Prepare now for next round of Paycheck Protection Program funding

Editor's note: as of May 4, only agricultural businesses are eligible for Economic Injury Disaster Loans. 

Editor's note: the Paycheck Protection Program has been extended through Aug. 8.

Funding for the Paycheck Protection Program (PPP) was replenished with $310 billion after President Trump signed a fourth COVID-19 emergency relief package into law Friday. Money that was returned from the first round of PPP loans, mainly by large publicly traded companies, will be added to that amount. The Small Business Administration (SBA) expects lenders to start taking applications April 27, and given how quickly the first round of funding was exhausted, businesses are advised to apply as soon as possible.

The PPP was established under the Coronavirus Aid, Relief and Economic Security (CARES) Act. It is intended to help businesses with fewer than 500 employees keep workers on the payroll during the COVID-19 pandemic by extending loans of up to $10 million that can be forgiven if employers keep paying their workforce. The funds are predominantly for payroll but may also be used to cover rent, mortgage interest, or utilities. A portion of the funds — $60 billion — has been earmarked for borrowers that don’t have an existing banking relationship so underserved areas aren’t left out. An additional $60 billion is being provided through Economic Injury Disaster Loans (EIDL).

Do’s and Don’ts:

The following tips will help you navigate the PPP process.

DO prepare now and apply early. Funds are expected to be exhausted quickly again.   

• If you already applied for the PPP loan and you have not received an SBA approval number, continue working with your existing lender regarding next steps. Your lender may be holding those applications until the additional funding is received, so you may not need to reapply.
• If you haven’t yet applied, determine your eligibility, calculate your PPP loan amount, and apply (preferably with a lender with whom you have an existing banking relationship).

DO gather items that will likely be needed for the application. The most common items lenders need are:

• For companies with employees: payroll records or IRS Form 941 for 2019, and 2019 health insurance premiums,
• For sole proprietors/self-employed: IRS Form 1040 Schedule C and profit/loss statement,
• For independent contractors: IRS Form 1099-MISC.

DO work through your existing bank relationship. Banks tend to service their existing customers first, so this is your best chance at getting funded. Keep in frequent contact until your loan is approved, and try not to miss calls or emails pertaining to the loan.

DO look beyond your local bank if they aren’t able to help you. Congress allowed additional non-bank and third-party companies to handle loans. This article provides a listing of additional lenders, which should give small businesses better access to loans.

DO understand the terms of the loans. PPP loan recipients are expected to self-certify “in good faith” that they actually need the loan. This shouldn’t present an issue for small businesses but may be problematic for public companies and subsidiaries owned by large companies with adequate liquidity to support ongoing operations. The SBA retains the right to audit borrowers later.

DO keep good records of how funds from all programs under the CARES Act are used. Proceeds from the PPP and EIDL programs must be used for different expenses. Questions remain as to how all the various programs under the CARES Act interact with each other. Business owners need to be careful about double-counting expenses.

DO consider applying for both a PPP and EIDL loan. While the proceeds need to be used for different expenses, this should be fairly easy to accomplish, as EIDL funds are more flexible. They can be used for general working capital, and come with the option of an advance of up to $1,000 per employee ($10,000 maximum) that is forgivable.

DON’T accept multiple PPP loans. You are only allowed to have one PPP loan. You may apply with multiple lenders, but once you are approved for a loan you must withdraw your other applications.

DON’T give up if your loan isn’t funded. This may not be the last round of funding so be ready to apply again.

The PPP borrower application can be found here and must be filed with your lender. The EIDL is filed directly with the SBA and the application can be found here. Visit the SBA site for more information.

Refer back to the American Academy of Family Physician’s pages covering COVID-19 financial relief and daily updates for ongoing guidance.

— Sandy Pogones, MPA, CPHQ; Senior Strategist Health Care Quality, Practice Advancement