By Trung Phan
Over the past few weeks, our Trends team has written a small business owner’s guide to the CARES Act and compiled 19 mini-case studies on how other small businesses are navigating the coronavirus crisis.
Here are 5 of his takeaways for small-business owners looking for a loan from the SBA Paycheck Protection Program (PPP):
The SBA’s outdated tech is fast improving. A lot of lenders have been working with the administration’s E-Trans portal — “a dinosaur of technology,” Blake said. But the systems are improving with each day — so keep at it.
It’s critical whether your lender is SBA-licensed. They’re the only ones who can actually fund your loan application. It’s not your fault if you’re not banking with an SBA-approved lender, and Lendio (among others) is pushing hard to get all legitimate lenders approved. But it’s something to be aware of before you plow ahead.
Yes, you can apply to multiple banks. When each lender receives your application, they submit a PLP (a unique ID number) to the SBA. The SBA uses the PLP to say, “this bank is funding this owner.” As soon as you get a PLP number, then you have to go with that bank. Go to multiple banks and stick with the one that processes your application first.
Be thorough with your paperwork. Very thorough. Lenders have asked follow–up questions related to driver’s licenses, tax forms and other documents. Lendio has blog posts on what you’ll need to get your SBA paperwork in order and what constitutes a fully completed application. (The company also has a useful list of additional state and corporate relief programs.)
Getting the money is just the first step. Accounting for your expenses is the next hurdle. To get loan forgiveness, you’ll have to be diligent in tracking how you spend the money.
For more, read highlights of our April 9th conversation below. The transcript has been edited for length and clarity.
Trung Phan: What is your biggest concern right now with the loan-application process?
Brock Blake (Lendio CEO): I think the biggest concern I have today is that a lot of business owners are at a disadvantage and it’s not their fault.
Let me explain why.
As of right now, the only lenders that can fund loans are SBA-licensed lenders. If you’re a business that started banking with a lender because you had a relationship with them [and the relationship has gone for ten years], and they happened to not be an SBA lender, that means the bank can’t offer the PPP loan.
Now you have to go to another bank and the challenge is that you’ll have to go to an SBA-licensed lender that already has a bunch of customers and because they are one of the few lenders participating in the loan, they rightfully have to prioritize [existing] customers.
So what that means is that you could have two restaurants on the same street. Both are doing exceptionally well, but one happens to be banking with an SBA lender and will be able to get a loan while the other one won’t because its bank isn’t licensed.
Without a loan, [the latter restaurant’s] chances of going out of business is much much greater because it’s de-prioritized.
I’m pushing extremely hard with the Treasury and SBA to approve all legit lenders – fintech firms, credit unions.
I just hung up with a lender that is not SBA-approved. They want to fund $1B in PPP loans but they’re waiting.
TP: Is there a concern that the money will run out?
BB: Clearly the money is going much faster than anticipated. I know the intention is to fund all the small businesses and they haven’t even turned on the 1099 self-employed contractors, [which will be on April 10].
Congress needs to get its act together and at least double the size of the program. And they need to do it quickly.
Because the current situation is creating an unhealthy level of stress and FOMO for the small business owners worrying that “I can’t get my money.” And they can’t. There’s nothing they can do and it’s it not their fault. They can’t influence [the process].
Fortunately, we are seeing a lot of lenders that want to take on more volume. More lenders that are saying “we’ve filled loans for our current customers and now can help new customers.”
So that’s happening but the question is can it happen fast enough.
Everyday that goes by, these businesses are less likely to make it.
TP: One question we have from our audience is, “can I apply to multiple banks?”
BB: Yes. People ask us “hey, I have an application at Lendio, can I apply somewhere else.”
I tell these customers, “listen, we care about getting money in your hands and if Lendio can get it to you the fastest — and we hope we are — that’s our goal. But if you have a relationship with a bank that can get it faster, we’ll support you.”
Now, what happens is that each lender when they get your application, they submit a PLP (unique ID number) to the SBA. The SBA uses the PLP to say, “this bank is funding this owner.” As soon as you get a PLP number, then you have to go with that bank and you’re already in processing.
Go to multiple banks and stick to which one funds you fastest.
The other thing I’d recommend for these business owners is to make sure wherever you’ve submitted your application, make sure your paperwork is very thorough.
Lenders have given us follow up questions on ID (driver’s licenses), tax forms and other documents. We have blogs [on what you’ll need to make sure your SBA paperwork is in order] and what a fully completed application looks like.
TP: What has the coronavirus crisis changed about Lendio’s roadmap and mission?
BB: Pre-coronavirus, our mission at Lendio was to “Fuel The American Dream”. So you have millions of business owners that have this dream of growing their business and need the fuel, the capital to make it happen.
Right now, we tweaked [our motto], now it’s “Save The American Dream”.
When I talk about it, I get a little emotional and — I don’t want to exaggerate or sensationalize it — but we feel like we’re putting on our capes on helping business owners and doing our part. Everyone is. So many people are.
We’re not self-proclaimed heroes, but there’s real deep meaning to what we’re doing. Right now, we’ve [gone] all in on the PPP program.
After that, in 8 weeks, we know we’ll have to help these businesses apply for loan forgiveness. We have to help these borrowers account for expenses and lenders are asking how we’re doing that.
This capital is probably only going to get [these small businesses] over the next little while to save the business. But then, just saving the business is a lot different than having the working capital to grow your business.
So, for us to establish a relationship with small businesses, we need to help with a PPP loan now and an SBA or working capital loan in the future. We’ll get there when we can provide a service to these customers today and earn that business and have them come back in the future.