Why Was My Business Declined for PPP?

A look at why your PPP application may have been denied.

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The coronavirus pandemic has caused a stir in the business community and left many business owners seeking financial assistance. As such, the government has extended financial aid in the form of loans under the Paycheck Protection Program (PPP). For qualifying small businesses, this means that you can use the loans to help pay your employees and other essential expenses during the crisis. However, you may be a business owner that applied for PPP and was denied. 

If you’re wondering, “Why was my business declined for PPP?” we will share some of the most common reasons why your application may have been rejected. We’ll also dive into the details about PPP qualification and alternative funding options that are worthwhile to consider. 

General Information about PPP

The Paycheck Protection Program is a government program that authorizes $349 billion in forgivable loans. These loans can be forgiven if and only if borrowers adhere to these two requirements:

  1. The loan amounts are used for payroll costs or mortgage interest, utility costs and rent over 8 weeks after the money has been given 
  2. Compensation and employee headcount remains unchanged 

For each employee, payroll costs max out at $100,000 annually. There’s a 6 month loan deferment period.

Who Can Apply?

The application process opened on April 3, 2020. The application initially opened to sole proprietorships and small businesses. One week later, self-employed individuals and independent contractors could apply for the loan to cover specific expenses, as well. 

Any business with less than 500 employees is eligible to apply, including: veteran organizations, Tribal businesses, nonprofits, self-employed persons, independent contractors and sole proprietorships. 

So, if your business does not fit those descriptions, your application would have been denied.

What Can PPP Loans Be Used For?

Loans in this program are mandated to be used for:

  • Payroll costs 
  • Rent (for lease agreements made before February 15, 2020)
  • Utilities (for services that started before February 15, 2020)
  • Mortgage interest (incurred before February 15, 2020)

Loan amounts can be made for up to two months of average monthly payroll costs (from 2019), with an additional 25% on top of that number. This amount is capped at $10 million. The interest rate is a fixed 1.00%

The loan is forgivable as long as these conditions are met:

  • The funds are used for the above reasons within 8 weeks after the funds are given 
  • Employee headcount remains unchanged 
  • You do not change employee salaries by more than 25% for any employee who made less than $100,000 annualized in 2019 
  • You rehire full-time employees and provide their salaries by June 30,2020 for any changes that have been made to your headcount between February 15, 2020 and April 26, 2020. 

Things to Check on Your Application

Now that you have all the details, it’s time to look at why you may have been denied for your PPP loan. It could be something as small as a simple mistake. For example, maybe you left a number off your Employee Identification Number or made a different typo that led to denial. 

If you’ve been denied, it’s likely that the lender will reach out to notify you directly, rather than the Small Business Administration. In some cases, they may tell you why you were denied, but in others, you may not be given a reason. 

Additional reasons for denial include:

  • You don’t meet the lender’s requirements 
  • You applied for a loan for various businesses or franchises 

To problem-solve the reason for your denial, it’s worth it to try these steps:

  • Check that the information your submitted in your application is accurate
  • Reach out directly to a representative to discuss why your application was denied
  • Try work with another PPP lender

Automatic Reasons for Disqualification

If you still don’t understand why you’ve been denied, it could have been because of an automatic disqualification. Automatic disqualification is based on your answers to the questions in the application. 

You would have been automatically disqualified to receive PPP aid if you answered yes to the questions about the following:

  • SBA Default: You’ve defaulted on a SBA or Federal agency loan in the last 7 years
  • Criminal Charges: You have been indicted for criminal charges or are currently on parole 
  • Federal Agency Suspension/Exclusion: You’re currently involved in a bankruptcy or have been suspended, debarred, declared ineligible or voluntary excluded from Federal departments or agencies
  • Felony Records: You have a felony record in the past 5 years. Whether you’ve been convicted, pled guilty, pled nolo contendere, been placed on diversion or been placed on probation, your application will be denied.

Other Financing Options

It’s undoubtedly stressful to feel financially strained, especially as a small business owner. You want to be able to keep your doors open and take care of your employees’ needs during this unprecedented time. 

Don’t worry, even if your SBA PPP loan was denied, you have other funding options. 

Here’s a look at a few alternatives you can consider:

  • Credit card: Apply for a business credit card. The Prime Rate was cut by the Federal Reserve so many credit cards have much lower APRs. 
  • Line of credit: A business line of credit can be taken out and you’ll only have to pay for what you borrow. Since some lenders may be tightening the amount they are lending, it could be worthwhile to draw funds sooner than later. 
  • Merchant cash advance: Take a look at merchant cash advances from providers like Uplyft Capital. A merchant cash advance provides almost instantaneous cash in exchange for a promise of a portion of your future sales. Even if you don’t access funds directly from Uplyft Capital, you can leverage our marketplace to automatically connect you with a lender that best suits your needs. 
  • Access home equity: As a last and final resort, you may want to discuss the option to use your home equity for access to capital. It’s best to discuss this option with your CPA or financial advisor before doing so because it’s obviously a big risk. 

The Bottom Line

Getting business funding and financial aid during an economic and global health crisis may present challenges, but it is surely possible. Some businesses simply don’t qualify for the Federal government’s programs, and others may qualify but have been denied for one reason or another. 

Be sure to double check your application and reach out to your SBA lender to find out more information regarding your specific case. However, if you need cash quickly, you can take advantage of other funding options like credit cards or merchant cash advances.

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