Do's & Don'ts for PPP's ft. Lead Bank Chief Credit Officer

Apr 10, 2020

Kansas City Business Journal

KC lenders share do's and don'ts for SBA's PPP loan program

Bankers in the Kansas City area continue to hammer away at processing the thousands of applications for the Small Business Administration’s Paycheck Protection Program.

As of Thursday night, the program had allocated about $125 billion of the $349 billion pool, meaning about a week after the program started, almost half the money is gone. But Congress is considering adding $250 billion to the pool, and the federal government is assuring business owners it will met the demand.

The Paycheck Protection Program (PPP) loans are available for businesses with 500 employees or fewer and provide as much as $10 million. If borrowers use 75% percent of the loan on payroll over an eight-week period, money for payroll and operational expenses will be forgiven.

To improve the chances of successfully being approved for a PPP loan and receiving the full benefit of the loan forgiveness, local bankers are sharing a few do’s and don’ts from what they’ve seen so far.

Don’t handwrite the application

Tim Barron, senior vice president of small business lending at Landmark National Bank, said it’s really important for all address, Social Security, EINs and other numbers to be legible. If those numbers are misinterpreted because an application was handwritten, the SBA can reject the application and send it back to the bank.

“Even if you’re not technically savvy, these are fillable PDF documents that are super simple to fill out electronically and could save you some frustration down the road,” Barron said.

Don’t include contract workers in your equations

Jeff Gallery, chief credit officer for Lead Bank, said there has been a lot of confusion from borrowers that include the pay for contract workers in the calculations of payroll on their applications. The SBA doesn’t allow this because contract workers are self-employed and eligible to file for a PPP loan themselves. The SBA doesn’t want any double dipping.

Do be patient with your bank

Local bankers are getting lots of inquiries from clients worried the money will run out before their application is approved and asking whether they should apply at another bank.

By moving to another bank, borrowers will end up at the back of the line for processing and be even more at risk of not getting a loan approved.


Do be ready to close on a PPP loan immediately

One of the biggest issues banks have with clients is that they apply for a PPP loan but don’t want to close on it for three or four weeks. The SBA requires the loans to be closed within 10 days. If it’s not, the application is voided, and the borrower has to start the application process all over again.

The eight-week period for calculation of payroll payments for loan forgiveness starts the moment the loan is closed. It creates a dilemma for businesses, such as restaurants, that aren’t sure when they’ll be able to reopen. If they can’t open for four weeks after closing, they won’t reach the 75% threshold for payroll payments and won’t get the loan forgiven. Any money not forgiven needs to be repaid within two years.


Don’t over complicate your documentation

Some borrowers send banks too much payroll information, making it difficult for them to match the numbers in the application with the supporting documents.

“Banks are getting hundreds of applications, so we need it to be simplified for us,” Barron said. “Just give us a breakout of where you’re getting your information, so I can reference the documents quickly. Most people think we want this overly documented, but when we’re trying to process 600 applications in a week, simple is better. Just give us a road map to how we can match up those numbers and verify them. Because If we can’t figure out how to get the numbers to add up, it’s going to delay your application as we try to clarify the situation.”


Original article here.

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