open to as many companies as the Paycheck Protection Program. Ami Kassar, Inc. columnist and founder and CEO of MultiFunding, a small-business loan adviser, suggests the next round will be more industry-specific.
7. You can hire employees to help reopen.
Now may be an ideal time to apply for a PPP loan as many businesses are now looking to reopen or plan to reopen in the near future. Regardless of what your employees' roles were before Covid-19, you can always ask them to temporarily switch responsibilities to prep the business for reopening. And even if you can't get employees to return, you won't necessarily be dinged in your forgiveness calculation, thanks to various changes to the PPP over the past couple of months.