Banks lobby Congress to postpone PPP deadline

Lenders are pressing Congress to extend the Paycheck Protection Program’s end date, citing rules that have yet to be issued and the need for legislative fixes.

The latest version of the PPP is set to expire on March 31.

While the Small Business Administration has approved $156 billion of loans this year, many small businesses are still complaining about complications with the application process.

The Biden administration created more confusion when it changed the formula for calculating loan amounts but declined to apply it retroactively to pre-existing loans. Lenders are still waiting for the SBA to release interim rules for the new methodology.

Lawmakers, including Ben Cardin, D-Md., who chairs the Senate Small Business and Entrepreneurship Committee, are vowing to hold a hearing to look into the formula issue. But it is unclear if lawmakers can intervene before the program is set to end.

An extension is needed to give lenders a chance to sort through the recent changes, said Jill Castilla, president and CEO at the $327 million-asset Citizens Bank of Edmond in Oklahoma.

“Let’s get the rules out, advocate for an extension and then lobby” for revised guidance, she said. “As long as the crisis continues, this program needs to continue.”

Broader application of the funding formula, announced on Feb. 22, would give the smallest businesses, sole proprietors, independent contractors and other self-employed entrepreneurs a chance at getting a bigger loan. Under the proposed guidelines, loans for microbusinesses would be calculated off gross income, rather than net profit.

PPP lenders urged the SBA, which is managing the program with the Treasury Department, to make retroactive payments a priority as soon as the new formula was announced. The agency said it lacked the administrative authority to implement such a change.

“Agencies engage in retroactive rulemaking when they have statutory authority to do so,” an SBA spokesman said. “Such authority was given to the agency in the Economic Aid Act [only] in relation to farmers and ranchers.”

The most-recent stimulus law was enacted on Dec. 27.

Cardin said during a press conference Tuesday that he hopes to attract bipartisan support to apply the more-generous funding formula to pre-existing PPP loans. Cardin, who said such a proposal could not be included in the stimulus plan that is under reconciliation, expressed support for extending the PPP deadline.

“We’d like to continue making improvements, including [helping] those who have already received PPP loans under the original calculation,” Cardin said.

Many PPP lenders said applying the formula retroactively is the fair thing to do, particularly for loans that were approved in the weeks leading up to the Feb. 22 announcement.

A process to allow existing borrowers to add to their existing loans “is by far the smartest way to do it,” said David Becker, chairman, president and CEO at the $4.2 billion-asset First Internet Bancorp in Fishers Ind. He said some borrowers who had loans approved under the more-restrictive formula want to paying them off and apply for a bigger payout.

“We’re telling them … this is what we think the rules are going to be,” Becker added. “Calculate it and determine if that’s enough money for you to try and reapply. Right now, we’re staring at that March 31 deadline so they might wind up with nothing at the end of the day.”

Citizens is reaching out to hundreds of microbusinesses that applied but failed to qualify for funding under the more restrictive formula, Castilla said.

“We’re telling them we’re ready to serve them and get them the funding they desperately need,” Castilla said.

The SBA also gave companies with fewer than 20 employees exclusive access to the PPP portal for a two-week period that will end on March 9.

Cardin and Sen. Jack Reed, D-R.I., have also announced a proposal to add nearly $7.3 billion of additional PPP funding authority for loans to nonprofits and digital media companies.

“We need to expand eligibility, and its going to be a challenge to get those applications processed by the end of the month,” Cardin said.

Lenders agree.

“These things take time,” said Nimi Natan, president and CEO at Gulf Coast Small Business Lending, a unit of the $2.3 billion-asset Gulf Coast Bank & Trust in New Orleans.

“We could work in a more-relaxed manner, make fewer mistakes, spend more time making sure documentation was in place and work through all the [error] codes being thrown at us” if the deadline were extended, Natan said.

“It can take [up to 10 days] to process a loan depending on the codes being thrown at us,” Natan added. “I’d hate to have to stop accepting applications on March 25.”

“I don’t think [PPP] should go on indefinitely, but there are still a lot of funds available,” Becker said.

“I think the changes they made will help small businesses, but they need more time,” Becker added. “If they extended it 30 to 45 days after we get the [regulations], I think it would give everybody an opportunity to reach the businesses that really need the help.”

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