Key Takeaway: If your PPP application is stuck in limbo with a large bank, you may have better luck submitting a new application with a community bank. It’s important to understand the pros and cons of submitting a new application before you decide.
Small businesses have not had much luck getting PPP loans from national banks. The news media has widely reported about large banks pushing their preferred clients to the front of the line ahead of the small businesses with the greatest needs. Many clients have shared their frustrations about receiving incoherenent emails from their bank about the status of their PPP application and being unable to reach a bank representative on the phone to discuss.
To the contrary, community banks and credit unions are actually getting PPP funds into the hands of small businesses. In fact, $60 billion of the new funding set to be released in the coming days is set aside for community-based lenders, smaller banks and credit unions to assist smaller businesses. For those who have already applied for a PPP loan, the question that naturally arises is Should I submit a second application to a smaller bank for a PPP loan? Here are a few things to consider when deciding what to do:
Did the bank submit my application to the SBA?
When you submit a PPP application to your bank, the bank is required to conduct an initial review before submitting it to the SBA. If you pass the initial review, then the bank submits the loan to the SBA through an electronic processing system called E-Tran.
Before submitting a second application with a new bank, contact the first bank to find out if your loan has been submitted to the SBA. If multiple banks submit your application through E-Tran, YOUR ACCOUNT WILL BE FLAGGED FOR FRAUD AND BOTH APPLICATIONS COULD BE REJECTED.
Will I lose my place in line if I submit a new application?
Many businesses are worried they will lose “priority” for PPP loans if they submit a new application. As recent headlines have proven, banks are not required to issue PPP loans on a first come, first served basis.
If you have an approved loan package, then you are better off sticking with the initial bank. You probably have an approved loan package if you have signed all documents required to receive the loan (such as a loan agreement and promissory note) but you were notified that you would not receive the loan because the PPP funds were exhausted.
Even though the government is backing PPP loans, Banks still want to loan to businesses who are likely to repay the loans. Banks are going to be eager to lend to businesses with complete and accurate financial records, who have filed 2019 taxes, do not have significant debt and have tangible assets that can be used as collateral. If your business satisfies these criteria, your chances of being approved quickly are higher. Explain your company’s strengths to the bank before applying and ask if you qualify for faster approval.
What can I do to increase my chances of getting approved quickly?
Businesses with sound financials who provide complete and accurate information will likely move to the front of the line. Some community banks are providing FAQs and recommendations to applicants. Ask your banker to explain common application errors and send you any information that could help you avoid hangups during the application process.
- Make sure your financial records are up-to-date and accurate.
- Make sure your business is current on all taxes and filings with the Secretary of State and other agencies are up-to-date.
- Anticipate potential questions about your financial records and provide explanatory notes in the documents you submit.
- Contact your payroll provider and ask for a PPP report. Many payroll providers have made custom reports available online that are meant to provide the information necessary to apply for a PPP loan.