On the April 9, 2020 SobelCo weekly webinar, Mike LaForge, Mark Weber and Ken Bagner shared their insights on the progress of the loan application process under the Small Business Administration’s Paycheck Protection Plan (PPP).

Under Brad Muniz’ guidance as moderator, there was ample time for a town hall style discussion after the original presentations were made.

A series of poll questions was also launched throughout the session. While only 52% of the participants on the call responded to the first poll indicating that they have applied for the loan so far, another 21% said they are intending to do so. With much of the business and nonprofit community focusing on the opportunities created by the infusion of capital from the PPP, there are also many questions and challenges.

The roll out of the Plan has been inconsistent due to what amounts to weekly changes in the rules by the SBA and the onslaught of thousands of applications. Now that almost a week has passed since it launched, some observations are:

  • It may take a while due to technology glitches to upload the forms; be patient.
  • Have all the documentation handy for easy entry. KEEP THIS DOCUMENTATION. It will be critical when it is time to apply for forgiveness.
  • Every borrower will need to have an account at the bank - as that is where the loan will be deposited.
  • Banks are doing their best to keep up with the requests, so borrowers should try first to work with a bank where they enjoy an existing relationship. Staying in close touch with the banker is important; a strong relationship can help move the process along more quickly.
  • The banks all have their own notification processes, so borrowers should confirm with their bankers that their application is confirmed.

Once the process is completed, and the money is deposited in the borrower’s account, there are more traps and tricks to be aware of.

As Mike LaForge pointed out:

  • The funds are meant to offer “payroll protection” and must be used as such. In other words, the borrower must use at least 75% of the funds to cover payroll costs.Funds can also be used for occupancy expenses, including rent, utilities and perhaps telephone (and maybe IT – but is not yet determined).
  • The funds must be used within eight weeks of being received. Not two months; eight weeks consisting of 56 days.
  • Because PPP is intended to keep employees on the payroll and away from collecting unemployment compensation, head count is important. Keep track of head count as a way of verifying that the company qualifies for the loan.Reducing your headcount may reduce the amount of the loan forgiven
  • When it is time to apply for forgiveness, the borrower has responsibility to do so. All documentation will be needed at this point.Final rules on the process of obtaining loan forgiveness have not be provided by the SBA.

There was a general discussion of some of the additional nuances regarding PPP, but the main point is that there is limited guidance at this time from the SBA and many of the details remain unclear.

The final poll question asked, “When do you expect to recover?” 16% of the respondents said within the eight weeks of the PPP; 33% indicated within six months; 37% estimate recoveryone year and 14% said they have not been impacted!

SobelCo will continue to present information and keep the business community educated and prepared whenever possible.