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Lenders Seek Extension of March 31 PPP Deadline

  • Lenders and CPA group call on Congress to extend deadline for PPP applications beyond March 31
  • Groups say issues such as error codes and complications with application process could exclude borrowers if the deadline remains in place
  • Some lenders are also calling on a loan calculation formula to apply retroactively to borrowers whose applications have already been approved

Summary by Dirk Langeveld

Lenders are urging Congress to extend the deadline for Paycheck Protection Program applications, saying additional time is needed to work out complications with the program and ensure that all applications are processed. There have also been some calls to make a recently announced loan calculation formula retroactive to borrowers whose applications have already been approved.

The Economic Aid Act passed in December included funding for another round of PPP loans targeted at smaller companies, including businesses that previously received a loan but can demonstrate significant financial losses. The program opened to applications on Jan. 11, and the deadline for applications is March 31.

The American Institute of Certified Public Accountants is asking Congress to approve a 60-day extension to the deadline. The organization praised the Biden administration’s efforts to make PPP loans more accessible to smaller companies and underserved communities, but said the changes in rules have created new complications for lenders. These hurdles come in addition to an existing challenge in which many borrowers are flagged under a new verification and review process designed to prevent fraud, creating error codes that require time and effort to resolve.

Pushing out the deadline would ensure that lenders have a chance to adapt to new rules and resolve any complications, advocates of a deadline extension say. Lenders have also warned that it takes several days to process a PPP application, which could lead them to stop accepting applications ahead of the March 31 deadline.

The changes announced by the Biden administration include a two-week period where applications are limited to companies with fewer than 20 employees, lifting restrictions on applicants who have non-financial felony convictions as well as those who are in default or delinquent on federal student loans, and updating a loan calculation formula to better cater to non-employer applicants such as self-employed workers, sole proprietors, and independent contractors.

The new formula, which was released Wednesday, allows these business owners to calculate their loan amount based on gross income rather than net income. Under the latter method, business cost deductions often drastically reduced the loan amounts available to business owners or made them ineligible for the program.

Some lenders are asking that the new formula be applied retroactively to non-employer borrowers whose applications have already been approved or who have already received funds. The Small Business Administration has said it lacks the administrative authority to do so, and the new rules state that the formula can only be used for applications submitted after the rule went into place.

As of Feb. 28, the SBA had approved 2.2 million PPP loans totaling approximately $158 billion, or about 55 percent of the $284.5 billion approved for the program. If approved, the American Rescue Plan would add another $7.25 billion for the program and expand eligibility to larger nonprofits and digital news agencies, but the deadline would not be adjusted.

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