Most lighting showrooms should probably apply for the PPP loan program (but consult with your CPA first) given our level of economic cloudiness. Even if your showroom is doing well, the impacts of the COVID-19 simply cannot be certain.
Below is a link with more information on the program, but in short, it will lend a small business up to 2.5 months worth of payroll and if you commit to keep employee payroll at pre-COVID-19 levels the loan will be forgiven (won’t need to be paid back). There is a limited amount of funding for this program so you’ll want to move quickly if you decide to apply and haven’t already.
I submitted my application Friday (April 3rd – which was the first day the program opened) and it looks like things went through successfully. I’m hearing that a LOT of others are having problems and delays, so I figured I share some tips on getting an application through with fewer hiccups:
- BANK VS. SBA SITE: Most will want to apply through your bank. You can apply online through the SBA site, but I’m guessing that will cause delays because it’s being processed through a 3rd party (Lendio) and then they connect you with a local lender anyways.
- BANK SIZE: I’m hearing that smaller local and regional banks are better to go through for this. With larger national banks like Bank of America, Chase, Wells Fargo, etc. I’m hearing it’s harder to get through to people and there’s more red tape. The smaller banks seem to have fewer applications to process and perhaps less red tape but the biggest thing is that you can get people on the phone.
We have accounts with both a large national bank and a small local bank and by far my experience has been better (getting info about the program before it started, for example) with the smaller bank.
- BANK PROBLEMS: If your bank doesn’t participate, or if they’re giving you the run-around, I don’t think it’s work dawdling on this. There’s no telling how fast the funds will dry up and who knows if there will be more. Rather than accept major delays from your bank (if they don’t seem to be able to get the job done), I’d probably go through another bank or the online SBA/Lendio route.
- BE PROACTIVE: I took one look at the SBA application form last week and thought, “they’re going to need more information than this… I’ll bet they come back with multiple rounds of ‘need this too’ information unless I’m proactive and don’t wait for them to ask.”
Sure enough, what I’m hearing from many that submitted their application with just what the bank asked for up front… now they’re being asked for more info and their application moved to the back of the line.
I called my banker before I submitted my application and asked what information isn’t listed yet that he thought MIGHT be necessary. Based upon that, here’s a list of things to consider sending in with your application even if you aren’t asked for it:
– A third party payroll report for the period you’re using (most of us will use the monthly average of last year’s payroll). Note that the payroll report NEEDS to show the total payroll per employee for the year so you can show that you’re following the $100k cap rule (see next item).
– An excel spreadsheet (but print it as a PDF, don’t send it as an excel file, more on that below) with your payroll numbers broken out showing HOW EXACTLY you calculated the numbers you put on your application. Show where you followed the $100,000 annual cap (note: you cannot apply more payroll than $100,000 for any single employee). So pretend you have 5 employees, and 4 of them were paid $60k last year, and the other paid $120k last year. You’d have 4 rows showing an average of $5,000 per month in pay each and one row showing $8,333.33 in average monthly pay (the employee at $120k can only count for up to $100k… $100k/12=$8,333.33). Then you’d total it up to $28,333.33 in total average monthly pay.
By spelling out your numbers in unmistakable detail, you make it more likely that your overwhelmed-with-applications banker will just see yours, understand the numbers, and be like “this one’s easy… I’ll just push it in now and get it off my desk.”
– Lease agreement (if you’re declaring that you will use the funds for rent).
– Last 3 months utility statements (if you’re declaring that you’ll use funds for utilities.
– A current Balance Sheet. Our bank asked us for an EQUITY WORKSHEET and they had rush-prepared an assets and liabilities worksheet that was a confusing mess… so I sent a balance sheet. To be doubly proactive, send the report they give you on their form AND a balance sheet as substantiation.
– The name/last four numbers/other information needed for them to identify the checking account you want the funds deposited into (but WITHOUT emailing so much that your bank account could be compromised if the email were hacked/stolen). This was one of the little sneaky ones that I didn’t think of until I talked to my banker. Nothing on the SBA form asks where you want the funds deposited.
4/7/2020 UPDATE: My banker called just after this post was published and advised that we set up a new checking account to deposit the funds into from the PPP. This makes it easier to separate, track, and verify that funds are used properly and he felt would speed up funding itself now that we have approval.
– Add an addendum to your application for any other businesses that you own more than 20% in and include the EIN, contact info, and exact percentages you own of each company. Note that I both attached the addendum to my application itself (which is what the SBA application asked us too do) and also attached it separately to the email as an individual attachment.
– MAKE SURE YOU LOOK CAREFULLY FOR ALL THE PLACES ON THE APPLICATION YOU NEED TO INITIAL… on some of the newer SBA applications I’m seeing two sections for initials and one of them is not in a spot you’d think to look for it (up in the first set of questions… they ask you to initial right next to the end of the question rather than out where it makes sense) and they are easy to miss.
– Make sure when you print or save to PDF…that you CHECK EVERY BOX THAT YOU FILLED IN TO MAKE SURE IT DIDN’T GET CUT OFF. On the September version of the SBA application form I filled out there were two boxes (an address and one of the EIN boxes) in which the numbers didn’t auto-size as you typed them and so it cut off the last few characters when the application was converted to a PDF or printed.
– Attach a health insurance statement or other proof from your provider verifying the health insurance costs if you provide insurance and plan to add that to your payroll numbers.
– Attach 401K or other retirement programs that you contribute to (as income) for your employees as proof of those if you plan to add that to your payroll numbers. (note: there is some confusion on whether 401K contributions etc. can be added to your payroll numbers… if you want to play it safe leave them out).
– Save and send files as a PDF. Don’t send any WORD or EXCEL or GIF or JPG or any other format because the bank might not have the right program to open the file, likely has security protocols that prohibit all but a few file types, and the formatting might get screwed up if you send anything from Docs or Microsoft office. PDF is almost universally used. If you need help converting to PDF or attaching images, pages (like the addendum A), or anything else. Let me know and I will help (I have the full Adobe professional suite so I can help out by editing PDF’s in ways that normal Adobe Acrobat doesn’t allow)
– NOTE: Probably overkill, but I sent two versions of the application. One that I digitally signed using secure Adobe Acrobat digital signature tool and the other that I printed, signed/initialed physically, and then scanned so I could email it.
My philosophy is that any time more information is needed my banker will take a week to communicate that to me (there are so many applications to process that any delay will be big) and after I send it back, it wait in line for another week until my banker works on it again.
I’d suggest to cut as many delays down by being proactive up front and sending everything they MIGHT need to process your application.