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This March, when it became evident that the novel coronavirus that causes COVID-19 was not going to simply disappear, Congress worked hard to pass an economic stimulus package. Within a few weeks, the president signed the Coronavirus Aid, Relief and Economic Security (CARES) Act into law.


A portion of that act, the Paycheck Protection


Program (PPP) set aside nearly $350 billion in relief for small businesses – an amount that was later increased to $660 billion. The U.S. Small Business Administration (SBA) was put in charge of the program and given 30 days to set up regulations guiding how it should be run. Though it felt like an eternity to those most in need of the promised relief, remarkably, the agency had the program up and running within a week.


The banking industry has been a central piece


of that relief effort, helping applicants through the process and doing the legwork necessary to turn the loans from a government program into usable funding. From the perspective of those that lead the industry, the PPP has been a proven lifeline for businesses and employees impacted by the coronavirus pandemic. “Broadly, the program of getting money out the door and into people’s hands worked really well,” says Brant Ahrens, CIBC, chairman of the Illinois Bankers Association. “Banks loaned $550 billion to 4.7 million businesses, from


sole proprietorships to companies with up to 500 employees, in that time. About 5,400 banks participated in the program, 5,300 of which are small banks.”


Trouble in Paradise As the program rolled out, however, problems quickly became apparent. “If you’re in a business that couldn’t reopen quickly, you couldn’t really use the money,” Ahrens says, “but it enabled some to hang on.”


Likewise, if your business depends on other businesses reopening – as equipment distributors depend on restaurants and other foodservice operations – you might have thought there was little point in taking out a PPP loan. Especially since the initial act said you had to spend 75 percent of the loan on payroll expenses, and the loan covered only eight weeks’ worth of those expenses.


Following the rollout of the program and the questions that followed, the SBA and the Internal Revenue Service weighed in with additional rules on how PPP loan amounts could be forgiven and treated from a tax standpoint. Congress soon recognized that portions of the PPP needed tweaking. In mid-May, lawmakers went to work on revisions, and by early June, the Paycheck Protection Program Flexibility Act (PPPFA) was signed into law. The PPPFA extended the coverage period from eight weeks from the date the borrower signs loan documents to 24 weeks. Additionally, borrowers only must spend 60 percent of their loan amount on payroll expenses, rather than 75 percent; they can use up to 40 percent for other expenses such as rent, utilities, or mortgage payments. Further, loan forgiveness doesn’t require that businesses rehire the same number of full-time equivalent employees they had before Feb. 15, 2020, providing they can show they were unable to rehire former or similarly qualified employees, or if their business is unable to return to its previous level of activity due to compliance with federal, state, or local COVID-19 guidelines.


The application period for the PPP has since been extended as well. Originally, the program was set to close to new applicants on June 30; however, in the week leading up to that deadline, lawmakers in the House and Senate worked together to give businesses until Aug. 8 to submit an application.


PPP APPLICATION TIPS


With the new August 8 application deadline for PPP loans looming, here are some tips that may make the application process go more smoothly. 1. Determine the amount you’re eligible for. 2. Calculate the amount that can be forgiven. 3. Determine eligible expenses you’ll cover with the PPP loan.


4. Have your paperwork ready. 5. Work with a local bank if possible. 6. Talk to multiple banks and even financial technology companies like Square or PayPal if your local bank won’t work with you. 7. Only apply with one financial resource. 8. Follow up.


Summer 2020 17


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