Note: This post was updated at 11:18 a.m. on April 8 with new guidance regarding potential fraud implications.
Starting April 3, small businesses and sole proprietors can start applying for Covid-19-relief loans as part of $349 billion Paycheck Protection Program (PPP), but that doesn't mean the money will come immediately.
It's still unclear which lenders are participating on Day 1, as some banks are reporting confusion over the program. And even after lenders work out those issues, it will take time to process the loans.
You do have options to speed up the process. Here are four:
1. Apply for fast cash now.
Small businesses have the opportunity for an immediate Economic Injury Disaster Loan advance of $10,000, which, according to the Small Business Administration, will be given within three business days of the request. This money doesn't have to be repaid if it's used for payroll, even if you get denied for the EIDL loan later on. Note that if you get an EIDL advance, and later apply for a PPP loan, the EIDL will be subtracted from the amount that gets forgiven.
You can also apply for a bridge loan through the SBA's Express loan program for as much as $25,000, says Ami Kassar, founder and CEO of MultiFunding, a small-business loan adviser. The loan can be repaid in full with your EIDL loan or refinanced into your PPP loan, should you get one. SBA bridge loans are expected to arrive in about two weeks, says Kassar.
Your bank can further provide a non-SBA-linked bridge loan, which similarly could take as little as a couple of weeks, says Kassar.
2. Get organized.
While you need fewer documents to apply for a PPP loan than you do for a traditional SBA 7(a) loan, there's still information your bank will need from you. The more organized and ready you are will help your ability to get a loan processed sooner. Here are few documents you'll need:
- Payroll report as of February 15, 2020.
- A copy of W2 forms for all employees, including those who make over $100,000. This should be submitted as part of your payroll information.
- List of any payments to partners who own 20 percent or more, up to $100,000.
- 1099s for any contractors that received more than $100,000 in compensation (any amount over $100,000 must be deducted for the average monthly calculation).
While the following documents aren't necessary for the application, you should have them ready anyway in case your lender asks for them or the SBA decides to require them:
- Company tax return for 2019, if filed already.
- Your balance sheet for 2019, with a previous year comparison.
- Year-end profit and loss statement, with a previous year comparison.
3. Check in with your bank.
Your chances of getting a loan faster will improve if your current lender is also an approved SBA lender. The complexity of the program and speed with which lenders are expected to get the program up and running gives customers who are known to the bank an advantage, said Daniel Martini, vice president of congressional relations and public policy at the American Bankers' Association, a banking industry group. He made these comments during an Inc. and U.S. Chamber of Commerce Town Hall webinar for small businesses on April 3.
For banks that are not yet preferred SBA lenders, it's unclear how long applying to become one will take or whether they will be inclined to do so at all. Lenders aren't expected to make much money on these loans, which come with no fees and 1 percent interest charges.
4. Apply with multiple banks.
If your current bank is unable to process your loan, it may be beneficial to apply for a loan through multiple banks in the hope that one of them will be able to process it first.
"Different banks are going to have different waiting periods," says Kassar. "One bank may be super efficient and process it in three days, and another bank's queue could be backed up because their processes may be backed up, or they don't have enough people."
It's also worth noting, he says, that just because a lender has accepted your application, that doesn't mean it will authorize your loan. So, go ahead and hedge your bets. Just make sure that multiple lenders don't apply on your behalf at once, as that could trigger a fraud alert, says Kassar. Ask for a guarantee that the lender will contact you before submitting your application. Then if you get approved for a loan, withdraw your other applications.