Last-Minute Changes to P.P.P. Rules Cause Gridlock
Highly anticipated changes to Paycheck Protection Program rules set in motion earlier in March and designed to deliver generous relief to the most vulnerable small businesses might be coming too late.
With the program set to expire in just a few weeks, lenders say they don’t have enough time to adapt to the changes. As such, newly eligible loan-seekers are having difficulty finding lenders willing to accept applications before the deadline.
Under the program’s previous rules, unprofitable businesses weren’t eligible for loans. But the new formula introduced by the Biden administration allows sole proprietors to get loans based on their income before expenses while expanding eligibility to include minority-owned, veteran-owned, and women-owned businesses. This opens the door to small businesses, self-employed people, and non-profit organizations devastated by the coronavirus pandemic.
However, the move comes dreadfully close to the March deadline. Major lenders that already have a severe backlog of applications, including JPMorgan Chase and Bank of America, refused to adapt to the changes. The latter has stopped accepting new applications altogether.
Bill Halldin, a Bank of America spokesman, justified this by pointing to more than 30.000 applications that need to be processed before the deadline.
Meanwhile, the policy changes are only fueling confusion among borrowers who were initially advised by lenders to submit their applications after the new, more lenient standards were set in place.
Those who applied as soon as the White House made the overhaul announcement are now either being approved under old requirements or asked to repeat the application process. There is also no route for those already approved to apply again under better terms.
Considering that there is still $119 billion left out of $284 billion authorized for the program, both lenders and borrowers are calling for an extension with admirable tenacity. The Biden administration hasn’t asked for an extension yet, but key congressional leaders are open to the idea. The P.P.P. status will come under the spotlight during an upcoming hearing at the House Small Business Committee.
In the meantime, small businesses across America are hoping for an extended deadline to get much-needed funds to keep their businesses alive during this unprecedented crisis.