The Benefit of Secondary Lenders

PPP Applications Round 2

Today, I’m going to be talking about the very  confusing second round of PPP applications and the benefit of secondary lenders. Let’s discuss who qualifies, who doesn’t, and what it all means. 

The first round of PPP was open to everybody.  This means large corporations all the way down to the little guy or a Sole Proprietor. What came about that was, the big guys got most of the money. The little guys got very little, if any, to survive their businesses through the last year of the pandemic.

Who is it For?

So the second round of PPP was to create the ability for smaller  businesses, less than 300 employees, to be able to participate and get money from these programs. But what is confusing a lot of people is that Biden passed on February 24th through March 9th, a stimulus package specific to people of Sole Proprietorships and small LLCs.

That doesn’t mean that you’re going to gain more money if you file as a Sole Proprietor versus if you file your taxes as an S-Corp or an LLC. It means that they’re targeting specific people who have smaller incomes and Sole Proprietor businesses. That means that you have to have less than 200 employees and you have to show a 25% less reduction from year over year. Also that COVID affected you at least by a 25% reduction in gross revenue. 

What Do Secondary Lenders Need?

These lending  companies want to see a 941 or a 940. That is your quarterly filings of your employer tax obligation to the federal and to the state. 

By that documentation, that proves to the lender that you have less than 200 or 300 employees, depending on if you’re in PPP round A or PPP round B, which is the more specified February 24th to March 9th funding. 

This is the confusing part. If you are applying for PPP as an S-Corp a C-Corp, a Nonprofit, or an LLC, they’re going to require you to show 940 and 941 documentation showing the fact that you have actually paid into the payroll tax system throughout the year 2020 and 2019.

Now, that comes to be an issue if you fired your employees or had to let them go due to lack of being able to pay them or turn them into contractors like I did. I took myself off payroll because I couldn’t afford to pay myself anymore, and I put my staff on contract. That becomes an issue because I can’t prove that I paid payroll taxes throughout last year.

What I did is file as a Sole Proprietorship under my social security number. Even though I filed my taxes as an S-Corp, even though I’m registered as an S-Corp, I showed that I was a Sole Proprietor because I couldn’t prove I had 941 or 940 documentation, and I couldn’t prove that I had anybody on payroll last year.

The Benefit of Secondary Lenders

So I got denied by the larger banks, Wells  Fargo, Bank of America, Chase all those large banking institutions. As you also should know, those banking institutions, in round two, are much more difficult to get PPP from than say the secondary lenders like Lendio, Lendistry, Square Intuit, those types of institutions.

I suggest if anybody’s trying to do a round two and cannot show 940 or 941 documentation, go to the secondary lenders. They are much more willing and obliging to help Sole Proprietors and small LLCs get funding and also be able to meet the requirements that the SBA has set forth in order to get it.

To learn more or if you would like clarification on the benefit of secondary lenders please send us an email at [email protected] or  contact us here .