Armanino Blog

What We're Hearing About the SBA Loan Process

April 12, 2020

During this COVID-19 crisis, some of the most common questions we're hearing are about how to secure a Paycheck Protection Program (PPP) loan from the Small Business Administration (SBA). As you can imagine, it's not as simple as just asking for money. And while the loans are forgivable, there is some complexity and even more questions around the requirements it takes to forgive the loan.

Our COVID-19 Rapid Response Team, a team we put together to solely concentrate on the financial impacts of this pandemic event, have been closely monitoring activity from the SBA and has kept open lines of communications with our banking relationships, which has led to dozens of companies securing PPP loans in just the past week. Through these conversations and loan experiences, we've been able to identify some answers to many of the questions that are being asked.

Interpreting the Rules of the Road

The first question that is often asked is, "How do I understand the specific nuances of CARES Act legislation?"

As a law that was drafted in just a week, there is a lot open to interpretation – and the SBA continues to update and revise its application process. In fact, we are now on the 18th version of our loan calculator due to rapid updates! However, what we've talked about with our clients regarding this question is, while time is of the essence, it's important to stop and take a breath to get your bearings. Make sure you're doing proper payroll calculations. For instance, independent contractors are not counted toward your payroll – but part-time employees are.

Also, look at payroll tax deferral. Despite some initial concerns, taking the payroll tax deferral does not disqualify you from PPP. It's only companies that have had their PPP loan forgiven that cannot defer payroll taxes – and that cannot happen until you apply for forgiveness after eight weeks have elapsed since loan origination.

It is critical that you "dot all the I's" when filling out applications to ensure every box is checked and compliance is met. Any unaccounted for claimed expenses can lead to a rejection, requiring you to start over. Make sure you are communicating clearly how much money you are asking to borrow and exactly how those funds will be spent, down to the last dollar. Be precise and specific.

Relationships Matter

The second big question is, "Which bank will process my loan?"

The famous saying rings true: that it's not what you know, but who you know. Banks are processing thousands of PPP applications, and while the loans are federally guaranteed, banks still have overhead to administer loans. Most banks participating in the PPP are operating on thin margins, so they are giving priority to businesses that they have long-term lending relationships with. Sometimes even cash management and banking relationships aren't enough.

Your first call should be to your long-term banking partner. But we are aware that some commercial and retail banks aren't even participating in PPP. If your bank is not participating or cannot work with you to secure a PPP loan, we may be able to help identify a lender for you.

Do Not Ignore the Back End

And the last big question is, "How do I ensure the loan I receive is forgiven?"

This is a big one and may be the difference between having your PPP loan forgiven or having to repay some or all of it yourself. We know that you are motivated to access PPP loans as quickly as possible. Your business, your employees and your vendors are counting on it. But, the need to address today's problems doesn't mean you can put off your business plan on how you're going to use the money, properly account for itemized spending and keep your business on track down the road.

You cannot just cash an SBA check into your business checking account. You cannot comingle your PPP funds with your general funds. Every dollar must be accounted for and used for the purposes approved in your loan application. It is important that you set up a system to track where the PPP funds go and how they were properly used in order to qualify for loan forgiveness or even avoid possible criminal liability.

Make sure you're completely on top of your paperwork and accounting from start to finish. It is not overly difficult, but it does require diligence.

Keep Asking Questions

This is new territory for everyone. Information can be confusing, vague or conflicting, so ask questions! Stay in touch with the SBA, your bank and your accounting partner to ensure you're doing everything by the book, and you won't be hit with any unwelcome surprises down the road. And as more questions arise, we want to be there to provide the answers you need. You can visit to our SBA Loan Support Program page as we will continue updating that with the most recent information.

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