COVID-19 has sparked unprecedented impact across industries and has changed the way almost every business operates. And while many of these businesses have probably sought funding in the past — whether business loans for expansion, venture capital to launch or otherwise — the concept of a Paycheck Protection Program (PPP) that so many businesses raced to apply for, and have since relied on — just to survive — is a first.
But in a matter of months the term “PPP” has not only become familiar to most, search data indicates the acronym has officially outpaced “SBA” (Small Business Administration), also known as the government agency that manages PPP.
In 2020, the SBA worked with private lenders to distribute a historic nine million loans worth $750 billion. And this week, they’ve opened the initial phase of a new $284 billion round of funding, which is intended to prioritize underserved borrowers who meet certain qualifications prior to opening up the PPP to all applicants next week.
These loans are providing a critical lifeline to businesses impacted by COVID-19 and are intended to help keep workers employed and safe, while also keeping businesses afloat. However, each round of funding is finite, making the process of obtaining a loan potentially competitive.
“For many of the 30+ million small businesses across the U.S., the ability to source and secure PPP funding will determine whether or not their organizations will continue to exist,” explains Anthony Noto, CEO at SoFi, a one-stop-shop digital personal finance company. “And while many assume their options are limited to the local bank they’ve always used, traditional banks are certainly not their only option. In many cases, they’re not the best option either — especially when it comes to PPP. Product comparison sites like Lantern by SoFi are free of cost to the borrower and offer added value by equipping business owners with the insights they need to make an informed decision, enabling choice and competition in the marketplace.”
If your business is in need of a PPP loan, remember that evaluating a few options is a smart way to make an important decision. After all, choice isn’t a “luxury” reserved for some organizations; it’s a best practice for any business. And as you pursue next steps, consider these tips to help ensure you’re well-positioned to have your loan approved, and to assist in choosing the lender that makes the most sense for you and your business:
Lean on lender networks to enable choice and competition
There’s no need to fill out multiple applications; instead, opt for one standard form to save time and help protect you and your privacy. An objective product comparison site can do the legwork of researching possible lenders and recommend options that have the capacity to provide you with timely support based on your circumstances. Look for sites that offer transparency, foster trust in the form of real lender reviews and explain the rationale for the selection you’re presented with.
Have your paperwork ready
Although the SBA provides a standardized form that’s intended to help streamline the application process, many banks will still incorporate their own processes. Expect to provide the following:
- 2019 tax returns (also include 2018 if you have available)
- Payroll reports that clearly explain the rationale for your requested loan amount
- Legal company formation documents or organization legal structure/setup, ownership, etc.
- Documentation that explains how COVID-19 has negatively impacted your business. If you’re not sure how to go about demonstrating this, review online tips for more in-depth guidance on how to get your finances together before applying for your PPP loan.
Follow up after you’ve submitted your application
This is your business’ livelihood — don’t be shy. Email, call and ask for information from your lender. You should be getting feedback and information in a timely manner. Keep in mind: Once your application goes through and the funds are allocated by the SBA, your lender has 10 business days to get your loan documents and fund your PPP loan.
Of course, finding a PPP lender that works for you is the most important first step. If you’re unsure which one makes sense for you and your business — or even if you simply want to see what options are out there, visit lanterncredit.com.