Customers Bank Backs SBA’s Stronger Support for Sole Proprietors, Independent Contractors, Self-Employed Individuals, as well as Mom-and-Pop Businesses

Rhea-AI Summary

Customers Bank, a prominent PPP lender, has highlighted new changes to the Paycheck Protection Program aimed at improving access for sole proprietors and small businesses, especially minority-owned and ITIN holders. Effective from March 3, 2021, the SBA now allows applicants to base their loan amounts on gross income instead of net profits, potentially increasing eligibility from $3,300 to $20,833 for sole proprietors. Moreover, the program introduces a 14-day exclusive application period for businesses with 20 or fewer employees. These changes aim to make federal aid more equitable and accessible.

Positive

• New PPP loan calculation allows sole proprietors to use gross income, significantly increasing potential loan amounts.
• 14-day exclusive application period for companies with 20 or fewer employees enhances access to funds.
• Eligibility expanded for lawful immigrant entrepreneurs and non-U.S. citizens with ITINs.

Negative

• Borrowers with approved loans cannot increase their loan amounts under the new guidelines, risking funding delays.

Customers Bank, a top-5 ranked Paycheck Protection Program (PPP) lender in both 2020 and the current round of federal stimulus, recognized that some of the smallest businesses, including sole proprietors, independent contractors, self-employed individuals and mom-and-pop businesses, as well as those with Individual Taxpayer Identification Numbers (ITINs) continue to struggle to access the federal stimulus they need due to the calculation method for PPP loan amounts.

In response to the Biden-Harris Administration’s request to make PPP loans more equitable and accessible to these individuals and businesses, on March 3rd, 2021 the SBA announced a new PPP application that changes the method used to determine the amount of federal stimulus for sole proprietors. For companies without employees, the calculation was based on a sole proprietor’s net profit, on line 31 of Schedule C. The new application will allow sole proprietors to choose whether they file using net profits or use gross income, line 7 of Schedule C, to determine the PPP loan amount. The new application for sole proprietors with employees similarly allows the loan to be based on gross income minus expenses reported for employee benefit programs, pension and profit-sharing plans, and wages (Schedule C lines 14, 19 and 26).

“For many minority-owned businesses and those with ITINs, this change can equate to a difference of thousands of dollars,” stated Sam Sidhu, Vice Chairman and Chief Operating Officer of Customers Bank. “A sole proprietor who was eligible for $3,300 under the old calculation could potentially now be eligible for a PPP loan of up to $20,833. Sole proprietorships – individuals who have a business with no employees – should take advantage of this program and apply for a PPP loan.”

The changes will provide a more equitable distribution of the federal relief funds to the smallest businesses, many of which were overlooked by other lenders in the first rounds of the PPP loans. Other important changes that sole practitioners should be aware of include:

• Starting February 24 and extending through March 9, the SBA introduced a 14-day exclusive period for companies with 20 or fewer employees to submit PPP loan applications.
• Lawful immigrant entrepreneurs who reside in the United States and pay taxes will be eligible to apply.
• Non-U.S. citizens that have an Individual Taxpayer Identification Number (ITIN) for their business are eligible to apply for a PPP loan.
• First-time borrowers can apply for a Second Draw PPP loan once the initial funds are spent and the required waiting period is satisfied (currently 8 weeks but subject to change).
• The SBA will now allow access to the PPP loans regardless of a borrower’s federal student loan delinquency status.
• The PPP exclusionary restriction for small business owners with prior non-financial fraud felony convictions will be removed.
• Loans can be forgiven, subject to regulations.

It is important to note that those borrowers that have already had their loan approved cannot increase their PPP loan based on these updated guidelines. The borrower can cancel the loan and can make a new application using the new calculations but runs the risk that the loan may not get approved and funded before the program’s scheduled end on March 31.

To help small business owners have greater access to PPP loans, Customers Bank introduced a turn-key white-label PPP solution in January 2021 to provide a PPP loan origination, funding and servicing system. Currently, more than 300 banks and over two dozen chambers of commerce and other similar organizations are taking advantage of this program. There are thousands of small businesses in various stages of the application process from nearly all states.

About Customers Bank

Customers Bank, a subsidiary of Customers Bancorp, Inc. (NYSE:CUBI) a bank holding company, is a full-service super-community bank with assets of approximately $18.4 billion at December 31, 2020. A member of the Federal Reserve System with deposits insured by the Federal Deposit Insurance Corporation, Customers Bank is an equal opportunity lender that provides a range of banking and lending services to small and medium-sized businesses, professionals, individuals and families. Services and products are available wherever permitted by law through digital-first apps, online portals, and a network of offices and branches. Additional information can be found on the company’s website, www.customersbank.com.

View source version on businesswire.com: https://www.businesswire.com/news/home/20210305005046/en/

FAQ

What changes did Customers Bank announce for the PPP on March 3, 2021?

Customers Bank announced that the SBA will allow sole proprietors to use gross income for PPP loan calculations, potentially increasing their loan eligibility.

How much could sole proprietors be eligible for under the new PPP guidelines?

Under the new guidelines, a sole proprietor could be eligible for a PPP loan of up to $20,833, compared to $3,300 under previous calculations.

What is the exclusive application period for PPP loans?

From February 24 to March 9, 2021, the SBA introduced a 14-day exclusive period for companies with 20 or fewer employees to submit their PPP loan applications.

Are non-U.S. citizens eligible for PPP loans?

Yes, non-U.S. citizens with an Individual Taxpayer Identification Number (ITIN) for their business are now eligible to apply for PPP loans.

What risks do borrowers face when applying for new PPP loans under updated guidelines?

Borrowers who cancel their approved loans to apply under the new guidelines risk not getting approved before the program ends on March 31.