The news is swarming with data, articles, newsfeeds on the Paycheck Protection Program (PPP) regarding funding, fraud, and extensions. What you will receive here is how to choose the right PPP Lender.
$291 Billion plus for the 2nd round PPP has been released for 2021. The good news, PPP has been extended to June 30, 2021; therefore, this article will present detailed information for those businesses who have not applied and/or those who have applied and are still waiting on PPP funding.
This information will provide certainty your business is with the correct PPP Lender. By chance, the right PPP Lender was not selected, nor has any applications been created yet; here is how to make quick changes to maximize the opportunity.
There are thousands of Lenders and 3rd party platforms accepting PPP applications nationwide. However, each Lender is different based on their own authorized approval limit for PPP lending. These limitations affect the consumer and/or business owner in a big way. The PPP approval authority is a limitation; each approved lending entity can lend SBA funds. Not all Lenders have the same approval amount. This means each Lender has a maximum dollar amount per application a borrower can borrow. This main factor grossly places the consumer at a disadvantage.
Here is the reason why:
Each Lender’s approval authority is based on their prior historical performance of lending, meaning the number of loans provided prior to COVID and their dollar range of what the Lender has loaned previously; what is on the banks’ books or balance sheets. Based on this performance, these factors will determine the Lender’s allowances. For example, if a particular Lender has never provided a million-dollar loan nor collected or serviced a million-dollar loan, the SBA will not authorize that Lender a million dollars per loan as they would not have any prior history to manage nor facilitate a loan of that magnitude. Therefore, the Lender is authorized within their range based on their prior lending history.
How this affects the Borrower:
In the 1st round of PPP offerings- business filings of 1120 and 1040 or Schedule C net earnings (line 31) were utilized. If the business income/earnings surpass, as an example, $1,000,000.00, the business is entitled to receive a $500,000.00 plus in a PPP loan. The same would apply for the 2nd round less now Schedule C gross earnings (line 7) can be utilized fairly and equivalent to all other businesses less expense deducted.
The Borrower’s Advantage vs. Disadvantage:
If Lender A is authorized to dispense 3 Million dollars per application, the business is in a great position, loan proceeds of $625k are not a problem. If Lender B is authorized to dispense or loan $20k, $100k, $350k, and/or any amount less than $625k, the business is at a great disadvantage unknowingly. Because the business did not apply with the correct PPP Lender that could provide the full loan amount qualified, that Lender or platform will qualify the business for the maximum dollar amount they are authorized to provide per application, essentially leaving money on the table.
If the business qualified for more than the Lender was authorized to disburse or loan, this is what happens to the remaining funds. “Forfeiture.” Clarification will be in two (2) parts: For the businesses applying for the first round.
- Going forward, effective today, before applying, check the maximum limit the Lender can provide. Determine your loan value against your earnings to ensure the Lender can meet your expectation. In the event, the Lender cannot meet your expectation based on your qualification, check around before applying to ensure your business finds its perfect match.
- For businesses that have already applied yet have not received funding, then continue if the decision is to remain on this current path. Once the loan is issued, there is nothing that can be done; those funds are forfeited if the business qualified for more. If your business decision is to maximize your loan potential once discovering the current Lender your business have applied to cannot meet your qualified expectation, then cancel the current loan before funding and then switch Lenders to a Lender with a higher approval limit. Overstand, only do this if your business qualifies for more than what has been approved, yet funding is limited based on the current lending institution’s capability to provide the full amount.
Whatever decision one makes once the loan amount is received, one cannot return for the balance nor go to another bank or platform to acquire the difference or forfeiture loan proceeds. Your business would register in the SBA PPP internal E Tran system as a recipient per the executed SBA contractual loan agreement.
The terms of the PPP loan agreement remain unchanged:
1% interest rate, 10-month deferment before applying for forgiveness or making the first payment, and a 5-year term. Applying for forgiveness is optional. Amounts are approved based on proven annual earnings 100% backed by filed tax returns and proof of business life pre COVID 19 by providing invoices, bank statements, payroll, or book-keeping data.
To attain more information regarding all Small Business Administrative PPP guidelines for Lenders, Borrowers, and up-to-date data, resources, and other products, visit www.sba.gov. It will be hard to determine if a business is railroaded without knowing the correct information. Meaning, undercover inequality, so learn what is needed so that unnecessary documentation is not requested to eliminate your business from applying. More details are upcoming in the future regarding this serious matter.
Marcia Meredith of Ros DiMere Inc. brings a wealth of knowledge and expertise from her 25-year career in finance and the latter 11 years as a Wealth Asset Manager.
Marcia Meredith, Wealth Asset Manager, Louisiana native, and Texas-grown has been in the SBA space since the beginning of COVID-19, helping her clients mitigate and manage their processes to sustain and stabilize their foundations during this pandemic in the government, public and private sector to date. As a first financial responder and advocate, this small boutique firm, Ros DiMere Inc – Marcia, has assisted more than 300 companies nationwide, including those that were declined to overturned, including those that have been experiencing inequality.
Meredith was recently featured in Business Innovators Magazine on the subject “3 Reasons Why the SBA Turned Down Disaster Loans and How Marcia Meredith Got Them Overturn”. https://businessinnovatorsmagazine.com/3-reasons-why-the-small-business-administration-sba-turned-down-disaster-loans-how-marcia-meredith-of-ros-dimere-inc-got-them-overturn.
For more information, visit www.rosdimere.com or reach out to 832-412-2140.