PPP Loans Nonprofit Nightmare – April 13, 2020 confirms what every nonprofit has been experiencing since the Federal $349 billion Payment Protection Program (PPP) launched on April 3rd. Inside Charity has been silent this past week while our team worked diligently with lenders, borrowers and the Small Business Administration to discover what’s really happening to nonprofits. Simply put, the launch of this program was chaotic. Banks indicated guidance from the federal government was too slow to come (lenders were still waiting on information about the program in the final hours leading up to its launch) and confusing once it finally arrived. Here’s what happened, the Small Business Administration (SBA) tried to roll out PPP very, very quickly (presumably to give the stock market an up-tick.) They didn’t have time to receive feedback from the finance industry regarding a myriad of nuances and ended up changing the parameters of the program almost hourly.
550,000 loans, worth $141 billion, have been approved under the PPP, according to the Wall Street Journal as of Friday, April 10th.
70% of small businesses have applied for an emergency loan under the PPP, according to the National Federation of Independent Business (there are more than 30 million small businesses in the United States.)
50% of small businesses have applied for relief using the SBA’s Economic Injury Disaster Loan Program (EIDL) for a total of $383 billion in requests. The CARES Act increased funding for this previously existing program by only $17 billion. 4% of small businesses have been approved for EIDL to-date.
Most applicants haven’t received any funding (even if they were approved.) “Money isn’t flowing yet.” says Amanda Ballantyne of the Main Street Alliance.
The number of lenders offering PPP Loans has increased from 1,800 to 4,100 in one week’s time according to the SBA.
The Small Business Administration has launched an online FIND ELIGIBLE LENDERS tool at SBA.gov. We found it to be thorough and easy-to-use.
The banking industry (not the federal government) made the decision to restrict loan offerings to existing customers only.
Several banks have posted an “initial” application vetting form. You may think that you’ve successfully applied only to find out that you must complete a secondary application before the actual loan approval process even starts.
Most banks insist that you apply online and refrain from contacting your local branch officers indicating that your personal banker has little or no influence on your loan request.
Many frustrated applicants have moved to the online lending route and have applied with companies like BoeFly, Kabbage, etc.
W-2 employees vs 1099 independent contractor confusion has finally been sorted out. PPP loan amounts will be calculated based on W-2 PAYROLL ONLY (1099 employee pay cannot be included.)
1099 independent contractor loan application process opened on Friday, April 10th. Like small businesses owners, independent contractors will apply for relief using their banks, credit unions and SBA 7(a) approved lenders.
Overwhelming demand, exacerbated by the April 10th expansion of the PPP program to include independent contractors, is creating concern that the $349 billion will run out.
Like PPP funding, which the White House initially said could be available “as soon as same day,” EIDL grants were also said to be delivered within three days to struggling nonprofits — both have turned out to largely be untrue.
Thursday, April 9th, lawmakers blocked a bid to unanimously approve an additional $250 billion for the program, pushing for additional provisions that would allow people without an existing banking relationship to be eligible for aid.
Here’s a list of reliable anecdotes (we’ve heard these lines hundreds of times this past week in one form or another):
Different Local United Ways received email notices from Wells Fargo confirming that Wells Fargo had received their “PPP Inquiry” and would email them a link to “complete an application.” The notice concluded, “Don’t call us to check, we’ll call you.” United Way has received more emails since that time indicating that they are STILL in the que (and should remain patient.) Wells Fargo has yet to send any of these programs an actual application link.
“Friday, April 3rd was a nightmare,” shared the CEO of an east coast private nonprofit school. “We’ve been banking with Bank of America for 9 years using both their payroll and checking account services, but have no loans. Initially they indicated we were not not eligible because we didn’t have a credit card with them. They eventually caved and let us apply, but it will go in order of priority, so now I think we’re at the bottom of the list.”
“My biggest fear is that we may not have filled out our application properly,” shared a nonprofit CFO (referencing the line where nonprofits were asked to provide a list of “owners.”) What if we’re rejected based on an “application error” and have to start over. By the time we reapply PPP funds may have run out.”
We shared at the beginning of this article Inside Charity stopped writing this past week while our team went into the field to discover what’s really happening. We’ve worked with various lenders on behalf of multiple nonprofits.
We’ll keep you posted.
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PPP Loans Nonprofit Nightmare was first posted at INSIDE CHARITY
PPP Loans Nonprofit Nightmare is commentary on the $2.3 trillion CARES (Coronavirus Aid, Relief, and Economic Security) Act, an 880-page document signed into federal law on March 28, 2020.