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.
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:
For each employee, payroll costs max out at $100,000 annually. There’s a 6 month loan deferment period.
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.
Loans in this program are mandated to be used for:
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:
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:
To problem-solve the reason for your denial, it’s worth it to try these steps:
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:
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:
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.
If you meet the list of criteria, then you may be eligible to have your PPP loan forgiven. Check out this list of requirements from the SBA.