At long last, the second round of the Paycheck Protection Program (PPP) is well underway. Unfortunately, though, too many small business owners are still anxiously awaiting funding, despite applications opening 6 weeks ago.
While changes to PPP this time around have worked well for some, pain points such as time consuming paperwork and a need for tax return information mean securing funding is still too difficult for the smallest small businesses. These businesses are the most financially vulnerable and therefore under the most pressure to see an influx of cash.
Demand is, unsurprisingly, extremely high. I work at Nav, a fintech company that helps small businesses secure financing. Of all the applications Nav helped get started in the first rounds of PPP—spanning a period of almost 5 months—we saw more than 15% of that total volume in just the first 24 hours of this round.
After reflecting on how this round of PPP is going so far, and knowing that many small business owners are still anxious to get their funds, here are three tips to make the PPP journey a little smoother.
Get a Business Bank Account
This round, it appears that more lenders are requiring a business bank account to deposit PPP funds. This can be a hurdle especially for independent contractors and the self employed, as they’re more likely to be operating from personal accounts. We’ve had questions about using PayPal accounts, prepaid debit cards and other alternative payment methods—opening a business bank account is always my recommendation.
If you don’t have a business bank account, I encourage you to get one as soon as possible. Not only will it help you secure PPP funds, but it’s also the best practice for your business going forward. A 2018 Nav Business Banking Survey found that 70% of small business owners without a business checking account were turned down for a business loan in the past two years.
Complete 2020 Taxes As Soon As You Can
Many borrowers don’t have their 2020 taxes ready to file yet and it’s making it harder for them to apply based on 2020 information. (You also have the option to apply based on 2019 tax information.) You don’t have to file your 2020 tax return to apply based on that information, but you should have completed it, and it should be as accurate as possible.
Note that if you are self-employed and file Schedule C to report your business income to the IRS, there is a new PPP loan calculation that may entitle you to a larger loan. The new alternative calculation is based on gross income (line 7 of your Schedule C) rather than net profit (line 31). If your PPP loan has not been approved by the SBA as of March 3, 2021 you may be able to take advantage of this change.
This round of PPP seems to be dominated by feelings of having to hurry up and wait. There’s urgency around the rush to apply and get the process started, but it’s generally slow going once applications are in the hands of the SBA. As irritating as this reality may be, I do encourage you to channel patience. Of course, you should respond quickly to any inquiries from your lender, but also remember that your lender doesn’t have a crystal ball that will tell them when the SBA will review or approve your loan.
No matter how long the process takes or how frustrated you may be, stick with your original lender. Don’t apply at multiple places to try and expedite the process—something I’ve seen people do. This can cause issues down the road, like the SBA rejecting applications because they are already in the SBA’s E-Tran system.
For small business owners eagerly awaiting funds, I completely understand any sense of frustration. Ideally, the system would be optimized to prioritize financing for the eligible applicants that are most in need, like small business owners. Unfortunately, as has been made abundantly clear by PPP, that’s not the case. By getting your finances in order—doing things like proactively opening a business bank account and filing your taxes—stay confident knowing that you’re doing what you can to set yourself up for success.
Gerri Detweiler is the Education Director at Nav.