Important: Although the Paycheck Protection Program (PPP) ran out of its first wave of $350 billion funding on April 16th, another wave of funding ($250 billion) is expected to pass soon. If you did not submit a PPP loan application in the first wave, but still want to try and obtain one of these loans, it’s a good idea to prepare. Also, please note that Hatch currently does not offer any products related to the PPP.
In this post:
🐣What is the PPP?
🐣Where’s the best place to apply?
🐣What do I need to prepare for my application?
🐣How much will I receive?
What’s the PPP and Who's it For?
A quick refresher: Payment Protection Program (PPP) Loans are a result of the CARES act, designed to help small businesses stay afloat during the unprecedented economic waves caused by COVID-19. The loans are open to all self-employed people and small business owners, including LLCs, corps, sole props (with or without employees), and independent contractors in operation since February 2020.
The loan terms are quite generous. They are given in the amount of up to 250% your monthly payroll expenses (if you have no employees, this is just your average monthly income). They earn a 1% fixed interest rate for 24 months, with all payments deferred for the first 6 months. Finally, the government offers full loan forgiveness if the entire loan is used toward “qualifying costs:” this means at least 75% of the loan is used for payroll expenses, and you either don’t lay off employees, or if you do, you rehire them by June 30, 2020. It’s important to note that your credit score is not a factor in the application, and no personal guarantee is required for the loan.
With terms like these, it’s easy to see why banks have been swamped with applications, and the program ran out of money on Thursday, April 16. However, an additional $250 billion to the program is expected to be approved by Congress soon.
Where’s the Best Place to Apply?
The PPP application itself is a standard form, and all applications--regardless of what bank processes them-- are ultimately sent to the SBA for approval. A wide variety of banks, lenders and Fintech startups are accepting PPP applications, but some may be more ideal servicers for you than others.
In our opinion, the fastest way to get a PPP loan is to apply through your current bank. Although there is some evidence that smaller, regional banks may process your application faster, a bank who already knows you and your business will likely need you to jump through fewer hoops. Applications take time to process, and lenders are legally required to put applicants through a process known as Know Your Customer/Know Your Business (KYC/KYB)-- essentially a background and identity check. If you already have active financing through a bank who knows you, they likely won't have to do this with you, and so can get your application moving sooner.
What if My Bank isn't Accepting Applications?
If you don’t currently have any business financing through a bank, or your bank is not yet accepting applications, it’s worth checking in with your current payroll or payments processor (PayPal and Intuit, for example, are expected to start re-accepting applications once the next wave of funding is approved). Other, smaller processing companies may have the ability to service applications, but are only offering them to their current customers. It’s worth asking your payments processor or payroll provider if they have an application available for you.
Even if your partner financial companies can’t process your application directly, they can likely help you generate payroll or income reports you need, saving you time wherever you apply. So, definitely check in with them before you fill out your loan application.
Anywhere Else to Apply?
For a complete directory of all banks accepting PPP applications, you can search the SBA’s directory, here.
In light of larger banks delaying accepting applications, many FinTech startups -- financial technology companies who can maneuver quickly -- are working to accept and process PPP loan applications right now, as well. It’s important to note that most FinTech startups are not direct lenders of PPP funds, but operate as helpful and conscientious middlemen between your application and a larger bank who ultimately services the loan (usually with no extra fees).
Many loan-seekers who don’t have an existing relationship with a lender may find working with a FinTech much easier than beginning a relationship with a large and unfamiliar bank right now. It’s also worth noting that, along with big banks, FinTech companies are facing their fair share of obstacles in working within the constraints of the PPP. So, again, if you already have a relationship with a bank, that’s still probably your best place to fill out a PPP application. If not, a FinTech like Kabbage or Lendio may be a pleasant path for you.
We’d also like to shoutout to a number of FinTechs doing incredible behind-the-scenes work to help banks process and service PPP applications and funds as fast as possible. FIS, Plaid, Biz2X, Computer Services Inc, Fiserv and Wolters Kluwer are using their technologies to help lenders both large and small to process PPP applications, ensure compliance, and ultimately help business owners get their PPP money quickly.
What Do I Need To Apply?
It depends a little bit on what type of business you are. For a great breakdown of what you need by business-type (LLC, Corporation, Limited Partnership, NPO, Sole-Prop/ Independent Contractor), we recommend this easy-to-read checklist from NYMBUS.
One thing to note: if you are interested in taking advantage of the loan forgiveness aspect of the PPP, you will need to document your expenses after you receive your PPP loan, especially for things like payroll, rent and utilities. It’s a good idea to think about keeping track of those bills and receipts now, so the SBA can more easily process your forgiveness request down the line.
How Much Will I Receive?
The SBA website has an interactive calculator which can give you an estimate. There is also a quick calculator from SmartAsset that gives broad estimates based on payroll alone.
At Hatch, we’re committed to empowering you with information that can help your business during this time. We’ll continue to keep you updated with resources and guidance wherever we can.
If you have an open line of credit with us, and find yourself needing assistance dealing with struggles brought on by the Coronavirus pandemic, we’d like to help. More info about our Covid-19 customer relief can be found here.
At Hatch, we offer small business owners something that no other lending company does: a fresh start and the benefit of the doubt. We extend a line of credit (up to $5,000) to business owners who are just starting out, without requiring a previous business history or a great credit score. Click here to learn more about applying for your Hatch Card today!