4 things business owners can do right now to prepare for the next round of PPP loan applications
- The US Small Business Administration is expected to release details about the next round of Paycheck Protection Program loans on January 6.
- Once that happens, lenders will be able to prepare their application processes, which should begin next week.
- In the meantime, business owners can prepare by gathering documentation, reaching out to their lender, opening a dedicated account for your loan funds, and meeting with an accountant.
- Afterall, the sooner you apply, the sooner you'll receive your loan.
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The US Small Business Administration is expected to release details about the next round of Paycheck Protection Program loans on January 6. Once that happens, lenders will be able to prepare their application processes, which should begin next week.
While the legislation authorizing a re-launching of the massive Main Street rescue has several new provisions to consider, the SBA, Treasury, and participating financial institutions have previously interpreted the law in ways that have left borrowers confused and frustrated.
During a recent Insider webinar about the PPP, many business owner participants had questions about how they can best use their time before applications open next week.
Based on past experience with initial rounds of the PPP, here are four steps business owners can take to prepare — whether applying for your first loan, or an additional one.
Get your documentation in order
The standard PPP application is strikingly simple, but lenders are wary of being left holding the bag for non-compliant loans and may ask for additional information from borrowers.
In order to substantiate your claims of eligibility, such as quarterly revenue losses of 25%, pandemic-related investments, or property damage repairs, you may need to provide paperwork.
Tax filings, bank statements, and other internal records can help make your case to the lender who will determine whether to submit it to the SBA. If you do get approved, you may need those documents as well as proof of how you spent the loan in order to get it forgiven.
Read more: 5 changes to PPP loans that will affect your business' eligibility
Make contact with an SBA-approved lender
If a bank, fintech, or other financial institution is participating in the Paycheck Protection Program, they will most certainly advertise it prominently.
Wall Street banks were the largest lenders among the nearly 5,500 financial institutions participating in the initial rounds of the PPP, but the new legislation sets aside $15 billion for smaller banks and community development financial institutions.
In addition to lenders where you currently have open accounts, consider signing up for email notifications from a handful of others, especially smaller lenders in your community who may be able to offer a more personal level of service.
Read more: PPP is back — and yes, you should apply for a 2nd loan
Open a dedicated account for loan tracking
The simplest way to get your PPP loan forgiven is to have clear documentation that it was spent according to the rules of the program, and the simplest way to generate that documentation is by using a dedicated account.
Borrowers who use at least 60% of their loan on payroll will be eligible to have their loans fully forgiven, and the new legislation allows for an expanded list of approved expenses for the remaining 40%.
While asking lenders for information about their PPP applications, it's worth asking about sign-up incentives for new accounts.
Read more: How restaurant owners can cash in on PPP loans and get up to 3.5 times their monthly payroll
Meet with an accountant to get help
Once you've made these preparations — and before you take on any new debt — consider going over everything with an accountant or certified financial planner.
You may sometimes feel like no-one could possibly understand your business, much less keep up with the ever-changing regulations, but a professional adviser has most certainly seen a case like yours before.
Some banks will provide this service (healthy businesses make good banking clients, after all), but it may also be worth talking things over with an independent financial counselor.
An outside opinion can help you navigate not just your current emergency, but set a course for the long term, too.
Read more: How live music venues, theaters, and talent managers can get up to $10 million of $15 billion covid relief grants — with no requirement to pay it back
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