Payroll Protection Loans – Round Two and other Reflections

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Good news as Congress has approved another $310 billion in new funding to add into the cash depleted Payroll Protection loan program. An additional $174 Billion is included in the coronavirus relief bill to fund primarily SBA disaster assistance loans ($60 billion), grants to hospitals ($75 billion) and coronavirus testing ($25 billion).  President Trump has previously indicated he would sign the legislation.

Since the mechanism for application and funding will stay the same, the funds should roll out very quickly.  Insider wanted to answer, in advance, some question our readers might have:

What about my application I already have in with my bank? 

First off, each bank can be a little different, but we have a wide enough sampling where it is likely if you have an application in with your bank, you should not have to complete another application to have access to the new funds.  If you have the ability to confirm with your banker that your application is in place and, maybe most importantly, correctly completed, it’s a good idea to make that call.  Some of the banks may have already provided you with an update.  Here is an example Insider received.

Thank you for choosing BECU for your Paycheck Protection Program loan. We have received your application, however government funding for this program has been depleted  at this time. We are hopeful that Congress will approve additional funding in the days ahead. Despite the current status of the program, we are continuing to internally process your application to be ready to submit to the SBA should the program become available again.
What if I am not happy with how my bank is responding to my application process?
We have had feedback that many of the smaller owner/operators working with  larger banks have seen slower processing or a reluctance from the banks to even take applications.  If you are in that category, you should think about quickly identifying a community bank and applying through them.  It is likely you already know a bank that has been very helpful to local business.  This new money will go quickly too, so do it NOW.
Will there be a higher level of focus on small business operations?
The answer on this one is maybe.  The program was set up as first-come, first-serve and the first round saw at least $300 million of the total $349 billion funneled to 71 publicly traded companies, including 15 with market caps of over $100M. As has been reported over the last week, the program ran dry before many smaller independent businesses were able to apply.  Another interesting glitch was even though the definition of a small business was under 500 employees, the SBA interpreted that as 500 per location, allowing a number of large restaurant chains to obtain loans. When the CEO of Shake Shack agreed to send back the $10 million in PPP proceeds they had received, it created a large spotlight on that loophole. Later this week, after more than 200,000 people signed a petition, Ruth’s Chris agreed to return $20 million they received in two different subsidiaries. As a result, Insider is hopeful that small business will see more of the funds in this round.
So be proactive, get your applications in, communicate with your banking contacts and if you think you have an underperforming bank, make a switch to a community bank that has performed well.
If you have comments, please send them to me at johnhweller@comcast.net.
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