Payroll Protection Program Loan

Many small businesses have their Payroll Protection Program Loan (PPP Loans) applications already approved by their bank and the Small Business Association (SBA). However, there are just as many small businesses that are confused, frustrated, and stuck! Here are some ideas to help with the Payroll Protection Program Loan (PPP Loans):

Background

As part of the coronavirus stimulus package, the federal government is offering loans up to 2.5 times your monthly payroll and related expenses in a fast track loan. If you retain your employees, much of the loan can be forgiven. Unfortunately, the high demand and rushed process to set up the program is creating havoc.

Some ideas to unplug your process

Remove the application plug. If you don’t have the required 2019 information, make collecting it a priority and get it done! Here are common 2019 documents you need:

• Quarterly payroll 941 reports or the equivalent
• Financials proving payroll, and other core expenses
• 1099 filings and related form 1096
• Bank provided excel or similar file that calculates the loan limit and # of full time employees (FTE)

Remember this could be FREE money! Make getting information a priority …TODAY!!

Unplug the bank bottleneck. Is your bank the hold up? Here are the common problems.

• Your bank is not an approved SBA lender
• The bank is focusing on large customers first
• You don’t have a business banker that knows you
• No account at the bank
• Bank is unsure about what they will require
• Or the bank is too small

Your action:

1st: Understand your bank’s status. What problem is holding up your request?

2nd: Determine if the problem can be immediately solved. If so, stay on it and keep communicating with your lender until they confirm your application has been submitted to the SBA.

3rd: If not solved OR you get the run around, MOVE! Look for a bank or former bank that is using this situation to build their new customer base. The U.S. Treasury has also approved non-banks to participate in the lending program, such as Cross River, Divvy, Quickbooks Capital and Ready Capital. If you can’t find a bank to take your application, consider these non-bank options.

4th: Don’t confuse the SBA by having multiple loan requests. It could knock you out, so keep your efforts coordinated.

I don’t think my business will benefit. 

Too many small businesses don’t think the PPP loan will work for them because they don’t think they will have enough future payroll to translate the loan into repayment forgiveness. This is a big mistake. Here is what to do now:

• Apply anyway. You are not committed to the loan until you are approved and sign loan papers. So the no go loan decision should be made AFTER you apply, not before.
• Do the math. Remember there are no costs to apply for this loan. Your cost will be the deferred interest until payments are required. Remember, you can repay what you don’t use without penalty. So, if your interest cost is lower than the amount of loan forgiveness, it might still provide your business with free funds. Plus if you re-hire employees by the end of June you can still benefit.

It’s not too late attitude. The worst bottleneck of all is thinking it is too late to apply. Yes, it is possible that the funds will be used up if you come late to the party. But don’t give up until the funds are gone. And even then, get your application approved by a bank. Who knows, if you miss this round, you will be at the head of the line if additional funds are made available.