If your small business has been impacted by COVID-19, you are able to apply for the SBA’s Paycheck Protection Program (PPP) loans. If you missed out on the first round, the $310 billion expansion of the PPP is now approved for release on Monday, April 27.
Now the application and allocation process for the original $349 billion was anything but smooth, and the funds made available through the CARES Act were exhausted in under 2-weeks, and it’s likely that this next round will go even faster. To give you the best chance of getting your application approved before the money runs out, here are our tips from first-hand experience, (applying for our company and helping various nonprofits) to help you apply.
1. Determine the amount you are eligible for
The maximum amount you qualify for is based on your average monthly payroll (details about what is and what is not included are here) times 2.5. Depending on if you apply through your bank or an SBA approved fintech lender, this may or may not be calculated for you.
2. Calculate the amount that can be forgiven
You are for 8 weeks of payroll, rent, and or mortgage interest and some utilities. But you must spend 75% of the money on payroll, and you must maintain your full-time employees and not lay people off. You can get the details about forgiveness calculations here.
3. Determine eligible expenses you’ll cover with the PPP Loan
Make sure your business can use the PPP money appropriately so that you can ask for forgiveness. Some businesses have large rent or mortgage payments and would use more than 25% of the PPP loan for rent and or mortgage. Other businesses may have already laid off or furloughed employees, and it may not make sense to bring those employees back. But it could be just what your business needs to receive loan forgiveness.
4. Have your paperwork ready
While the SBA has an application that they have given banks, many banks have their own process. You will need:
- Tax returns for at least 2019, but if you have 2 years of tax returns easily available, get those ready.
- Payroll reports that show clearly how you achieved your total loan amount.
- Legal company formation documents or organization legal structure/setup, ownership, etc.
- You will need to document in one way or another how COVID-19 has negatively impacted your business. The easiest way to do this is to compare your sales from February to April 2019 to your 2020 sales for the same months. Also document the downturn in sales from January 2020, monthly, through the current month. The last piece is to create a forecast of the continued impact on your sales based on the current trends. If you followed step 2 correctly, you should have this forecast scenario in hand already.
5. Work with a local bank if possible
Not everybody banks with a local community bank, but if you do, you will find you are more likely to be able to work with a real person and get more information and better service throughout the process. The larger banks have long lists of businesses and organizations that have applied, and many have stopped taking new applications. You may need to move your business bank accounts to the local community bank to get into their queue, but it may be the difference between getting and not getting PPP money.
6. Talk to multiple banks
If your bank is not playing ball, or you’re stuck on a waiting list, try going to another local community bank or credit union. Some banks have been able to be more nimble, as they are smaller and have less overhead, making it easier for them to agree to help.
Again I want to stress that your best possible scenario is to work with a person at a bank. Larger banks and other potential PPP providers that are automating everything won’t be able to give you as much insight as to where you are in the process or provide help with the paperwork if you need it.
7. Don’t start applications with multiple banks
Creating multiple PPP applications can slow the entire process down. It’s worth talking to multiple banks, but then you’ll need to make a decision and apply with just one bank. As part of the application process, you’ll have to certify that you’ve only applied for a PPP loan once.
8. Check out one of the fintech companies that is processing PPP loans
Divvy and Lendio are already doing it. PayPal, Square, and Intuit also plan on processing PPP loans. The biggest issue with these companies is that for the most part, they are using technology to fully automate the process. This makes it easy and simple for current customers that have that info on file but can lead to misfires for those that just joined or that are just applying.
If there is something “wrong” or filled in incorrectly they will just reject you, most of them without telling you what is actually the problem. But it doesn’t hurt to get in line and see what happens.
9. Follow up!
Wherever you applied, don’t be shy. Email, call and ask for information. You should be getting responses and you should be getting information. Once your application goes through and the funds are allocated by the SBA, your lender has 10 business days to get your loan documents and fund your PPP loan.
If you do these 9 things when applying for a PPP loan, you stand a better chance of your application being approved and the money from the loan being made available to you much more quickly. If you’re looking for more insight into what you can do to help your business survive and thrive through this crisis, check out our recent writeups listed below, as well as our COVID-19 Resource page for webinars, articles, and up-to-date information.
Crisis Planning Resources
How to create a plan to save your company in a crisis:
When facing an economic crisis, it can be difficult to think about the future of your business. The need to survive takes precedence over planning and that can lead to both short and long-term problems for your business. But there are steps you can take to save your business and pivot to recession-proof success. Read More.
Why You Should Update Your Budget and Forecasts in the Age of Coronavirus:
Don’t let times of uncertainty lead to panic and rushed decisions. Instead find ways to adapt and plan, starting with reviewing your budget and forecasts. Read more.
Paycheck Protection and SBA Disaster Loan Checklist:
Streamline the loan application process and get your emergency funding faster with the right documents and reports. We’ll show you exactly what you need today to win an SBA loan. Read more.
How to Manage Cash Flow in a Crisis:
Cash flow management in a crisis is absolutely vital. Check out our five tips to improve your cash flow and help your small business survive and thrive. Read more.