Be Prepared for PPP Loans, Round 2
The floodgates on the $349 billion SBA guaranteed, forgivable, loan program slammed shut last Thursday morning when the SBA's guarantee authorization ran out. Congress is about to increase the number of loans that the SBA is permitted to guarantee. The amount of the increase is still being debated in Congress as this is written, but all of the numbers we have seen are in excess of an additional $300 billion. Once the authorization is enacted, the floodgates will re-open, and based upon what our bank clients tell us, we anticipate that the SBA will be flooded with hundreds of thousands of loan guarantee requests almost immediately. Therefore, we strongly urge our clients who are eligible for the loans but have not yet received complete approval to be prepared to submit their applications immediately.
There are many misunderstandings regarding the application process, which have led to clients believing that they are much further along than they actually are. Some of the largest banks have accepted applications, but those applications are still being reviewed by the bank. Although these banks are sending out polite, “we’re sorry” emails, many of these banks do not tell you, as an applicant, whether you are first online or last online. In many cases, the bank does not tell you whether it has even completed its own review of your application. We recommend that if you are in that purgatory of not knowing where you really stand, you should contact your personal banker immediately to determine your status.
We also recommend that you not accept vague platitudes instead of an honest answer. If you are unsatisfied with the response from your own banker, you may want to contact us. Although it will be difficult to do so, we may be able to help you find an alternate source of the funds if you have an application requesting a loan for only payroll costs that are strictly authorized by the rules (which means, among other things, no 1099 employees and no compensation over $100,000 per person).
In addition, Congress is also expected to increase the authorization for the Economic Injury Disaster Loan program, known as the EIDL. If that happens, the SBA should reopen its direct application portal, and we recommend that you apply for an EIDL loan if you qualify. The loan should be accompanied by a $10,000 EIDL grant that you are not required to repay even if your loan application is not granted.