As small businesses continue to navigate challenges related to the coronavirus pandemic, one of the biggest is determining if new government loan programs can help them keep employees. The Payroll Protection Program (PPP), part of the $2 trillion CARES Act, was explicitly passed to help small businesses maintain payroll, but sorting through this complex legislation has not been easy for small business owners.

At the second National Small Business Town Hall, held on April 3 by the U.S. Chamber of Commerce and Inc., a panel of business leaders walked employers through the latest information on the PPP and related topics. Much of the U.S. government's guidance on PPP has been updated in the past week, so they’ve been keeping track of all the latest developments.

During the Town Hall, Inc. editor-at-large Kimberly Weisul spoke with several experts, including Neil Bradley, executive vice president and chief policy officer at the U.S. Chamber of Commerce; Manny Cosme, president and CEO of CFO Services Group; Danny Fitzgerald, associate regional director of San Diego-Imperial SBDC Regional Network; Marilyn Landis, president and CEO of Basic Business Concepts, Inc.; and Dan Martini; VP of Congressional relations and public policy for the American Bankers Association.

Here are seven important takeaways from these business leaders when it comes to the Paycheck Protection Act and what businesses should be doing during this critical time.

Many small businesses can start applying for PPP loans immediately

Bradley said that businesses should be able to start applying for PPP loans from private banks now. Starting April 3, small businesses and sole proprietorships were able to start applying for loans. Starting April 10, independent contractors and self-employed individuals can begin applying.

However, he also notes many lenders are not set up to process the loans just yet, given that the loan program passed through Congress a week ago and is still being updated by the Small Business Administration (SBA). Lenders are scrambling to get this in place and some will not be ready to process loans until next week. The best bet for small businesses is to check with their existing lender to see when they can apply via their system.

The Paycheck Protection Program loan program changed a lot in a week

Since the passage of the CARES Act on March 27, several important provisions of PPP have been changed. Bradley said that these changes include:

  • Originally, the interest rate on PPP loans was set at .5%, and now the loan is set for a 1% interest rate. This could still change, but if you lock in that 1% interest rate today, that will be your set rate.
  • PPP loans mature after two years.
  • Businesses are required to use 75% of their PPP loan proceeds for payroll, which reduces how much of the loan can be used on mortgage, rent, and utility payments.
  • Paperwork requirements for loan processing have been simplified further, and tax filings that show payroll amounts for 2019 will work.
  • Eligibility for small businesses has been expanded to include all small businesses that have all employees working in the U.S., no matter if any owners are foreign.

There’s a lot of different things to navigate and a lot of small business owners may not understand how to put this information together.

Danny Fitzgerald, associate regional director, San Diego-Imperial SBDC Regional Network

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PPP loans may not help venture-backed startups

Venture capital-backed startups are not being treated the same as traditional small businesses with less than 500 employees when it comes to PPP loans. So all startups in this position need to keep a close watch as the government updates its policies. “We know this is being discussed at the highest levels of government about how to address this,” Bradley said.

Economic Injury Disaster Loans (EIDLs) can be rolled into PPP loans

EIDL loans, which are separate from PPP loans, are an option for small businesses right now but these are being changed now so they can be “rolled into your PPP loan,” Bradley said. This means if you apply first for EIDL loan and then secondly for a PPP loan, all debt may be put under the PPP loan terms. Some entities may still be better off only having an EIDL loan and not apply for a PPP loan at all, depending on their financial circumstances.

Small Business Development Centers (SBDCs) can help businesses for free

Fitzgerald notes that more than 1,000 SBDCs around the country have been given additional funds in order to provide free services to small businesses that are trying to apply for EIDL and PPP loans. “As soon as the disaster was declared, we were immediately mobilized,” Fitzgerald said. “There’s a lot of different things to navigate and a lot of small business owners may not understand how to put this information together. We are a free resource for small businesses in your community.”

Pay close attention to how you are spending PPP loans

Cosme suggests businesses be extremely careful with record-keeping if they get a PPP loan, in order to get some or all of the loan forgiven at the end. Once you get the loan, Cosme said employers should use software like QuickBooks to create a “class-tracking system” and treat this money like its own class. “For every dollar that is spent, make sure it is spent on the authorized expenditure and you are accounting for that,” Cosme said.

Do not pay for services or scams related to PPP applications

Landis notes that borrowers can’t be charged a fee for help preparing a PPP loan application, outside of your regular CPA. “The bank has to pay for it, not the borrower,” Landis said. “Be careful. If someone comes to you and wants to charge you to put the application together, [say no.] They really want the business owner to do it.”

Additionally, Fitzgerald said businesses should only work with existing trusted advisors and SBDCs on PPP and to watch out for scams. “The SBA and government are not going to email you and tell you to apply for this,” Fitzgerald said. “If you do not see something come from a .gov email, don’t trust it.”

For more resources from the U.S. Chamber of Commerce:

  • Check out the U.S. Chamber's Small Business Loan Guide.
  • To help you manage your business through the coronavirus crisis, the U.S. Chamber of Commerce has created a toolkit for businesses and a customizable flyer for businesses to communicate their coronavirus efforts to customers.
  • For more information pertaining to your specific location, you can find your local Chamber of Commerce here.
  • The U.S. Chamber of Commerce Foundation has created a full list of programs providing financial assistance to small businesses impacted by COVID-19. You can find that here.

CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.

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