Why The PPP Loan Extension Is Good News For This Group Of Business Owners

As we head into the July Fourth weekend, the Paycheck Protection Program Extension Act is on its way to President Trump’s desk for signature. This Act will extend the time small businesses and self-employed individuals have to file an application for a PPP loan to August 8, 2020. 

However, while Congress congratulates itself on this latest legislation, many self-employed and minority small business owners are wondering if this extension will have a real impact. For a large number of this group, the PPP loan has been a source of frustration and anger. The process was complicated as banks were not forthcoming with information and appeared to prioritize their larger clients. Further, self-employed individuals had to wait a week longer to apply than small businesses. As one business owner pointed out, “As a sole proprietor, I wasn’t eligible until late in the game.”

As a result, many of the smaller businesses did not get access to PPP funds until the second round of funding. In fact, some potential borrowers bailed on the program before they got funding due to the challenges in the process. It seemed like there were a lot of roadblocks to success and Treasury and the Small Business Administration (SBA) did no favors to borrowers by releasing guidance very slowly.

“The lack of consistency from the government and the banks made this a very difficult process for the business owner on how to ensure that paperwork was sufficient to get them approved,” explains Eric Pierre, CPA and owner of Pierre Accounting in Southern California and Austin, Texas.

Getting access to loans was even more complicated for some groups of business owners with less access to banks.   Minority business owners often do not have access to the same financing resources as other businesses.

“An additional challenge for the self-employed and minority business owners is that a lot of them didn’t keep good accounting and payroll records which made it harder for them and it also was frustrating for them to play catchup, particularly in the first round when the money was going so fast,” says Pierre.

But there is a reason that the 5-week extension might be a reason for hope for the self-employed and minority small business owners. Interestingly enough, that hope might be driven by how FinTech firms like PayPal

PYPL
, Kabbage and Square

SQ
have adapted to being leaders in PPP loans.

The Process and Players Improved

Part of the challenge with the initial roll out of PPP loans, was it was a plan rolled out very quickly by Treasury and the SBA. The roll out was so quick, that the banks were not ready for the inflow of applications coming their way. The process was confusing and opaque. 

However, improvement to the program has happened quickly. First, through the roll out of FAQs, the process has become…