What's in the PPP Extension Act and how to take advantage of it

Small businesses will have more time to apply for the government-backed Payment Protection Program and sole proprietors can request larger loan amounts thanks to a new bill the Senate narrowly passed March 25, 2021, clearing the way for President Joe Biden's signature.

The PPP Extension Act pushes the deadline from March 31 to May 31 to file for the government relief program and provides the Small Business Administration an additional 30 days to process those loans.

“There are a number of businesses that haven't been able to file or whose applications were erroneously rejected," says Brooke Lively, founder and president of Fort Worth, Texas-based Cathedral Capital, which helps small businesses outsource finance services. “Both of these groups need more time to reapply, and the bill provides for that."

Filing delays and denials

As many as 65 error or hold codes can delay or deny PPP applications, according to Travis Miskowitz, a small business advisor at Wiss & Co. LLP, an accounting firm in Florham Park, N.J.

“As many as 70% of all PPP loan applications this year have been flagged for error or hold codes, which has created a bottleneck of 200,000 loan applications that have not been approved or funded," he says. “The error/hold codes have caused tremendous anxiety in the small business community as applicants do not have visibility into when their loan will be approved and funded."

The codes result from increased due diligence, verification, and underwriting by the SBA and lenders to preserve taxpayer funds and eliminate fraud.

Nearly every PPP loan is expected to be forgiven as long as the application is legitimate and non-fraudulent.

More help for smallest PPP applicants

The SBA recently updated the loan amount formula for sole proprietors, independent contractors, and Schedule C filers. The extension provides an opportunity for this segment to apply for more funding than under previous guidance.

“It's prioritizing truly small businesses, so they don't get squeezed by the big boys," says Patrick West, chief executive and founder of New York City-based experiential marketer Be The Machine. “The intent when it started was good, but it was damaged by corporate interest, big bank bureaucracies, and typical political red tape. Now, with round 2 and the Extension Act, there really is no excuse for any small business owner in need not to receive the funds."

His company worked with a local community bank to secure PPP loans in both of the first two rounds, earmarking 90% of the funds to cover eight weeks of payroll.

“PPP helped cover some small expenses like rent and some minor items, but it was the payroll that put money in the pockets of workers that mattered the most," West says. “People are the key to any business."

With demand high, PPP funding running low

The SBA through March 21 had dispersed about $718 billion of the $806 billion Congress appropriated for PPP, or nearly 90% of the funds. SBA officials project the remaining funds will be allocated by mid-April at current lending rates.

Jason Lefkowitz is advising businesses to apply as soon as possible, given the time crunch, ongoing demand, and increased lender scrutiny.

He recommends getting a list from the lender with all proper documentation requirements before applying. Some lenders also have portals where borrowers can upload documents right into the system.

“We are noticing that some banks are asking for different documentation, and some banks are taking more time than others," says Lefkowitz, director of operations and business development at CFO Strategies LLC in Monroe, N.J. “The more docs you can provide typically, the quicker the process will be in getting approvals."