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Your Next Move if your PPP Loan Request was Turned Down

The scandalous PPP loans were seen as the crème de la crème for microbusinesses struggling to survive and thrive through the Coronavirus. 

Many business owners have applied, but only a handful acquired PPP loans. The first round of relief funding worth 349 billion dollars maxed out in a matter of months. However, the SBA topped up the funds in April with an extra 310 billion dollars to be disbursed via banks and web-based lenders.

But these loans shouldn’t be a big deal because even round two won’t last long. So what next if you are among the many who got rejected for one reason or another? We’ll get to that in a few.

Possible Reasons Your PPP loan Request was Rejected.

Before searching elsewhere, let’s try to understand why your PPP application was rejected;

  • Simple application errors like missing a number or two on your EIN
  • You failed to meet the terms of a specific lender. e.g., you don’t have a relationship with them; your requested amount was below their preferred cap (Try to call your lender for an explanation).
  • You applied with multiple businesses
  • You provided false data, such as per-month payroll amount, number of workers, etc.

NB: on providing false data, perpetrators may face stricter punishments as the Treasury department has plans to launch investigations on fraudulent PPP applications.

What Next?

Rejected businesses might want to review their request for any mistakes. You also want to reach out to your lender to understand the reasons and see whether your application can be reconsidered.

However, a discussion, response, or reconsideration is not always given, so you should think of a backup plan. Here are your next best options.

Payroll Tax Deferral & Employee Retention Credit

Businesses that did not meet the requirements for a PPP loan still have a reason to smile. 

The CARES Act also included a payroll tax deferral for companies that failed to enjoy loan leniency under relief funding programs.

The payroll tax deferral program allows qualified employers to defer payroll-related tax payments accumulated between Mar 27, 2020, and Dec 31, 2020. 

The same group can also enjoy employee retention credit on payroll taxes for 50 percent of qualified wages of an eligible worker for payments disbursed between Mar 13, 2020, and Dec 31, 2020.

NB: Those who receive a PPP loan and enjoy partial or full forgiveness do NOT qualify for tax deferral.

Other Sources of Funding 

Apart from relief loans, micro-businesses should focus on other sources of funding.

The most common sources include;

1. Other SBA loans e.g., SBA 7(a) Loans, SBA Express Loans, SBA 504 Loans, SBA Microloans 

2. Alternative Lending Options including; 

  • Equipment financing
  • Invoice factoring
  • Merchant cash advances
  • Crowdfunding
  • Vendor credit
  • Online term loans
  • Business lines of credit
  • Business credit cards

You have a long list of products to choose from. Business owners must familiarize themselves with each product before taking out any form of credit. 

Author Bio: Michael Hollis is a Detroit native who now lives in Los Angeles. He is an account executive who has helped hundreds of business owners with their merchant cash advance ISO programs. He’s experimented with various occupations: computer programming, dog-training, scientificating… But his favorite job is the one he’s now doing full time — providing business funding for hard-working business owners across the country.

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