Extend The PPP Deadline To Help Small Businesses Secure Access To Loans Under New Rules

For many of the smallest U.S. business owners, the March 31st deadline for filing for Payroll Protection Program’s (PPP) funding looms large.

Voices from across the industry, including the American Institute of CPAs (AICPA), payroll processing giant Paychex, and business associations are calling on Congress to extend the Paycheck Protection Program’s (PPP) March 31 loan application deadline. Last week, more than 100 trade and business organizations sent a letter to federal lawmakers urging them to extend the PPP deadline until at least June 30, 2021.

AICPA believes that the federal government can and should provide ongoing support for small businesses and non-profits by agreeing to an extension of the so-called PPP2 lending program. Since the program reopened in January (after the first round of PPP closed on August 8, 2020), more than 2 million loans have been approved for more than $156 billion in loans, being funded by 5,185 banks and non-bank lenders. Overall, the Paycheck Protection Program has put nearly $680 billion into the hands of desperate business owners whose very survival depends on getting these government-backed loans.

“We thank Congress for its ongoing bipartisan support of the PPP, which is valuable lifeline to millions of businesses. However, too many small, underserved and minority-owned businesses continue to face serious challenges with the PPP application process,” said Barry Melancon, CPA, CGAM, AICPA president and CEO. “The accounting profession believes that Congressional action now to extend the deadline creates much needed breathing room for Main Street America.”

“Since PPP was first launched last year, we have called on Congress and the SBA to ensure the program is reaching small businesses with the greatest need, particularly as too many small businesses owned by people of color and the self-employed were left behind during the first rounds of funding,” said Small Business Majority founder and CEO John Arensmeyer.


“Few business owners of color who applied for PPP last year received the full loan amount they requested, and just 7% of the self-employed even applied,” Arensmeyer added. “What’s more, a majority of entrepreneurs of color report they will need loans or grants this year to keep their businesses open.”

Right now, there are millions of businesses working on PPP applications that have not yet been submitted to the SBA. The smallest businesses, often minority- or immigrant-owned, have had the most difficulty applying. Many times, they do not have existing business checking accounts at banks or their accounts went below minimum balances because of the effects of government-mandated closures or increased expenses on things like PPE for their employees. Conditions such as these have posed challenges to businesses seeking PPP loans as they are often required by lenders before a borrower can secure a loan from the program. Often, these very small businesses don’t have accountants and lawyers to help them get over such PPP hurdles.

AICPA president Barry Melancon, whose 431,000 member organization is the world’s largest association representing the CPA profession, says that there are many PPP issues that must be addressed.

“It is well documented that small businesses, non-profits and the CPAs who advise them are experiencing error codes when submitting a PPP loan application. We continue to speak with the SBA about these problems and are hopeful for a solution soon,” added Melancon.

“When the Biden administration rightly created a two-week window to prioritize PPP loans for entities with fewer than 20 employees, other larger businesses were confused about how last-minute process changes might impact their applications that are lingering in the SBA’s system,” he added. “A deadline extension would give the SBA more time to process these applications.”

President Biden’s two-week period for companies with less than 20 employees to be allowed to apply for PPP loans is helping to ensure that truly small companies can get financial assistance. Many of the smallest businesses seeking to get funding are Black-owned, Brown-owned and women-owned companies. Outreach efforts are underway to reach these business owners, particularly those in low-and-middle-income communities, and areas that have been under-served by the banking industry.

Plenty of funding still available

Congress authorized an additional $284 billion in funding for PPP2. Right now, after two months, a little more than half of that funding ($156,253,510,068) has been approved.

To help move things along, the SBA is providing additional capabilities for lenders to resolve error codes. Unfortunately, a lot of applications are being held up. Right at the start of the program, applicants should have been told that validation checks would take time. The safeguards were put in place by the government to ensure against fraud this time around. Progress is being made, but it is unfortunately taking a longer time than expected for error codes to be resolved.

“Almost 90% of the error codes are happening before the applications are submitted to the SBA,” said Eric Asgeirsson, president and CEO of CPA.com. “A lot of the progress is happening manually. However, I am hopeful that we will catch up.”

The first phase of error codes is an API validation error code that somehow stops submission of PPP loan applications into the SBA system. Unfortunately, the vast majority of the error codes are happening before the SBA even receives the applications.

Next, there are compliance checks. The applications are validated for further review. In some instances, applications are being stopped here and borrowers and lenders are asked for further information. Sometimes the lender can clear the code, and sometimes not. A frequent delay is because additional documentation is needed to prove that an applicant was indeed operating on Feb. 15, 2020.

In the third phase, the applicant gets an SBA number (E-Tran) or a “do not approve” category. The lenders can at that point work with the borrowers to resolve the error codes, often by collecting unique and specific documentation required by the SBA for each kind of error code. These error codes are unexpected, and they are causing delays for many borrowers.

Sometimes it can take weeks to get approval because of these safeguards put into place to prevent fraud. Progress is being made as lenders work with the SBA, but unfortunately, the program is so popular that there is a logjam. Resolving the error codes takes time, and the SBA still has to provide more definitive guidance for lenders on how to resolve these errors more efficiently. For this reason, Congress should extend the PPP application deadline past March 31.

The smallest businesses and self-employed workers need access to capital, but they might not get it without an extension of PPP2. There is simply not enough time before March 31 for the SBA and its 5,000 partner lenders to first implement rule changes required by the administration, second resolve compliance issues and error messages, and of course complete the funding for all approved businesses. The best way to ensure that the little guys get a piece of the PPP pie is to extend the deadline to give applications more time to be processed, approved, and funded.

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