PPP credit score guidelines and precedence home windows excite and confuse small companies

Sinelia Louis can finally apply for a PPP loan due to changes made by the Biden administration that allow access for non-citizenship small business owners.

Sinelia Louis

When Sinelia Louis, 50, heard of the recent changes to the Small Business Administration’s paycheck protection program, she felt that her prayers had been answered.

“I cleaned and said, ‘Thank God,'” said Louis. “That gives me hope to move on, hope that my business won’t die here and now.”

Louis operates Caregivers Company LLC, a home care service that works with seniors in St. Louis. She is a sole proprietor who has tried to expand her business in hopes of hiring employees.

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When Covid hit last March it was devastating and the PPP program was a ray of hope. Louis applied for a forgivable loan in the first round but was ultimately denied due to her immigration status. She came to the US from Haiti in 1998 and is still waiting for her green card. Even so, she works legally with a business license and pays taxes with an individual tax identification number.

She can now get a PPP loan under new rules that will come into effect soon. She is preparing her documents and planning to use the priority application deadline.

PPP confusion is great

The Biden government on Monday announced major changes to the SBA’s paycheck protection program, first set up by the CARES Act to provide futile credit to companies affected by the pandemic. For a two-week period that began on Wednesday, the program will only process loans to the smallest businesses with fewer than 20 employees.

At the same time, the administration made important changes to the program, which will start in the first week of March. It will update the sole proprietorship credit calculation formula, allow some non-US residents to apply for credit, and remove previous restrictions that have delayed business owners with certain criminal convictions or access to student loan funds.

The misaligned timing of the priority application period and the start of these program changes have created both excitement and confusion among business owners, especially sole proprietors, wondering when to submit their information for an eligible loan.

“It’s déjà vu once again,” said Megan Gorman, attorney and managing partner at Checkers Financial Management in San Francisco, adding that the uncertainty reminded her of the first PPP rollout in April 2020 [small businesses] ready to go through a process that will play out when you use it? “

Small businesses with employees who are already eligible should submit their records as soon as possible, Gorman said. Those who would benefit from changes coming soon – either sole traders who would get more money, non-nationals, or those with a specific criminal background – should get their finance house in order, she said, but wait for them to be filed.

“We hope to get instructions sooner rather than later,” said Gorman.

Some companies aren’t sure if the rules apply to them

The timing of the guidelines has also created confusion for small business owners with pending applications, such as Tracy Sarris Braddock, who runs Inova Management management consulting firm in Lavon, Texas. Braddock, 53, was able to apply for a PPP loan as a sole proprietor last year and received $ 19,500.

While the loan was helpful, it wasn’t enough to make up for the business she lost due to the pandemic. As a result, she also applied for an unforgivable SBA loan for economic damage that could not be granted, and in early February submitted documents for a second PPP loan that is still outstanding.

She hopes this means it could fall under the updated calculation formula, which would result in a bigger loan – by her own rough estimate, that could mean about seven thousand dollars more.

Tracy Sarris Braddock has applied for a second drawing PPP loan to keep her small business alive. She’s not sure if it’s subject to the new sole proprietorship credit calculation formula.

Tracy Sarris Braddock

So far, the SBA has announced that small businesses will be subject to the rules in force at the time of their application. Some groups are pushing the White House for flexibility or retroactivity to help small businesses that have recently applied for credit or have pending applications.

“I am extremely optimistic that the new calculation – gross income versus net income – will apply to these claims even after they are submitted,” said Keith Hall, president and CEO of the National Association for the Self-Employed. “I think there will be a trial.”

If the current SBA guidelines are not updated, Braddock and others like her may have to settle for less money with outstanding loans.

“It’s frustrating,” she said. “As a small company, I am getting used to being kicked in the teeth.”

However, experts have generally welcomed updates to the PPP aimed at providing funding to businesses that had difficulty accessing forgivable credit in the previous round, including businesses run by women and minorities.

“If you look at when the Biden-Harris administration is trying to do this, they are trying to do the right thing,” Gorman said.

Another bumpy rollout, however, means lenders and borrowers are waiting for updates in real time and grappling with an ever-changing program as they try to apply.

In addition, time is running out for all small businesses – not even those covered by the new rules. The SBA’s program expires on March 31, and the Biden administration has not yet asked Congress to extend it. This leaves little time for all eligible borrowers to take advantage of the changes and resolve issues.

“We will run out of time if they are not extended beyond March 31,” said Chris Hurn, managing director of Fountainhead Commercial Capital. “It’s going to be a real shame because so many of these people are qualified and deserve these funds.”

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