Business owners have been rushing to fill out the Paycheck Protection Program (PPP) application in order to retain employees and keep their businesses financially afloat during the pandemic.
The program, the first of its kind in the US, was designed to provide small businesses that have been closed or reduced in operation by the COVID-19 crisis with cash to cover payroll, rent, mortgage interest and utilities.
The program, which has a finite amount of funds, has been receiving tons of applications since it was made available to small business owners last week.
If you’re a small business owner, looking to benefit from this program, beware! This process is not for the faint-hearted!
We’ve been helping our clients fill these applications online and we want you to know what you can expect.
#1 Not All Banks Will Help You Apply for the PPP
This has definitely been the most difficult part of applying for the PPP.
Not all banks are 1) participating in the PPP; 2) allowing you to apply for the PPP unless you were their customer before February 15th, 2020 and 3) are accepting applications due to the influx of submissions they’ve already received.
Check your bank’s Website for information on the Paycheck Protection Program or call them if information is not clear. Most of the larger banks have their application right online, so filling it out does not mean having to go to the bank.
If your bank is not participating in the PPP, then you’ll face some challenges finding an institution that will help you since banks are stating that they want to help their customers first.
If you just became a customer at your current bank and have not had a banking relationship with them since before February 15th of this year, they may not allow you to participate in the program through them.
Some, such as Bank of America, began by saying you needed to have an existing line of credit or loan with them in order to qualify, (a policy that has been quickly updated to allow checking account holders to apply after significant slamming by the public at large on social media).
If you happen to be in a situation where your bank is not participating in the program, not taking applications anymore, or simply not allowing you to participate in the program through them, we have a suggestion that we found while researching online trying to find help for our clients who were in the same situation: try an online loan broker.
Online loan brokers match borrowers with lenders participating in the PPP. You fill out a simple application with the online loan broker and will then be required to provide more extensive documentation once a lender shows interest in you, which brings us to the next challenging point…
#2 The Documentation Requirements Are Sometimes Overwhelming
Since we began helping our clients fill out their applications, we found that banks vary quite a bit in the documentation they require to process you application.
Some banks will require the main business owner to upload their valid driver’s license, so be sure to have a clear image of that on your computer or favorite device.
All banks will ask for the average monthly payroll amount you required for your business in the last 12 months. This amount will need to have included any state and local tax you paid, which varies from state to state.
This can be obtained from your payroll processing company, from the accounting software you use to process payroll, or by simply using your 2019 payroll annual figures and then dividing by 12. This is your average monthly payroll amount.
This figure is then multiplied by 2.5 to obtain your PPP loan amount.
Some lenders will require you to upload a payroll statement and banks statements for each month (as in the case with TD Bank). Others will simply ask for an annual payroll summary for 2019 and the bank statement and payroll summary that shows you were still open and in business on February 15th, 2020.
We recommend finding out what your bank requires and putting the documentation together first. This way, you don’t have to be paranoid about your application timing out on your lender’s Website or simply being frustrated because you have to stop in the middle of the application and go hunting for documentation not readily available.
You will also need payroll withholding forms such as the 941, 944, 940 or 1099 (in the case of independent contractors) to prove that you in fact, have the payroll you say you do. This is where paying people on the books and following all required laws really pays off in terms of how much you can claim as your average payroll amount. If you paid most of your employees off the books, your average payroll amount will be way lower than what it really is.
#3 Be Prepared to Be Patient, Understanding and Flexible
This may be the hardest part to ask of a small business owner, worried about the survival of their livelihood during the COVID-19 crisis.
As we stated in the beginning, this program is the first of its kind. Everyone, including the government, is learning and adjusting in real time. Some of the lenders can’t even answer some of the basic questions about the program because they’re learning as they go along.
This means you’ll be frustrated at times. Some tasks, like putting your documentation together, may be a little too time-consuming for your taste. You may ask people questions they should know the answers to and find that they have no clue.
Be patient. Be understanding. Be flexible.
These are baffling times we are living in and we need to adapt to survive.
#4 Use the PPP Loan to Cover Qualified Expenses So You It Can Be Forgiven
Remember, if you use this money for payroll costs, rent or mortgage interest, utilities and interest on pre-existing loans, the amount will be forgiven.
Make sure you document how you’re using the loan, to ensure you won’t have to pay any of it back.
For more information please visit the Small Business Administration (SBA) Website at www.sba.gov or your local lender. If there’s anything we can do, please feel free to visit our Website www.guriantax.com or give us a call at 570 491 4400.