Dispatch #17 -CARES Act PPP Loan Application
CARES Act Payroll Protection Program loan applications are now available, so below I am offering my current perspective on the program.
1. Educate yourself. It won’t take long.
Read the PPP loan application
Read the program’s guidelines provided by your bank (here’s a helpful FAQ by Heritage Bank). Pay special attention to the section, “How much of my loan will be forgiven?” The amount of loan forgiveness depends on how “back to normal” your payroll is by June 30th, which at this point, is a big question mark.
2. Despite the many questions surrounding the usefulness of this program for your construction company, the application form is simple. It appears there are degrees of loan forgiveness (some free money is better than none), and most of the loan terms are favorable. So taking a loan—even without forgiveness—is low risk.
3. A loan is still a loan:
Know its impact on your balance sheet and its implications for bank and bonding covenants;
At the outset, spend loan proceed money only on qualified expenses that you were already planning to pay and keep the rest in the bank until you can calculate the potential for loan forgiveness;
If repaying the loan over two years (after an automatic six-month deferral period) could cause your firm cash flow problems, consider instead a longer-term SBA Economic Injury Disaster Loan (EIDL);
Going deeper into debt should not be a substitute for cutting overhead in line with falling revenue and cash receipts.
You may also find the following resources helpful:
U.S. Chamber of Commerce PPP loan guide, checklist and calculator
Guide to the SBA loan and grant programs being offered through the CARES Act, courtesy of the U.S. Senate Committee on Small Business & Entrepreneurship.
4. And finally, here’s some advice from a local expert on the SBA emergency loan programs: “Figure out your 2019 [payroll] costs and wait for regs to be posted.”
He also shared this March 31, 2020, CARES Act update from the US SBA district Director for New Jersey:
I understand everyone is eager for how SBA will implement its part of the CARES ACT. . .as of 7:00 this morning, the NJ District Office has NO AGENCY GUIDANCE OR NOTICE(S) on that information...
It is being fast tracked, and approval could come at any time. However, until that happens we will have no OFFICIAL guidance for applicants, small businesses or lenders.
Organizations stating that they know what the new system is and how it will work, are strictly speculating. . . unless they have verifiable, written information from Agency headquarters in DC, or other SBA Regional or District sources on how SBA will be implementing the program, IT IS SPECULATION!
Once we have guidance, we will publicize it . . .via our media, SBA and NJ State partners. . .what we don’t want are folks falling prey to misinformation.
Need help with this or other financial matters faced by construction contractors? Let’s talk!
David Stern CFO makes every effort to provide useful and accurate information. This content, however, is not intended as a substitute for specific business-related financial advice. We disclaim all warranties and liabilities from its use.