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April 21, 2020 By jenleelaw Leave a Comment

Round 2 of PPP: Tips to Make or Break Your Approval Odds

The CARES Act, passed on March 27, 2020, kicked off a chaotic and unorganized process of applying for a new program called the Paycheck Protection Program. On the surface, this looked like a great program for struggling businesses. A loan that can be forgiven if used to pay employees, rent, and other approved business expenses. This idea was far better than saddling small businesses with more debt than they already have.

The initial problem was that lawmakers passed a bill that had absolutely no procedures or processes in place. Banks scrambled to obtain guidance with bankers working around the clock to get an approved SBA application…and then the application changed just hours before the launch of the program. Then, the money ran out two weeks into the program. As we gear up for round 2 of funding, here’s what you need to do immediately to obtain funds:

  1. Get a copy of the application (https://www.sba.gov/sites/default/files/2020-04/PPP%20Borrower%20Application%20Form.pdf) now.
  2. Fill it out completely. Do not leave a single field blank. If you do not know the answer or how to calculate your monthly payroll, call your accountant, your payroll specialist, or a professional who can explain it to you. The funds for this program are going to people who can follow instructions.
  3. There are specific documents required to move your application along to the next stage. They generally include your 2019 940 and 941 tax documents, bank statements to show proof of payroll, payroll reports to verify monthly payroll costs, and benefit invoices/statements. Your application does not move at all if you do not provide every single document that is requested. 
  4. If your bank requests something specific to complete your application, stop what you are doing and immediately find that document and submit it electronically and in a readable format. Do not wait until tomorrow or next week. Your application will be pushed to the side.
  5. Finally, not specific to PPP, but it became apparent that the majority of really small businesses who got funds in the initial round banked with smaller, local, or private banks. I highly suggest you find a bank where you have a personal relationship with a banker. I always hear from people that they have banked at xxx big bank for years and it’s too hard to switch or things are fine. When things go sideways, you want the bank where you have the cell phone number of your banker and she answers your call every time.

If you are looking to obtain funds under Round 2. Start now. Get your documents together. Respond to requests for documents. Understand how the program works. We wish you the best of luck in the coming weeks!

This is just a basic overview and is not legal advice specific to your situation. If you have questions about your rights when it comes to debt and credit, you should speak with an attorney in your area for legal advice. If you live in California or North Dakota and would like to speak with Jen Lee Law regarding your situation, please schedule an appointment.

Filed Under: Credit Tagged With: business

March 30, 2020 By Jen Lee Leave a Comment

The CARES Act and the Paycheck Protection Program: What You Need to Know

Money

Lots of information out there about the new CARES Act and what it purports to do. It’s a huge document and has a lot of moving parts. In an attempt to pull out useful information for the average consumer and small business owner, we are working on a series of blog posts to help answer some questions. 

One of the most interesting sections discusses a new loan program for small businesses that has an element of forgiveness involved. A chief complaint of SBA loans is that businesses were already saddled with debt and adding more debt may not make sense or even be feasible in the long-term. Enter the Paycheck Protection Program (PPP) loan.

The PPP is different than the disaster recovery loan that many have already tried to apply for in the past week or two. Applications are not available yet and documents, procedures, and communication with banks are still being established. The program offers cash flow assistance to small businesses with fewer than 500 employees.

The amount available is equal to 2.5 times the average monthly payroll costs or $10 million, whichever is less, and the average monthly payroll is based on 2019 payroll figures. Monthly payroll costs not only includes wages for employees, but also paid sick leave, health insurance premiums, payroll taxes, and other benefits. The loans are intended to cover payroll costs, business disruption, health insurance premiums, lease or rent expenses, and utilities.

A very important detail is that the loans will not be personally guaranteed or require collateral, which is very different than most SBA products previously on the market.

Now, the forgiveness part, which we should all be looking at to figure out the terms and conditions. Loans under the PPP may be fully or partially forgiven. Loan proceeds used to make payroll, pay utilities, rent, mortgage, and existing business debt may be forgiven, dollar for dollar. However, in order to receive the dollar for dollar forgiveness, employees need to remain employed and paid through the end of June. 

Keeping complete and accurate records will be key to the forgiveness of these loans. You have to be able to show what the funds were used for, that those uses qualify under the program, and that you kept payroll going through the end of June. The better your records, the easier it will be to have the loan reduced on a dollar for dollar basis.

The PPP loans will be offered through local banks, not directly from the SBA. If you need connections to a bank offering these programs, please feel free to email me.

This is just a basic overview and is not legal advice specific to your situation. If you have questions about your rights when it comes to debt and credit, you should speak with an attorney in your area for legal advice. If you live in California or North Dakota and would like to speak with Jen Lee Law regarding your situation, please schedule an appointment.

Filed Under: Business, Credit Tagged With: business, CARES

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LEGAL ADVERTISEMENT. The information included on this website is not intended as legal advice. You should consult with a lawyer before acting on any information contained in this website.

Jen Lee Law, Inc. is a federally designated Debt Relief Agency. Jen Lee helps clients file for bankruptcy protection under the laws of the United States.

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