Industry Companies Navigate The Sometimes Complex Small Business Loan Process
The Coronavirus Aid, Relief And Economic Security (CARES) Act, enacted last month, provides a range of assistance programs to U.S. citizens, businesses, local and state governments, and other entities. The Paycheck Protection Program, part of the CARES Act and overseen by the U.S. Small Business Administration (SBA), provides forgivable loans of up to $10 million to small businesses during the COVID-19 pandemic to help them meet payroll and day-to-day operating expenses.
While the rollout of the program has not been without its issues, several promotional products companies and professionals who have applied to the program have shared their experiences with PPB Newslink.
“If you haven’t already applied, you are behind the 8-ball. But it’s not too late,” says Robert Fiveash, co-president of distributor Brand Fuel in Morrisville, North Carolina. “We made sure we were first in line by reading many documents early, collaborating with distributor friends and contacting our banker before the first-day applications were due. So when applications were ready to be received Friday, April 3, we were first in line. We received our funds this past Friday, April 10.”
Fiveash adds, “It took a few hours to gather all the info. Your payroll service and benefits company can help you gather this, many have specific PPP reports. The actual application is only three pages and very quick. Essentially, you just answer 10 or so questions, check some boxes, sign and date, and you’re done.”
Mark Zapanta, vice president of finance at Silver Spring, Maryland, supplier Summit Group, recommends that in preparing for the application, to maintain constant communication with lenders regarding requirements and the necessary backup documentation. “While the calculation of the maximum loan amount is fairly straightforward—following AICPA [American Institute of Certified Public Accountants] interpretation—you will need to provide payroll documentation and backups for your annual payroll amount, qualified payroll cost, health-care cost and headcounts. Documentations may vary depending on your lender. I also advise engaging a CPA to review your calculation.”
He adds, “The most difficult part was determining the right set of calculations needed and amassing the necessary payroll data. We spent hours building the correct formulas and assembling the corresponding backup. The actual application is quick and straightforward once you have the proper data.”
Connie Mandula, president of distributor CM Promotions in Bloomington, Illinois, also highlighted the importance of communication. “I had the option to apply from two of my banks,” she says. “One was a smaller community bank with less than $1 billion in assets. My community banker also reached out to me with information and asked if I would be applying. I chose to apply through the community bank.”
Karen Foy, CAS, president of Plano, Texas, distributor Gorman Foy, has a similar perspective. She says, “I recommend reaching out to your bank. Most banks are sending the information through their online banking portal. If you’re not set up with online banking, that is the first step.”
Matt Davidson, principal of distributor LOGO Dynamics, Inc. in Henrico, Virginia, says, “The response to the crisis points out the need to have a good relationship with a local banker, and he has been very supportive of my efforts. I was on the contact list of a SBA point of contact and got good information from them on how to get ready to apply when the portal opened. I have also applied for the economic disaster loan and hope to use its cheap rates to refinance some of my debt.”
Davidson adds, “My bank opened their PPP portal on Friday night, April 3 and I applied in the first hour. I had all the paperwork ready. They approved the loan and sent the paperwork to sign electronically on Saturday. The money was in my account Monday morning. It was a great relief and I'm sleeping better.”
Francesco Indrio, chief executive officer of supplier Alpi International, Ltd. in Oakland, California, also emphasized the importance of a good relationship with bank staff and loan officers. He says, “Alpi applied for the SBA loan and it was funded today. I believe the success is tied to a good relationship with your bank and a good loan officer.”
The application process itself is a simple one, Foy says. “You need access to tax returns, payroll reports, articles of incorporation and your office lease information. We had online banking already set up, so we were able to skip that step. It took less than 10 minutes once all the information was pulled, and I believe we will receive a check around the middle of April.”
Mandula adds, “I have read that the community banks were having an easier time, for some reason, processing the loans. I am not sure if this was true or if it made a difference, but we submitted our request on Saturday, April 4. My banker notified me on the following Monday, April 6, that our application was received and accepted. They didn’t know when the funds would be available to us, but they would be in touch. As of today, we haven’t had any update regarding the funds’ availability.”
Brian Jolin, CAS, of Jolin Promo in Fort Worth, Texas, says, “I applied for the economic injury disaster loan and grant program at [the] end of March. I called the SBA Friday and was caller No. 900-something. However, it only took 30 minutes to speak to a representative. She said that I will get an email in the next week or two with instructions on how to sign up for the portal and that the SBA loan officer—this is not through a bank—will post any questions there. Unfortunately I was extremely disappointed yesterday to hear from SBA that my business with one employee only qualifies for a $1,000 grant. It feels like they are overwhelmed, but that they are working hard to service those of us who have applied. She said as of Friday about 15 percent of the applications had been populated into the new portal system.”
How long it takes for applicants to receive checks can be a wildcard, Zapanta says. “It largely depends on the financial institution. Our process took a week from application to funding. Based on what we’ve heard from others, this is on the shorter end of the expected timeframe. Once the application is submitted and the SBA approves it, then the bank needs to process the loan and collect additional documents. Since this was a new program, we had to wait at each step for the bank to create the next step in the process based on evolving guidance from the SBA.”
For industry businesses going into the application process, Fiveash advises they “start early and get it done.” He says, “Apparently, 75 percent of the initial $349 billion for PPP has been allocated. There may be another bill authorizing more funds, but it is not a done deal. Make sure your banker is approved for these SBA loan and get with him or her immediately. It was the personal relationship with our banker that allowed us to apply quickly and get paid quickly.”
Zapanta adds, “Ensure you have a plan for how you will use and track the loan once you receive it. Since the clock starts on both the loan and forgiveness calculation the day you receive the funds, it’s vital plans are in place and ready to execute.”
With his personal situation stabilized, Davidson is reaching out to his clients. He says, “I will be sending an email marketing blast to all on my contact list with the message, ‘We know from 9/11 that changes will be coming to our business endeavors, but Matt Davidson and LOGO Dynamics will continue to work to support your goals and objectives like we have done for 28 years. Who knows what the 2020 virus panic will bring, but you can be assured you have a continuing ally in Matt Davidson.’ I regret we are having to endure this crisis for all the pain it is causing but like the recession of 2008-2010, we'll get through it and be better people and businesspeople for it. There is hope but you have to look for it and be willing to adjust to find it.”
Find more reports on the industry’s COVID-19 response, provisions of the CARES Act, links to related webinars and further information on PPAI’s coronavirus information page here.