Reapplying for a PPP Loan
What Is a Paycheck Protection Program Loan?
The Paycheck Protection Program Loan is a provision of the CARES Act that intends to help small businesses by giving them forgivable loans. It is backed by the Small Business Administration (SBA) and aims to keep the workforce employed amidst the COVID-19 crisis. Small businesses are given funds in the form of loans to pay employees up to 8 weeks of payroll costs and benefits. Additionally, the funds may also be used to cover the interest on mortgages, utilities, and rent payments. Loan payments are deferred for half a year and no collateral arrangements are needed to back up the loan. Plus, there are no additional fees for getting the loan. Eligible to this loan are small businesses, sole proprietorships, self-employed individuals, and independent contractors with varying requirements.
Disapproved PPP Loan Application
Despite the large funding from the government and easy application requirements, there have been several reported cases of PPP loan applications that were disapproved.
Reasons for a Disapproved PPP Loan Application
There can be a variety of reasons why an application for a Paycheck Protection Program Loan may be rejected. The most common one is that the business doesn’t meet the required size or revenue limit. Only businesses with less than 500 employees or with less than $2 million in revenue are eligible. Another reason may be that the business has too much debt-to-income ratio or that it has filed for Chapter 7 or 11 bankruptcy in the past year. The SBA also looks at the company’s credit score and history to determine if it is likely to be able to repay the loan.
How Do I Know if My Application for PPP Has Been Disapproved?
If your small business has applied for a Paycheck Protection Program Loan and you have not received any communication from the SBA, your application has likely been rejected. In this case, it is best to reach out to the SBA directly and ask for more information about why your application was denied.
Where to Reapply for a PPP Loan
If your small business has been denied a Paycheck Protection Program Loan, the best place to start is by reapplying. The SBA has made it very easy for businesses to apply and you can do so on their website. You can reach out to online lenders, small community or regional banks, or credit unions for a loan. There are also regional or community banks that may be more willing to work with you. It is important to remember that each bank has different requirements and it is best to shop around for the best deal.
Other Options in Lieu of a PPP Loan
If banks are not an option, there are several other ways in which you or your small business can get the funds needed to pay employees. The CARES Act allows for the interest on mortgages and utilities to be part of the loan amount, so homeowners with a steady income may find this beneficial. Employee retention tax credits and unemployment compensation may also help and they come in the form of a check or direct deposit to make it easier for businesses. It also has provisions about deferring taxes during COVID-19 crisis times, which means that businesses may use these benefits to receive tax credits when they need them most. It is recommended that before you do anything, you reach out to your accountant and discuss your options with them. This way, you can get specific advice on what to do for your business first.
The Paycheck Protection Program Loan is a great way for small businesses to get the funds needed to keep their employees employed during the COVID-19 crisis. Despite the easy application process and large funding, there have been several cases of rejected applications. Reasons may range from not having the required revenue to having too much debt. If your small business has been denied a loan, the best place to start is by reapplying with other lenders. You can choose to reapply in a bank or reach out to a small community lender in your area. You may also opt to use some of the other benefits available to small businesses in crisis, like deferring taxes or taking advantage of tax credits.
About the Author
True Tamplin, BSc, CEPF®
True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.
True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.