Business owners will need to use a variety of strategies all at once as they pursue economic support in the newest round of Paycheck Protection Program (PPP) funding.
Borrowers will need to be aggressive, to get applications filled out in a timely fashion. They will need to be patient, as the U.S. Small Business Administration (SBA) and U.S. Treasury may take more time than in the past to screen applications and reduce the risk of fraud. Finally, borrowers will need to be vigilant and watch for changes to guidance that might affect their applications, funding, or loan forgiveness.
The process isn’t new, at least there’s familiarity with the program and how to go through the program. There are changes, though, in the new round of PPP funding, so as before, borrowers will have to stay cognizant of any new rules and regulations.
Some lenders are requiring PPP borrowers to apply for forgiveness on their first-draw PPP loan before they file to seek a second-draw PPP loan. However, this is not a requirement of the SBA and Treasury, which run the PPP.
Borrowers should also know the following as they participate in the latest round of PPP funding:
Data is critical. The first step in applying for a PPP loan is gathering all the relevant data borrowers will need. Information such as average monthly payroll amounts and (for second-draw PPP borrowers) quarterly revenue comparisons is necessary.
Take the time to make sure the correct data is submitted. While this program isn’t new, there are changes in the second-round rules. Make sure you’re aware of the changes and make sure that they’re integrated into any application submited.
There is a need to be aware of the differences between first-draw and second-draw loans and understand that second-draw applications require borrowers to prove they have experienced at least a 25% reduction in gross receipts as a result of the pandemic.
Gather and keep documentation. Retaining documentation that backs up the information submitted in application forms is critical.
Supporting documentation for the average monthly payroll calculation used to calculate the maximum loan amount must be obtained to support those amounts derived and will be helpful in the future, as it drove the amount of the PPP funds the borrower receives.
Understand the new expenditures eligible for forgiveness. New guidance makes certain covered operations expenditures, covered property damage costs, covered supplier costs, and covered worker protection expenditures eligible for PPP forgiveness.
New borrow opportunities. The latest round of the PPP opens funding to certain categories of clients that weren’t permitted to apply for earlier PPP funding.
Certain 501(c)(6) not-for-profits, such as chambers of commerce; destination marketing organizations; certain housing cooperatives; and some local newspapers, TV, and radio stations may now apply for PPP loans. Borrowers’ eligibility is subject to certain restrictions. Be sure to review all eligibility criteria when applying for PPP funds.
Be prepared for a longer approval process. It may take a bit more time for the SBA to approve PPP funding than it did the last time because reviews are being done more carefully to check for potential fraud and validate applications.
The SBA is trying to ensure that the funds are used appropriately. This translates to that when you go into the PPP application, make sure the correct data is submitted to avoid drawing out the review process.
With assistance in the PPP loan process or with PPP forgiveness applications, please feel free to contact Grant Thornton Israel at firstname.lastname@example.org or 03 710 6644