While the Paycheck Protection Program (PPP) promised relief for many Main Street businesses struggling amid the pandemic, the speedy rollout has led to a lot of questions. Here are some of the most common questions we’ve received from small businesses about the PPP.
Is Lendio a PPP lender?
Lendio is a lending marketplace that connects borrowers with a curated network of 300+ lenders. We are not a lender, and applying through Lendio does not guarantee you a PPP loan.
If not a lender, what is Lendio’s role with the PPP?
We match qualified borrowers with SBA-approved lenders. Our single, online application makes it easy to apply to our network of SBA-approved lenders. Once a borrower applies for a PPP loan, we work with them to ensure that the application has everything it needs to be deemed complete by the SBA, match the borrower with an appropriate lender, and then the lender takes care of the rest.
What is the lender’s role with PPP?
Each lender provides Lendio with the criteria (state, loan size, etc.) of customers they would like to serve. They also have 100% control of the volume of applications that they choose to pull from Lendio’s marketplace. Once small businesses are matched to the lender, the lender validates payroll, submits to E-Tran, performs necessary fraud checks (KYC/KYB, etc.), pushes out closing documents, and then ultimately funds the deal.
Does the lender actually underwrite each file?
Yes. The lender will review each application and the necessary payroll documents to make sure that the loan amount is calculated correctly. They will also validate that the business has less than 500 employees and was in business prior to February 15, 2020. If the lender believes that the loan amount calculation was incorrect or doesn’t have proper documentation, they will reach out to you for additional information.
I applied in the first round. Why don’t I have my money yet?
The PPP rolled out at an unprecedented speed. 30 million small businesses are all trying to get funding in a matter of days. As a result, lenders, borrowers, and the US government all had to learn on the fly. Throughout the country, there were only a limited number of approved SBA lenders, and the SBA was slow to approve new lenders. Some of those approved lenders chose to sit out the first round or greatly narrowed their lending practices to only service their existing clients.
A few lenders stepped up to the plate but were inundated with tens of thousands of loan applications, including applications from those individuals who they had no prior working relationship with. However, these institutions are still required to underwrite these loans and meet a number of other banking regulations. Unfortunately, some of this underwriting and other regulatory work must be done manually, which takes significant time. These lenders are working overtime to get through the volume.
How long does the SBA take to process the application once submitted by a lender?
Once a lender submits a PPP application through the SBA’s system (E-Tran), the SBA’s decision is fairly immediate. The delay comes from thousands of banking and other financial institutions submitting thousands of applications to the system all at once. This has led to the E-Tran system being shut down for periods of time. If the loan receives preliminary approval, the borrower is issued a Preferred Lending Program (PLP) number, which indicates that funds are reserved for them.
I have the option to get funded through my local bank. Should I take it?
We encourage borrowers to pursue whatever will be the fastest funding route. If you have an established relationship with an SBA-approved lender, that may be your fastest route to PPP funding. It doesn’t hurt to apply to multiple lenders.
Can a borrower be denied a PPP loan after being issued a PLP number?
Yes. Once a PLP number is issued, the PPP loan must still go through the lender’s final underwriting process.
Why was I denied? Do I need to resubmit somewhere else?
This varies on a borrower-by-borrower basis. It may be because the necessary documents are missing or an issue arose in the lender’s final underwriting that prohibits the borrower from receiving the PPP loan. Unfortunately, we don’t have full access to all of the reasons a lender may have for declining an application.
If your application is flagged by E-Tran due to one of these issues, it may still be possible to fix the issue. Once you fix the issue, you can reapply for the loan, and we’ll do our best to get you resubmitted through a different lender. Additionally, to increase your odds of approval and funding, we recommend you apply at as many places as possible.
Another common reason for denial is that there is already a PLP number under that Taxpayer Identification Number (TIN), which often happens when a business owner who owns multiple businesses applies for a loan.
If I miss out on funding in the second round of PPP, what should I do?
PPP loans, while vital, are not the only financial lifeline for small businesses. We’ve put together a list of local, state, and corporate-sponsored relief resources for small businesses to help you navigate additional tools that may be at your disposal.
Oh yeah, there are rumors that there will be round 3, but that’s out of our control.
Is it possible to cancel my PLP number with my lender?
Yes, it is possible. To cancel a PLP number, you need to reach out to your lender directly. Only the lender can request to cancel the PLP through the SBA. Once a PLP number has been canceled, you may reapply for a PPP loan with an alternate lender.
How fast should the lender fund the deal?
Based on guidance issued by the SBA on April 28, 2020, lenders have 10 calendar days to disburse funds once a borrower receives a PLP number. For borrowers who received a PLP number prior to April 28, 2020, lenders have until May 8, 2020, to disburse funds.
If a lender cannot disburse funds due to a delay from the borrower, then the lender has 20 calendar days to fund the loan. We recommend that you check your spam folders in case your loan documentation or other communication from the lender ends up there. If the loan cannot be funded due to a borrower’s delay, the PPP loan may be canceled by the lender.
Why are some small businesses getting funded faster than I am?
Every lender has their own process. Some use technology, others have hired many processors. As a result, speed-to-funding varies lender-to-lender.
Because so many lenders sat out the first round of PPP funding—whether by choice or due to the SBA’s limitation of approved lenders—a small number of lenders had to process an enormous number of applications.
Because more lenders have been able to fund during the second round, some applicants are receiving their disbursements quicker. We understand that this is incredibly frustrating, especially at the end of the month when you have bills to pay. We ask for your patience as the lenders that stepped up during the first round work to process an extraordinary number of loans.
Why am I being asked for a credit check?
It may be that the lender uses a credit check as part of their Know Your Customer (KYC) process or other underwriting and verification practices. The SBA does not require a credit check to qualify for a PPP loan.
Why have I received an email from Lendio saying my application is incomplete if I’ve already been issued a PLP number?
That email was a mistake. You should not have received it, and we apologize for the confusion it may have caused you in an already stressful time.
How will the SBA review borrowers’ required good-faith certification concerning the necessity of their loan requests?
All borrowers must certify in good faith that “current economic uncertainty makes this loan request necessary to support the ongoing operations of the applicant.” Any borrower that received a PPP loan with an original principal amount of less than $2 million will be deemed to have made the required certification concerning the necessity of the loan request in good faith.
Borrowers with loans greater than $2 million may still have made the certification in good faith. All loans greater than $2 million, and other loans as appropriate, will be subject to SBA review. Borrowers that did not have a basis to make the certification (concerning the necessity of the PPP loan request) will have to repay outstanding PPP loan balances and will not be eligible for loan forgiveness.
If the borrower repays the loan, the SBA will not pursue administrative enforcement. Any borrower that repaid a PPP loan in full by May 18, 2020, will be deemed by the SBA to have made the required certification concerning the necessity of the loan request in good faith.
Are employees of foreign affiliates included for purposes of determining whether a PPP borrower has more than 500 employees?
Yes, according to the interim final rule on the treatment of foreign affiliates, released on May 19, 2020. However, due to borrower confusion, the SBA will not find any borrower that applied for a PPP loan prior to May 5, 2020, to be ineligible based on the borrower’s exclusion of non-US employees from the borrower’s calculation of its employee headcount.
According to the interim final rule, borrowers must count non-US employees towards the 500 limit, but these employees are excluded for average payroll and loan calculations.