New P3 Guidance Confirms Formula Change, Encourages Calls To Extend Deadline
- Small business administration issued new guidelines Wednesday allowing sole proprietors, independent contractors and the self-employed use gross income rather than net income to calculate how much paycheck protection program funding they should receive.
- Changes occur during a two week window in which the PPP portal – until March 9 – only accepts applications from companies with less than 20 employees. However, the portal should stop receiving requests on March 31.
- The SBA approved nearly 2.2 million loans worth $ 156.2 billion between the relaunch of the PPP in January and February 28, according to agency data. This represents a little more than half of $ 284 billion a December invoice reserved for the program. The new guidance, combined with the prospect of remaining funds, has some bankers pushing for PPPs to extend beyond March.
The final rule codifies the changes the Biden administration teased last week, when it announced it was granting smaller businesses exclusive access to the portal for two weeks.
Borrowers whose PPP loans have been approved cannot increase their loan amounts using the new formula, the SBA said, adding that it could look at first-time PPP borrowers who calculate their loan amounts using the new formula. using gross income of over $ 150,000.
However, Senator Ben Cardin, for his part, said on Tuesday that he was aiming to garner bipartisan support for candidates to use the gross income formula to recalculate pre-existing PPP loans. Cardin, D-MD, wants to hold a hearing this month to explore the formula debate, he said. But lawmakers no longer have time to intervene.
Cardin has said he supports extending the PPP deadline – a prospect shared by a number of bankers.
“Let’s kick the rules, plead for an extension, then push” for revised guidelines, Jill Castilla, President and CEO of Citizens Bank from Edmond in Oklahoma, said American Banker. “As long as the crisis continues, this program must continue.”
David Becker, president, president and CEO of Indiana-based First Internet Bancorp, said letting borrowers strengthen their existing loans “is by far the smartest way to do it,” but it takes more. of time.
“If they extended it from 30 to 45 days” after the new rules were released, Becker told American Banker, “I think it would give everyone the opportunity to reach out to businesses that really need it. help.”
Matt Raker, executive director of community development finance institution Mountain BizWorks, based in Asheville, North Carolina, said The Wall Street Journal that Wednesday’s changes could double loan amounts for applicants without employees.
However, the head of a professional group will advise applicants not to wait until the last minute.
Tony Wilkinson, chief executive of the National Association of Government Guaranteed Lenders, told the Journal he heard some lenders plan to stop accepting applications before the March 31 deadline to allow sufficient time for the treatment.
It can take up to 10 days to process a loan “depending on the codes thrown at us,” Nimi Natan, CEO of Gulf Coast Small Business Lending, told American Banker. “I would hate to have to stop accepting nominations on March 25.”
An early cut would not be unprecedented. Some lenders under last year’s Main Street program ceased to receive applications on December 14 before the scheduled end of the program on December 31.
“We could work more relaxed, make fewer mistakes, spend more time making sure the documentation was in place, and work on all the [error] codes “if the deadline was extended,” Natan said.