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PPP Origination and Forgiveness for Dummies - What I Have Learned Over the Past Year of Living and Breathing PPP

Donna has over thirty years of Financial Industry experience and now serves in a Strategic Planning and Execution Role for a mid-size bank.

When it all started no one could have imagined that something seemingly so simple could consume, confuse, command, control, and contain so many.

This past Sunday, April 4th 2021 marked one year since Easter weekend of 2020 and it was quite a contrast between the two days. On April 12th, 2020, I sat in my makeshift home “office” at a card table in the guest bedroom. Outside of the window was a lovely spring day. The neighbor’s children dressed in pretty pastels happily giggled and hunted eggs in the sunshine. Inside my emails were pinging in at a clip of 100 a minute and I was desperately trying to learn (and simultaneously train) a new language that consisted of words like PPP, ETran, PLP number, SBA securitization, IFR, and Congressional Appropriations. I remember thinking that this was crazy and surely would not take too much time to finish. I was sure I would soon head outside to join the party.

Little did I know. Now a year later the entire financial industry and most small businesses (and a few large ones) are very familiar with the Paycheck Protection Program (PPP) and the good and evil contained within.

For many it felt like an opportunity for a failing business lifeline and potentially a free lunch. Now that we are all seasoned and much wiser, I wanted to share what I have learned and how to make it easier for a small business to have as close to a pain-free free lunch as possible.

Stay Flexible and Pay Attention

One thing we have learned in PPP is that change is constant. The rules and requirements are subject to modification at any point. During round one, a new Interim Final Rule (IFR) was released daily. Each release results in changes that your financial partner must make to their documents, software coding, procedures, processes, and controls. These changes must be interpreted, completed, communicated, and trained; often in real-time. Try to be patient and understand that the free lunch rules WILL change and be willing to flex with the rules.

Choose a Good Partner

During times like PPP, the need for a Community Bank Partner where you have a relationship is amplified 20x. Borrowers who applied for and eventually, maybe, received their first draw loan thru a lender where they had no relationship have since learned what pain that can cause. For some, their first draw lender sold the loan to a sub-servicer. For others the lender did not realize the amount of effort involved in maintaining the program and have almost disappeared off of the radar. This has resulted in a LOT of frustration for the borrower. Pick a Partner, not a lender. Go where you already have an advocate. If you are a business and don’t have a financial institution relationship, you need one. Online is great but nothing beats a relationship. Find the best of both worlds. A community bank where you can have a relationship, but the bank offers a solid online and mobile platform.

Be Proactive

The borrowers who had the best success in Second Draw were the ones who became proactive. Do not silently wait for an update or for someone to tell you what to do. If you are receiving email communications, keep a good eye on your inbox and respond quickly. If you see changes in the news and think it could impact you, do not sit by and wait. Contact your lending Partner and ask questions. If your status is not changing, keep asking questions until you understand the situation. If you feel like the person answering you is unsure or their answer does not make sense, keep asking to speak to someone else. If you have the right Lending Partner, you will get to the right person who can help. Or at least bring you up to speed on the SBA’s current madness.

Show Your Math

PPP is all about the numbers. The SBA has worked hard to simplify the requirements as much as possible, but you still have to follow the process. Make sure you have the documentation that proves out what you put in your application. Gather the documentation, make sure it is correct, and retain it in several safe places.

Even if you have a CPA, as the business owner you have a responsibility and a NEED to review the documentation. I have seen applications get delayed for MONTHS, even declined because a CPA or internal Bookkeeper put the wrong information in the application. Review it before submission and make sure it is correct. Check more than just payroll information. Look at ownership structure, percentages, names, titles, EINs and Social Security Numbers. Review all the data for accuracy. It will be worth your time.

Slow Down

PPP First Draw was a race to the finish line. If you were breathing and raised your hand, you got a loan. FREE MONEY!!! Let the games begin!! The pace at which the money was approved and was flying out of the SBA was heady and resulted in a mad, mad dash. This pace led to vast, varied, and huge mistakes. Borrowers, Lenders, and the SBA are now paying the price in the Forgiveness phase. But it will be the Borrower who pays the ultimate price.

For Second Draw, the SBA moved all their compliance checks to the front. This brought the process to a grinding halt as everyone learned how to sludge thru a host of Error and Hold Codes. Loans were stopped in their tracks for any inconsistency.

A lot of this could have been avoided if the Borrower slowed down, READ the question carefully, and paid attention to the answer. If the question is “Please enter the business inception date” and you answer 09/01/1081, it probably is not correct.

Slow down. Review your work before submitting or signing the document. This is about FREE money. Take a few minutes and do it right.

Taking Names and Kicking Butt

If you do find a good connection at your Lending Partner who is helpful, get their name and contact info. Once Borrowers latched onto me, they went to the top of my “I’m on it” list. I did not mind being pinged by Daniel at Acme Company. I like Daniel, we formed a bond and I wanted to see him get his money. I was his advocate. See, Daniel picked a good Partner. But in any case, if you can connect to a person take notes of who you spoke with, what they told you, the next steps, when you can expect to hear from them, their contact information. Be ready for when you must stay pro-active and follow-up.

I can tell you the adage is true. The squeaky wheel gets the free lunch.

Stay Organized

Organize all your documents and keep them handy. Store them on your computer and in print form. If your CPA has them, get copies and retain. If you sign online documents via DocuSign or E-Sign, make sure you print out copies or download and save. I cannot tell you how many people were delayed for ages in Second Draw because they did not have their first draw loan amount or SBA loan number.

If you must upload documents to an online portal, pay attention. Are you uploading the right document? Are you uploading all the requested documents? Are you naming them correctly? Did you include all the pages?

Seems simple, but many borrowers do not take the time to double check and do it right. They are the ones still waiting for the free lunch.

The SBA is Human Too

One thing I (surprisingly) learned is that the SBA is not a faceless Government Agency. It might seem like that to those of us hanging on to the tail as it is whipped back and forth but the people who work there are just like us. The folks at the SBA are doing the best they can in the middle of crazy. They are learning new requirements and trying to implement them and deal with them at the same pace we all are. They truly want to see you get your loan, AND to have it successfully Forgiven. As the process plays out, they always get better and better and more responsive.

Staying kind and keeping them anchored in our heads as people and not Villains who are trying to thwart us at every turn can help reduce the anxiety in the process. We will get thru this together. Might be a heck of a journey but we will get there.

What Now?

Will there be a Third Draw PPP? Only God and Congress know but there are funds earmarked in the America Rescue Plan Act recently signed into law. Until the economy recovers from COVID (which could be several years) PPP could be part of our collective tool set. We do know that Forgiveness has only just begun, we have a long way to go. Our short history with PPP tells us it could be a wild ride. So, strap in tight, follow the tips I’ve outlined, and let’s go get that free lunch.

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