If you’ve completed a Paycheck Protection Program (PPP) loan application and are waiting for funds, you may be asking yourself, “What the heck is taking so long?”
Believe it or not, the PPP rollout is progressing at a breakneck pace (by government standards). The Paycheck Protection Program was created under the CARES Act, which was signed into law on March 27, 2020. Some lenders began accepting applications on April 3, 2020—only 7 days after the loans were officially created. The speed of the rollout has led to a “figure it out as you go” approach. Lenders didn’t receive final guidance on the applications until the evening of April 2, the night before some applications went live.
Given how crucial these funds are for small businesses, we think you deserve to know why you’re waiting on funds. There are 6 major reasons funding for your PPP loan may be stalled.
1. Banks Are Having Trouble With the SBA Portal
We’ve made applying for a PPP loan as simple as possible for borrowers, but banks still have to apply through the E-Tran, the SBA’s portal, and to sum it up: they’re having some serious trouble with the tech.
Lenders are required to submit the deals through E-Tran—an older, outdated system—and it’s having trouble keeping up with traffic and demand. Lenders have reported difficulty submitting deals through the system and setting up their accounts if they weren’t already in the system.
2. Banks are Choosing Not to Fund Their Customers
Everyone wants to help their customers receive funding, but only a few are stepping up to fund.
3. Fintech Lenders Have Been Shut Out of Funding
Fintech, or financial technology, has set up the infrastructure to fund borrowers as quickly as possible. After all, technology controls how quickly borrowers can get funded (see the SBA’s issues with E-Tran), and tech companies are obviously going to have the best technology.
Unfortunately, up until this point, the US Treasury has not approved any fintech lenders to fund PPP loans. We expect to see that change soon.
That doesn’t mean that you can’t apply through a lending marketplace. Lendio has made it simple and quick for small businesses to apply for a PPP loan (thanks to some all-nighters from our developers), and we will pair you with approved SBA lenders. Once fintech lenders are approved, it’ll give borrowers more options and speedier funding.
4. Lenders See a Lack of Capital
Some of the larger lenders that are in a better position to successfully fund larger volumes don’t currently have the capital they need to fund loans. The Federal Reserve has announced a loan buyback program that will alleviate this pressure, but the challenge is… no details have yet been given.
Similar to the way that application guidance wasn’t released until the night before the application opened, the loan buyback was announced before the “how.” Given that the PPP applications opened a week after they were legally created under the CARES Act, we expect the rollout to continue in a similarly swift time frame.
5. Lenders Are Prioritizing Existing Customers
Given the enormous demand for PPP loans and the loose requirements, lenders are prioritizing applications for borrowers with whom they have an existing relationship. If this is the first time you’ve applied through a lender, your application will still be considered. You just may have to wait a little longer.
6. Your Application May Not Be Complete
You may not have control over the SBA’s technology shortfalls or who they approve to lend PPP loans, but you do have control over your application. An incomplete application will delay funding, and that’s not something you need right now.
We know it’s been a whirlwind couple of weeks for all of us with a constant trickle of new information. We’ve put together a step-by-step list of everything you need to complete your application so that when you hit “submit,” you can feel confident that you’ve crossed your T’s and dotted your I’s.
A Shortage of SBA Funds Is Not Causing a Delay in Your PPP Loans
It’s hard to wait in uncertainty, but as you do, rest assured that there will not be a shortage of SBA funding for PPP loans. Since applications opened, there has been enormous demand for the loans, and it’s become apparent that $350 billion will not be enough.
The SBA is determined to get funding into the hands of every small business that needs it. There have already been talks at the highest levels of government about expanding the appropriations for PPP loans, and we may expect the budget to potentially double. Once again, we can expect more information…soon.
What Is Soon?
We know that a constant refrain of “soon, soon, soon” can make you question the nature of time… among other things. Believe us when we say we’re right there with you. We’re working as hard as we can and using every tool in our power, including the occasional tweetstorm, to get answers to these questions and push to put funds into the hands of small business owners as quickly as possible.
For now, here’s what we can promise you: when we know, you’ll know. We’re working around the clock to keep small business owners up-to-date on the latest developments. When anything changes, we’ll spread the word. Until then, we’ll join you in crossing our fingers that “soon” means sooner rather than later.