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Tips for navigating the PPP loan application

May 06, 2020

If you feel like your small business is taking the brunt of the financial hit during this COVID-19 pandemic, you’re not alone. While the CARES Act stimulus bill designated $350 million dollars to support the small business sector, funds were hard to get, and the program ran out of money very quickly.

A second round of funding has been made available and, while the program is still experience crashing and overloading, it’s still a second chance at relief for small businesses. Fortunately, some businesses such as LivePlan.com successfully made it through the first round of funding and are offering sound advice to help other small business owners navigate the process. We’ve used their advice to compile this summarized list of tips to consider:

Know your eligible loan amount. Your loan amount will be your average monthly payroll times 2.5. Details to clarify payroll expenses can be found here.

Calculate the dollar amount of the loan that can be forgiven. While you’re eligible for a loan that provides eight weeks of payroll, rent, mortgage interest and utilities, you must spend 75% of the funds on payroll, maintain your full-time employees and not lay people off. Be sure this will work for your business before applying.

Determine which of your eligible expenses the PPP loan will cover. In order to ask for forgiveness, you must have proof that you’ve used the money appropriately. Put together a profit and cash flow forecast to understand if the PPP loan will or will not help your business’s unique financial situation.

Have needed paperwork ready. Many banks have a loan process different from the SBA. Having this information ready is key:

- 2019 tax returns, 2018 if you have them

- Detailed payroll reports to support your desired loan amount

- Legal documents for company formation, ownership, etc

- Documentation of how COVID-19 has had a negative impact on your business

Reach out to local banks first. Big banks tend to have a backlog of applications. If you can work locally, you’re more likely to be able to communicate with a live person and get a much higher level of service with lower applications than big banks.

Reach out to multiple local banks. If you experience a delay in communication or are put on a waiting list, try another local bank or credit union.

DO NOT start the application process with more than one financial institution. Decide and apply through only one bank to avoid delays.

Follow up on your application regularly. Stay in constant communication with the institution by email and phone, because once your loan goes through and funds are allocated through the SBA, your bank will only have 10 business days to get the loan documents and fund the loan.

While these tips can’t guarantee you’ll get a PPP loan, following them should give you a better chance of getting the relief you need. For all of the detailed information on the program’s rules, you can visit the U.S. Treasury’s PPP Loans Fact Sheet or PPP Loans FAQs.

 

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Stay well,