One of the most anticipated new relief measures in the CARES Act, Paycheck Protection Program Loans, is set to go live tomorrow, April 3rd, 2020.
Over the past 2 days we have devoted nearly all our resources as a firm to help as many clients (and new clients!) prepare to apply for these loans based on the application provided Tuesday night and our interpretation of the law. Even so, we still face much uncertainty.
The borrower (and lender) information sheets were the first communication from the Treasury, along with a “sample” and shortly thereafter the “actual” application, but the breakneck speed of this program still leaves us making many educated guesses on allowable payroll costs, time frame (based on the application, we believe that the average payroll calculation will be based on 2019 W-2s), questions on the application itself and for many, if their bank will be offering these loans, how to apply, and what support information will be necessary.
Around 5pm today, Secretary Mnuchin announced banks will still be originating these loans starting on April 3rd. During the day today, we canvassed our banking contacts and there is still not a lot of supportable answers. Here are a few key points we learned throughout this process:
1. The application we have been using on the website may actually NOT be final. This has been a concern and worry of many, but we need to prepare as best we can with the information at hand.
2. Many banks will have their own form or platform to apply. Many of the larger banks have indicated an online system will be used, which we think will mirror the application, but we cannot say for certain.
3. We still do not know what information, if any, banks will request. We have been preparing applications using copies of 2019 W-2s, healthcare and pension information, and payroll tax filings, but this may not be all that is necessary.
4. We are hearing reports from banking contacts and other sources that some banks are concerned with their underwriting and verification liability, and that may delay the launch (or their individual launch of the program).
5. We actually don’t know when (the time) when banks will be accepting applications.
Nothing official as of yet has come out to ease these concerns. A few tips for businesses and organizations as they plan to apply for these loans
1. If you have not already, please contact your bank to let them know your interest. This will allow them to contact you directly if/when things change and give you insight into their process.
2. Given the high popularity of these loans, be prepared and on high alert with your completed application and documents. There have been concerns (unverified) that only 30% of businesses and organizations will actually get these loans.
3. Make sure all relevant parties are on-call (other owners, directors, or officers) of the organization in the event there are action items for them.
4. Be prepared with other documents, such as last filed tax returns, just in case. The more you have available, the better prepared you will be for curveball requests.
5. Have patience with the process, despite its urgency. It is likely that many banks initial application systems may crash, be slow, or unresponsive. Be patient and persistent.
6. Have patience with your banking contact and anyone that helped you with the analysis for these applications or otherwise advises you and your organization, like your accountant. We will be ready to help, answer calls and emails as we can, but we may be facing a lot of inquiries at once and will work to try and help everyone.
If you have not yet, we urge you to start getting together documentation and calculations to apply for these loans if your organization needs them. We have a lot of information available on our website on these programs, and also are willing to assist anyone that needs help. Let’s see what tomorrow brings!
Edward McWilliams, CPA
Ed is a Partner in the firm’s tax and business advisory practice focusing on providing services to middle market private companies across different industries as well as to early stage startups. Ed has over a decade of experience providing tax and business consulting services to these companies of different sizes and across different industries, bringing a broad and diverse knowledge base and strategic solutions to the many complex issues that businesses face.