By: First Union
First-Hand Accounts of PPP Loan Process
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Only U.S.-Based Businesses are Eligible. No startups
Since the birth of the Paycheck Protection Program (PPP/) loans in early April, there has been confusion about how to get it and who qualifies. It was part of the 2.2 trillion COVID-19 relief package known also as the CARES act, which stands for “Coronavirus Aid, Relief, and Economic Security Act”. The PPP aspect was an SBA-backed loan to be granted to small businesses so they can keep employees on payroll, that could be forgiven. The idea was that employees could stay on payroll during the crisis, easing unemployment and keeping them connected to their employers. Today on April 16th, it is being reported that the funding is now frozen and the Small Business Association stated they are, “unable to accept new applications”. So, what's going on? Let's take a look.
In the Beginning
The SBA website calls the PPP loans, “An SBA loan that helps businesses keep their workforce employed during the Coronavirus (COVID-19/) crisis”. It was created as an incentive to keep employees on payroll and stated that the loan could possibly be forgiven if it was used directly for its purpose: payroll, mortgage interest, or utilities. The loans would begin to be processed on April 3, 2020, and continue until June 30, 2020. The SBA website states:
The following entities affected by Coronavirus (COVID-19/) may be eligible:
- Any small business concern that meets SBA’s size standards (either the industry based sized standard or the alternative size standard/)
- Any business, 501(c/)(3/) non-profit organization, 501(c/)(19/) veterans organization, or Tribal business concern (sec. 31(b/)(2/)(C/) of the Small Business Act/) with the greater of:
- 500 employees, or
- That meets the SBA industry size standard if more than 500
- Any business with a NAICS Code that begins with 72 (Accommodations and Food Services/) that has more than one physical location and employs less than 500 per location
- Sole proprietors, independent contractors, and self-employed persons
It seems pretty straightforward, but the confusion surrounding the process had left many small business owners wanting.
Furthermore, small business owners are now concerned that bigger chains may have gotten access to this aid before they had a chance. Fox Business reported that Ruth’s Chris Steak House, a large chain restaurant, received $20 million in PPP loans just 4 days after they applied through two subsidiaries for $10 million each- the maximum amount. This comes to the major frustration of small business owners who are unsure if they will get anything at all now. One comment online reads, “My wife applied through Wells Fargo in the first few hours on April 3rd. On April 5th when Wells Fargo closed off participation in the program she got an email saying she is in queue and the moment she can file her application they will let her know. This email got sent out 3 more times over the following 9 days. Yesterday the 15th at 7 am she got an email that she could officially apply. She did within the hour. The confirmation email said that even though she applied it didn't mean she was approved AND that even if approved the program could be out of money by then. After each email in this process, Wells Fargo almost begged us to apply elsewhere but almost all places need you to have a business account before Feb 15th with them. Wouldn't it make sense that the largest small business bank, Wells, be on the top of loans produced for its customers!” The frustration about the distribution process of the PPP loans is palpable. But, the banks struggled to process hundreds of thousands of these applications.
From a Business Owner
A business owner close to First Union Lending shared his experience applying for the PPP loan starting 3 weeks ago. He provided us this statement:
“I heard about it, knowing that Bank of America was an approved provider, I have been a customer for over 10 years, I decided to try applying. The site explicitly states everywhere not to come into the bank or call for assistance with filling out the request. You had to do everything through their online portal, which is fine by me but maybe a problem for a lot of people. I went to the site and was directed to answer two questions determining eligibility:
a/) Do you have an existing business checking account set up prior to February 15, 2020?
b/) Do you have a lending instrument with us, in the form of a business loan or credit card?
I do everything on a cash basis, and I do not use lending instruments from Bank of America. I determined I was not eligible because of that and set it aside to look for help elsewhere. The next day they announced they made changes in the application process overall, so I went back to online banking and they had taken away the second question. It seemed that I was now eligible so I started the process. It took me to a new window to verify my company information and everything seemed to be going well. But, then I was prompted to enter my monthly payroll. I do not have W2 employees on staff, and pay myself through distribution. Unsure where to gain clarity, I proceeded. My monthly average distribution amounts to approximately $6000. The website had a multiplier to times this by 2.5 and it came out to approximately $15,000 - that would be my loan amount. In a virtual chatbox, I asked if I should proceed with my application using distribution instead of payroll, and was told they could not advise me either way. So, I proceed. That evening I got an email saying my information had been received. This was on Friday, the next Tuesday I received another email saying to proceed with my application and prompting me to go back to the Bank of America website and give more company information. I was then asked to submit my documents and they requested: Tax Form 940 from 2019, Protection Loan Amount Template, and Tax Form 941 or payroll process record for the period including February 15th, 2020. I do not file form 940 and was prompted instead to provide 1040c, or 1099 Misc. I did not have any of that and seemed to hit a dead end. At this point, I was able to ask my accountant who eventually told me I do not qualify because I take distributions. So overall the process was relatively smooth but so many changes were happening day-to-day. Thinking back after being told I am not eligible if we had set up my SCORP for me to take my pay as a W2 I probably would have been eligible. Personally, I did not experience web delays on the site itself, but the bank offered no direct consultation which in the end led to me wasting a lot of time.”
Do You Still Need Help?
We have been hearing a lot of confusion and frustrated accounts such as this one. If you have not yet received funding from a PPP loan, chances are slim going forward unless the government announces more funding to the program. At First Union Lending small business owners have always been our top priority. We are working tirelessly to ease the burden and provide a clear path forward. While we are currently limited and can only fund businesses that are still currently generating revenue, help is still out there. We are also accepting SBA loan applications for the new, somewhat relaxed (relaxed, not fast/) express SBA loans. If speed is your thing, ask us about our next day funding cash advances. Click here or call 863-825-5626 today.