My Company Did Not Get a PPP Loan, Now What?
by Hal Levenson on Apr 22, 2020 2:02 PM
As of this week, the PPP loan & the EIDL $10K Grant have officially run out of funds. Some businesses have been approved and received their money while others have not. Below is a list of questions we explored on Tuesday’s call regarding the overall handling of the PPP funds for companies WHO WERE NOT approved and/or funded.
To offer guidance, Trilogy invited the following professional advisors to join our call:
- Rachel Stark, Shareholder: Stark & Stark, a full-service law firm serving PA & NJ.
- Jim Colitsas, CPA: Princeton Financial Group specializing in Tax, Assurance and Accounting, and Consultative & Planning Services
- Matt Putnam, Business Lending Specialist: Dogwood State Bank
- Matt Flannery, Senior Vice President, Team Leader SBA Lending: Provident Bank
The PPP application has you certify that you have not applied elsewhere. We cannot get through to speak to a live person at our bank regarding our application. We have only received an email, from an address we cannot respond to, advising us that the PPP funds are exhausted and the SBA is no longer accepting applications but the bank will continue to review our application for completeness in the event that additional PPP funds become available and the SBA starts accepting applications. A CPA is advising us to submit a 2nd application with another bank. If we get approved through one of the banks, we are to notify the other one immediately to pull our application. Is this legal?
- While not illegal, you should only apply to one bank at one time.
- Recommend that you stay with your 1st application – banks have a queue set up and you won’t want to lose your place in line. Lack of response or inability to talk to a live person from bank is creating fear but you may not get funding if you start over.
- Stay with the bank you know; try to reach out to your personal banker who may be able to help you with the requirements of the application.
- Counter to expert advice, one business owner did not get any response from larger bank, went to smaller bank and got funding. Bankers on call acknowledged that there is a risk to doing this and recommend that you fully understand the bank’s process moving through the PPP. Don’t want to risk being on the end of the queue at the new bank.
- Advise that if you submit to a new bank that you send an email to document withdrawal from original lender. Be transparent with new bank that you had an application on previously submitted.
I founded my S Corp just last year and have not yet set up payroll, therefore have not been paying into unemployment insurance since I do not have any employees on payroll. As the owner and only “employee”, I have been taking distributions as my source of income until setting myself up to receive paychecks. My business has been temporarily shut down since March 17, 2020 due to COVID-19. Am I eligible for PUA?
- Yes, you are eligible for PUA (Pandemic Unemployment Assistance).
The PPP Loan states that it also applies to Solopreneurs and Single Consultancies. However, when applying, the list of required documentation included some materials that a single solo operation would not have. We do not run a payroll. I do not have employees but rather 1099 subs. I do not have any records of paying health insurance or benefits —especially as I myself am covered through my spouse’s job. Consequently, when I applied, I submitted my taxes and proof of quarterlies paid. I stated what my salary draw was per month and multiplies that by 2.5 for the amount.
I was notified first that my bank did not submit my application in time before hearing the SBA had run out of funds. And it stated it was incomplete since it did not have all the docs they require. What is my recourse?
- This is where having a relationship with a banker is helpful. A lender’s early reaction might be to kick this application out but, with rules changing daily, a good relationship with a bank might help. Option to use 2019 Schedule C to calculate payroll. Try to call the bank and have a conversation otherwise, explore other options.
How likely is it that the government will provide more funding for the PPP loan and the EIDL grant?
- EIDL Grant: Unlikely
- If you have not received a request for additional information, it is highly unlikely you will receive any funding for the EIDL $10K grant.
- PPP loan: May be more funding by end of week
- Possible that some loans are still in the queue. Some participants shared that they heard late Friday that their loans were approved, finalized loans yesterday, and received the funds today.
If more funding is approved, do I need to re-apply with my bank or with the SBA?
- No need to reapply.
If the PPP is extended, will the rules for using the money be different? If so, how?
- Not likely that the rules will be different than current loan terms.
If we did not get the loan, can we lay off/furlough our employees or should we wait to see if the government provides more funding?
- Recommend that you speak with your accountant and/or labor attorney. Strategic decision that will be different for every business.
If we do eventually get approved for the PPP loan, do we have to re-hire the same employees that we let go or can we hire new employees?
- You may hire new employees.
What happens if a former employee does not want to be re-hired? How does that affect the PPP loan?
- Between Family First Legislation and additional $600 unemployment, some employees won’t want to come back, especially if they feel their safety is at risk. Advisors on the call don’t recommend hard lining by threatening to take away unemployment benefits. One suggested “Hazard Pay” to entice employees to return. It’s critical, especially with smaller teams to communicate. Also, consult a labor attorney if you have any questions.
Have businesses suffering a shut down or near shut down in Q2 explored the benefits of the ERC (Employee Retention Credit), if expecting at least a partial ramp up of business in Q3 and Q4?
- Cannot receive PPP and ERC. Advisors are not recommending ERC.
How have you currently changed your business model?
- Using technology and social media in new ways to connect and stay in front of customers.
- Giving back, a lot of goodwill.
Will benchmark of volume required for loan forgiveness be reimagined for June 30th if our revenue is dependent on other businesses?
- Lender should have taken into consideration when application went in to allow for loan forgiveness.
About Hal Levenson
Hal Levenson is the Founder and Chief Visionary Officer at Trilogy Partners. Trilogy Partners is an advisory & implementation firm whose mission is to help companies grow and transform. We accomplish this by focusing on 3 critical business areas: Financial, Strategy & People.
DISCLOSURE: Please check with your trusted professionals prior to acting for your business. This Q & A recap should not replace professional services from legal, financial, payroll, HR, insurance, or consulting professionals. If you need a resource in one of these areas, please reach out to Hal Levenson at email@example.com or contact Trilogy Partners at 609-688-0428.
Also, as expressed by the professionals on the call, it is critical that you do a personal examination of the many factors of your business to make the best decision for you and your employees.