The second round of PPP funding began this Monday at 9:30AM Eastern.
This funding was $322B (as opposed to the first at around $349B). The first round of $349B funded 1.6MM business.
As for those who were waiting on that first round, the SBA hasn’t shared recent numbers, but the last time they did, there were 800K pending applications in the queue when the first round ran out.
If yours was one of those pending applications, there is a very good chance that you should receive funding.
That said, the lessons were learned from the last round, and this funding will move MUCH faster — which means that it will run out faster.
For example, they are working to ensure that specific banks don’t receive the lion’s share of funding … so if your application is with a large bank, it would make sense to apply at a different institution.
Small banks and credit unions seem to be the most effective and efficient, but if you don’t have a relationship there, Kabbage, Lendio, PayPal and LendingClub are just some of the many other “non-bank” lenders out there, and they have also had good turnaround (though they are now running into similar problems as the large banks did before).
We are here to help you through this stage, but this is what I want all of my Greater New York City clients and friends to hear:
How you manage what happens next will determine the future of your Greater New York City business
Here’s what I mean by this. Your Greater New York City business might be in any of a variety of places right now, but from what I am seeing they are falling into these four tranches:
1) You didn’t receive SBA funding, and you don’t really need it. Your Greater New York City business has held steady and/or grown through this because of your ability to work remotely, or you qualified as an essential business in your municipality.
If that’s you, then you should be building for SCALE. That means:
- Evaluating your hiring and training (now is a great time to find amazing talent)
- Planning for how to continue your growth when the economy (eventually) recovers
- Building and planning for long-term sustainable growth
2) You didn’t receive SBA funding, and you REALLY need it. You’ve been impacted in a serious way, and your Greater New York City business is struggling.
If that’s you, then you’d better be applying for the PPP AND the EIDL, and working to make your banking partner’s life as EASY as possible.
We’re here to help you in that, but also you need to be doing these things:
- Finding other sources of funding outside of the PPP (I’ll write more about that in a future Note).
- Evaluating whether your business should be sold, shut down, or otherwise disposed of, whether or not you receive funding. We can help with this.
- Evaluating how long your business can sustain without funding, and making whatever changes necessary to keep going if you do NOT receive it.
- Making a concrete plan, if you DO receive funding, to evaluate whether it will actually be enough — and if not, what can you do NOW to somehow recapture revenue in order to survive. This requires financial prognostication, and we would be happy to help you in these decisions.
- Ensuring that when you do receive funding, that you discharge the funds in a compliant manner. Again, we can help with that.
3) You DID receive SBA funding, and it’s a good thing too … you might have gone under, had you not. You’ve been impacted, but your business is hanging in there, thanks to the SBA.
If this is you, then do THIS:
- PLAN that the crisis will NOT have run its course by the time your funding runs out, and use this time to build new streams of revenue for your business.
- Cut costs as you can (though you must keep your payroll at or above 75% of what it was before February 15th 2020).
- Ensure that you receive forgiveness of your funding by using it in a compliant manner.
- Evaluate the KPIs of your business to know whether or not you have a long-term sustainable venture when funding runs out. And if so …
- Find additional sources of funding as needed (more about that soon).
We are here to help with this.
Or, if the above three situations don’t describe you, then lastly…
4) You received funding, but it feels more like a “bonus” than a necessity. You jumped on the PPP, but your Greater New York City business hasn’t taken the hit that it might have, and the funding feels extraneous. So, again I say to you:
Disbursement compliance is essential. Don’t go crazy spending this money. Do it right.
- The funds MUST be spent in the 8 weeks following the disbursement date.
- They cannot be spent on anything BESIDES:
- Payroll (capped at $100,000 on an annualized basis for each employee)
- Group healthcare premiums (employer portion only)
- Rent/Mortgage (for the business only)
- You cannot juice these numbers by giving yourself or your employees a “bonus”. YES, you can bonus your people, but the numbers that COUNT for PPP forgiveness are the annualized figures, not *just* what is spent within these next 8 weeks.
- You must keep 75%+ of your payroll figure intact (remember, this is called the “Payroll Protection Plan” for a reason).
But if you are doing well, it might be time for some dreaming. Let’s make a tax-advantaged plan for coming out of this season stronger than ever.
And we’re here to help with that too.
Allan J Rolnick
Allan J Rolnick, CPA, CTC
I’m grateful for our chance to serve you and your business — and we are dedicated to its success, in every season.
Feel free to forward this article to a business associate or client you know who could benefit from our assistance. While these particular articles usually relate to business strategy, as you know, we specialize in tax preparation and planning for families and business owners.