The latest COVID-related aid package was signed into law on December 27, 2022.
The Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL) programs are expected to come back starting the week of January 11, 2022.
With this latest round of PPP funding, businesses — even those that received a PPP loan throughout the first funding period — will have a second chance to take advantage of the popular relief package. Now, two questions that many business people have been asking are: What is the credit score requirement one must pass in order to receive a PPP loan? Do lenders perform a credit check on PPP loan applicants?
Read onto find the answers to these along with other PPP loan credit score questions.
Credit Requirement Rules For PPP Loans
As far as formal requirements go, there is no credit score requirement you must meet in order to be eligible for a a PPP loan. This is despite the fact that the PPP program technically falls underneath the SBA’s 7(a) loan program, which does feature an acceptable credit requirement. However, this formal requirement has been suspended with regards to Paycheck Protection Program loans.
Now, in case your clients are suffering from the effects of this devastating pandemic and you’re seeking a PPP loan, be aware that, unfortunately, this policy does not be certain that your credit profile won’t be taken into account once the PPP lender assesses your application.
Do Lenders Check Credit When You Apply For A PPP Loan?
As lending for this current PPP funding round won’t actually begin until January 11, we can't definitively say how a PPP lender will assess your credit profile if and when are applying for a PPP loan.
However, based on accounts from PPP applicants — a few of which were posted to Reddit, Facebook, along with other online forums — during the 2022 PPP funding period, many PPP lenders did look at the credit profile of these applying for PPP loans and did, in fact, reject applicants in line with the health of their credit.
Unfortunately, these accounts do not paint a regular picture as to the way a PPP lender might measure the credit of the applicant. Sometimes, business people reported having a hard credit assessment appear on their credit report after applying for a PPP loan. In other instances, it appears a gentle credit check was performed. Again, different PPP lenders appear to have different policies regarding the running of credit report checks on PPP applicants, and unfortunately, these coverage is never disclosed up-front.
Now, based on the fact that, so far, the SBA hasn't further clarified how an applicant’s credit profile is going to be treated throughout the PPP application process, we can only think that this same scenario may play out again during this next round of funding. We wish we could provide you with a more definitive verdict on if and how your credit is going to be checked during the PPP application process, but we simply don’t obtain that clarity at the moment.
What To Do If You’re Rejected For Poor Credit
Based around the apparent inconsistency amongst PPP lenders regarding the way they treat the loan profile of would-be PPP borrowers, the only real advice we can give about this subject is that if a lender rejects your PPP application for the loan because of insufficiently healthy credit, you need to affect another PPP lender hoping their approach to PPP loan credit score requirements differs.
It’s unconscionable — and perhaps emblematic of the current haphazard national response to the difficulties resulting from the COVID-19 pandemic — that the SBA and its affiliated lenders haven't worked together to supply some clarity on this issue, particularly as hard credit checks can have a negative effect on one’s credit rating.
More About PPP Loans
For a complete rundown of the specifics of the latest pandemic aid package enacted into law on December 27, 2022 — including what the new law method for both the PPP and also the Economic Injury Disaster Loan (EIDL) programs, take a look at our article Congress Passes New PPP Legislation, Targeted EIDL Program.
We’ve also written a guide to what's needed for applying for a PPP loan (combined with the requirements based on how you have to spend your funds in order to have the loan forgiven). We highly encourage you to definitely read through this short article prior to applying for a PPP loan. The content also includes descriptions and links to some of our preferred PPP lenders. These lenders should permit you to complete and submit a web-based PPP application starting a few days of January 11th.
Finally, after you obtain a PPP loan, you may find yourself waiting to hear the results of the efforts for a while.
If you are within this position, take a look at how to check on the status of your PPP loan application.
If are applying for a PPP loan and are rejected based on your credit health (or maybe your application is accepted, for instance), please leave us a comment and let us know about your experience. It will help inform us all in this crazy, uncertain time.
