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Paycheck Protection a Good Opportunity – but Still Confusing

How does it work? Where to apply? Why was I blocked? Some lenders aren’t prepared to help quite yet, and the law itself has a bit of contradictory info, according to Fla. Sen. Rubio. He lists five program challenges at the moment, including a need for more funding.

MIAMI – According to a release from Florida Sen. Marco Rubio, there were reports of large banks declining Paycheck Protection Program (PPP) applications unless the business owner had previously taken out a loan or a credit card from them – and some larger banks are only accepting PPP applications from individuals with prior relationships at the bank.

Rubio says that’s changing, but a full explanation of the program – and the funding to help out small businesses and independent contractors – has to be available.

An expansive explanation of the program for businesses was put out by law firm Crowell Moring. It provides a solid overview of PPP and helps business owners and independent contractors – many real estate licensees – determine if they’re eligible for funding. It includes a questionnaire at the end and a link to sources.

Rubio’s release says PPP has “contradicting guidance” for business owners, such as brokers, in their payroll cost calculation. The contradiction focuses on whether they should include independent contractors’ 1099s in their payroll cost calculation. The U.S. Small Business Administration (SBA) should clarify this shortly.

According to Jovita Carranza, administrator of the SBA, 17,503 PPP loans valued at more than $5.4 billion were approved as of 7:30 p.m. Friday. Rubio says that money has so far “saved hundreds of thousands of jobs.”

Rubio’s top concerns with the PPP

Large bank existing customer policy: Rubio said he’s heard reports of large banks declining applications unless the business owner had previously taken out a loan or a credit card from the lender, and some larger banks are only accepting PPP applications from individuals with prior relationships at the bank.  

“Banks are already starting to change their policy on this and will start accepting new customers,” Rubio says. “More large banks will be up and running early next week. FinTechs, including PayPal and other online lenders, are ready to process PPP loans and can help with the demand for businesses that do not have existing bank relationships. The nonbank lender application will be out soon.” 

Holding loans: Bank and nonbank lenders are concerned about the interim final rule requiring lenders to hold loans for seven weeks before they can be purchased by the government. Most community banks and FinTech lenders need liquidity to continue to make loans to small businesses, especially considering current demand.

The Federal Reserve is expected to consider this problem shortly.

Affiliation rules for businesses and nonprofits: Lenders are requesting clear guidance on the application of SBA affiliation rules to businesses, including the now eligible 501(c)(3) nonprofit entities, which have not previously been eligible for 7(a) loans. And interim rule was released, and there may be additional guidance shortly.

Technology issues: Some lenders reported that SBA’s internal system for loan application processing, called E-Tran, has been slow. “This is to be expected with the volume of loan applications to be processed,” Rubio says, and the SBA has a third-party provider working on the issue. In addition, some community banks have reported issues with accessing their online portal; SBA says it’s working on that too.

Total funding: According to Rubio, it’s becoming clear that Congress will need to appropriate additional money for the PPP program, since current funding for the program could run out before the end of the covered period – June 30, 2020.

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