PPP Loans

According to the SBA.gov website, the Paycheck Protection Program loan program has been re-funded and is open for business again as of April 27. The process is the same as the first tranche of funding:

  • Loans are up to $10 million;
  • Meant for small businesses with under 500 employees;
  • 75% of the funds are for payroll;
  • The loan doesn’t have to be repaid if you don’t lay off employees;
  • Interest rate is low – in the 1% neighborhood; and
  • Apply through an SBA Lender.

Apply Soon

This being Friday, May 1, if you haven’t yet applied for a PPP loan and want one, you had better get moving soon. The first tranche was quickly depleted and likely this second tranche will as well. How might you do that and even perhaps make up some time on others who are ahead of you:

  • Use a Smaller Community Bank or even an Online SBA Lender: Anecdotal evidence from the first tranche is that the smaller SBA Lender banks had much better success in processing these loans through the SBA system, and borrower got their money sooner. Perhaps this is because smaller banks are more aware of the nuances of the SBA system and/or because smaller banks might have more motivation to complete these loans and hence may pay more attention to borrowers applying through them. The larger banks – the Bank of Americas, Wells Fargos, and JP Morgan Chases – were so overwhelmed with PPP loan applications that they prioritized helping existing profitable borrower relationships first before any one-off PPP loan applicants. I’m guessing that these PPP loans are not a high-profit center for large banks but they are more so for smaller banks.
  • Go to sba.gov, click a few icons, and find yourself a smaller SBA lender. The lender doesn’t have to be domiciled in your region or in your state. The SBA is a national program and so any SBA lender can handle your application. Once you identify an SBA lender or five that might work for you, ask them how well they fared during the initial funding tranche. Another option is to Google “best SBA lender for PPP” and see what pops up. On this, make sure it displays the best lender in terms of performance, not just the most prolific PPP program lender.
  • Before applying, make sure you aren’t already a publicly-traded company, a venture- or hedge fund-backed company, or a business that might otherwise take some political heat for accepting US Government loan proceeds. If you are any of these, don’t bother to apply. The PPP program was designed for privately-owned mom and pop businesses – think about local one-off restaurants, salons, and any other business that has been directly affected and forced to close by Covid-related restrictions. That publicly-traded and venture-backed companies, as well as apparently the Los Angeles Lakers, qualified under the stated restrictions doesn’t matter because these companies have been publicly shamed in the press and have in many cases returned the funds that they qualified for and received.
  • The initial application is relatively easy to complete, and then there are stages in the application process that applicants need to complete. Hopefully, you will have a good SBA lender contact that can hold your hand through the process. I recommend that you have the mindset of, “This is a government lending program. What could go wrong?”, then your approach should work. Expect the worst but hope for the best with respect to the process.

IMO

If you want or need a PPP loan and think you qualify and should avoid political heat and/or public shaming, then get to it. Time’s a wastin’. The SBA lending window is open now, so it is in your best interest to focus and complete the task. Hopefully, you will get your needed money in due time. Also, hopefully, the “2 months of payroll” concept of the PPP program is indicative of how long the government believes the shutdown will last, especially now that we are 1 month into it. We can only hope there is light at the end of the tunnel.

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