There’s just over a week left of priority access to Paycheck Protection Program forgivable loans for owners of the country’s smallest businesses.
Last Wednesday, the Small Business Administration began accepting only PPP loan applications from companies with fewer than 20 employees. This priority period is expected to last two weeks before the program reopens to the rest of the small business community.
“Whenever there is a deadline, people feel that pressure,” said Melissa Bradley, co-founder of the Ureeka mentoring technology platform, which now helps small businesses navigate the PPP application process.
“Don’t do it blindly,” she added. “Be opportunistic, but not opportunistic.”
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While Bradley appreciates the two-week window, she thinks contractors don’t have much time to clean up their papers and do their research. She is concerned that many business owners who could benefit from prioritization aren’t properly prepared and historically don’t have access to the kind of support that could help them.
There’s also some upcoming advice from the SBA, which is expected to update its formula this week for sole proprietors. There are plans to move eligibility calculations based on net profits to gross income.
“The change… is likely going to impact up to 10 times or more of the loan amount,” said Sam Sidhu, chief operating officer of Customers Bank, headquartered in Phoenixville, Pa. About 70% of its loan volume are first-time PPP customers.
“It will help those who need the money the most,” he added.
Customers Bank is suspending funding for these loans until the SBA issues its guidance.
Here are strategies to help you navigate the process – before, during and after your claim.
Whenever you assume a financial obligation, read the fine print, Bradley said. Download the app and pay close attention to the conditions.
Also check out everything that has been written about it, including the stories. The SBA details first and second draw loans and loan forgiveness, and also documents frequently asked questions on its website.
It also means staying tuned to any changes or adjustments to the law afterwards.
Get your financial house in order
Make sure your account statements are up to date and have them reviewed by an accountant.
Next, think about how much money you will be asking for in the application. Typically, women and entrepreneurs of color tend to ask for loans they think they can get, instead of what they need, Bradley said.
“Make sure you ask for enough not only to survive, but also to thrive,” she said.
Once you’ve determined what you need to thrive, perform another financial analysis that takes into account your ability to repay the loan if you need it, advises Bradley.
For the loan to be repayable, 60% must be spent on the payroll. Under current rules, sole proprietors can use it to pay themselves, up to a period of eight weeks of their 2019 net income. Still, updated guidance expected from the SBA may impact this. .
“There is no level of clarity on what will be required and how the loan forgiveness will be calculated,” Bradley said.
Once you get the loan, be sure to track how you use it and keep all paperwork. So when the window opens to request a discount, you don’t waste your time collecting information and documentation, she advised.
Complete the application
When it’s time to complete the application, make sure you pay attention to all the little details. Have your tax return information and other documents on hand and organized.
Here are more tips, courtesy of Customers Bank:
- Answer the questions exactly.
- If this is your second loan, get your first loan SBA number correct.
- Get the correct amount.
- Get the name of the correct lender.
- Know your North American Industry Classification System (NAICS) code and enter it correctly.
- Understand the difference between W-2 employees and 1099 employees.
- Organize your payroll numbers.
- Make sure you have the correct inbound routing number for the bank account you want the loan deposited to.
Remember, if you get the loan, until it’s canceled, it will show up as debt on your balance sheet, Bradley warned.
“So you need to understand the impact of debt on future rounds of financing until a loan is canceled.”
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