How we created a loan calculator that helped us successfully navigate the PPP application, and how it can help your small business.
Approximately a month ago, as COVID-19 started showing real impacts in terms of business activity, Nick and I realized that in order to protect Swenson He through what could be a very risky period of time, we had to proactively plan for the worst possible outcome. Fast forward to this past weekend… we were approved and funded for our Paycheck Protection Program (PPP) loan. This is the story of how that happened.
Our earliest internal mention of potentially receiving help from the federal government involved Nick sharing with me in mid March an early version of the CARES Act introduced in the United States Senate. In this draft bill, the as-yet-unnamed PPP was starting to take shape – $299 billion for “Small Business Interruption Loans”, and we quickly started building crude spreadsheets to calculate how much assistance we could be eligible for. A few days later, the Senate had passed an updated version of the bill, and on March 27, the full $2 trillion bill became law, including $349 billion for what was now referred to as the Paycheck Protection Program, to be administered by the Small Business Administration (SBA).
The basic premise was that an eligible small business would be allowed to work with an approved bank to quickly apply for a loan that represented roughly what their payroll costs were, and if the business largely retained their employees, then the loan would be all but forgiven. By this time, we had already pored through our accounting tools and generated detailed reports for both historical payroll costs and projected forgiveness amounts, and sent an email to our bank asking to be first in line when the application window opened.
That spreadsheet and associated research turned into an internal initiative to build an interactive tool that would help any small business owner calculate their own loan eligibility, which we made available at http://ppp.swensonhe.com*.
We are proud to share this tool with fellow small business owners, and hope that the information we curated from the Act, SBA guidance, and various similar tools we looked at, will be useful in our presented format. Though the premise of the PPP is fairly simple, there are nuances that have significant impacts on the eligibility for, and amount of, loans that can be taken, as well as the portion of the loans that can be forgiven.
Over the 3 weeks after the passing of the bill, we exchanged dozens of emails with our bank providing clarification and updated documentation. What was supposed to be a one page application was greatly complicated by continual changes from the SBA on how the Program was to be administered, in some places clearly contradicting plain language in the CARES Act. As reports poured in about massive demand for a limited pot, and daily guidance from the SBA required further changes, we anxiously updated our application and hoped to receive our loan in time. Finally, last Friday, we reached the final step and received our requested funds.
By no means is our journey over – in order for this program to have maximum impact, the bulk of loans must be forgiven, but documenting the actual expense stipulated by the Program (payroll, rent, utilities, etc) is likely to be challenging. Still, we are some of the fortunate ones – many businesses did not get their funds before the original $350 billion appropriation was consumed (in less than 2 weeks, with some banks saying they ran out within minutes, having received tens of thousands of applications in very short order). Unfortunately, it seems that the Program was abused, with one lender being accused of prioritizing loans that would net them more fees (against the directives of the government), and numerous publicly-traded enterprises with large ($1B+) market capitalizations and/or balance sheets ($100M+) receiving loans. Today Congress reached a deal for additional funding for the PPP, but already banks are saying that additional funding will dry up just as fast, maybe faster.
At Swenson He, we are proud to say that during this time of crisis, we have not furloughed a single member of our staff, because we believe that our people are our greatest asset. The Paycheck Protection Program has greatly contributed to our ability to do that, and we are hopeful that our experience is enlightening for others. If you have any questions about our experience, please don’t hesitate to reach out and we would be glad to assist in any way we can.
*Please note that Swenson He is not a CPA – if you wish to use this tool, please also consult with your financial advisor to receive professional guidance.