The Senate has passed additional funding for the Paycheck Protection Program (PPP) today (April 21, 2020) and there’s an anticipated vote in the House on April 23, 2020—although nothing is certain—it looks like an appropriation of more than $300 billion will be on the President’s desk for a signature before the end of the week. This is potentially good news for a lot of small businesses that didn’t see any funds the first go-round—and a good reason not to abandon your PPP loan application in frustration.
There’s no question that a lot of the smallest small businesses got the short end of the stick in the first round as banks (maybe even understandably) focused on their current customers in the first week or so those funds were available. I’d guess most of you would do the same when choosing between long-standing relationships with your customers and someone you didn’t know. That being said, we’re as frustrated as you are with how big bank customers were able to capture so much of the original $350 billion that would have done a lot to help Main Street small businesses all across the country and don’t blame you for your dissatisfaction with the PPP results so far.
That being said, now is not the time to fold, it’s time to double down.
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The Risk to Reward is Low: File Another PPP Loan Application
Lenders, partners, and everyone at Nav is confident that these additional funds will be available in the coming days and we’re recommending that you get your application in as quickly as you can to give lenders an opportunity to prepare your application and have it ready as soon as the SBA is able to process it. I say that understanding there will be many who accuse me of being a schill trying to drive more applicants into the Nav application process, but that is not the case.
On the contrary, I really believe this is the best advice I can offer right now.
Although we hope you will reach out to Nav to help you apply with one of our partners, I advise you not to stop there. You should make an application with as many lenders as you are able because the consensus is that this round of funding could go even faster than round one (think days not weeks). And, although you will not be able to get more than one loan, getting as many applications started as you can will improve the odds of success at obtaining a PPP loan with one of those lenders.
The risk to reward is very low. In other words, the only thing you have to lose right now is the time it takes to complete and submit your application. The reward is the possibility of a successful application and having access to a little capital that will help you make payroll and pay some other expenses.
What Makes This Round Different?
There are more lenders, partners, and agents in the game to make small business loans—including online lenders and other fintech players. I think there are several reasons why engaging with online lenders could be a good idea for smaller small businesses:
- Your status as an existing banking customer won’t matter. Many of the small businesses that found success were already customers of the banks making PPP loans. That will likely be a non-factor with any of the online lenders entering the field over the coming weeks. They will be looking for new customers and an opportunity to build new relationships.
- Most online lenders are already servicing smaller small businesses. In other words, if you have less than 20 employees—or even none other than yourself—these lenders are used to working with businesses like yours and are better equipped to help shepherd your application through the lending process. In fact, we saw our partners approving PPP loan offers of $50,000 or less; which tells us they are approving many smaller businesses like sole proprietors or those with fewer employees. This bodes well for Main Street, at least in my opinion.
- Unlike more traditional SBA lenders, these lenders are better equipped to accept an online application and respond quickly. This was a bottleneck for many traditional lenders and a frustration for borrowers during the first round of PPP financing. Putting an application online is not the same thing as having an online application—which was one of the challenges these traditional lenders faced with the online nature of many of the PPP loan applications.
- Online lenders and fintech institutions are ramping up. I can’t foresee any scenario where the federal government doesn’t make more aid available—sooner, rather than later. I get the impression from others in the space that they feel the same way. And, they are encouraging their customers to either finish their applications or get a new application started so they are better prepared to take advantage of the next round of financing available through another appropriation through the PPP loan program. Whether you are a Nav customer or not, I would advise you to do the same.
Why Should I Apply Now, the Legislation Isn’t Even Approved Yet?
Normally, I would agree with you, but not this time.
I don’t think the SBA expected the response they got last time and didn’t anticipate funds would be depleted after only two weeks. What’s more, many lenders have been queuing up those borrowers who didn’t make it through the first time in anticipation of a further round of funding. In other words, there is a backlog of borrowers poised for their applications to be processed once the SBA is ready to start accepting applications. You need to make sure yours is one of them.
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If you already have an application with a lender, great. Don’t put all your eggs into one basket. If you haven’t applied yet, don’t wait.
Complete Your PPP Loan Application While You Can
We’re not hearing any rumblings of a future round 3 of PPP funding so I can’t guarantee that there will be more money made available for small businesses once this allocation is gone. We’ll keep you informed as this story develops over the coming few days.
Please keep in mind this information is changing rapidly and is based on our current understanding of the programs. It can and likely will change. Although we will be monitoring and updating this as new information becomes available, please do not rely solely on this for your financial decisions. We encourage you to consult with your lawyers, CPAs and Financial Advisors. To review your real-time funding options with one of Nav’s lending experts, please contact us.