Why some business owners are applying for PPP loans at the last minute

Businesses have one day left to get approval for loans from the $134 billion remaining in the federal Paycheck Protection Program. Now that it’s winding down, some businesses are getting their applications in at the last minute. 
Back in April, a PPP loan sounded like a lifesaver to Richard Marks. He runs a professional training company called RDM Management Group, a business built on face-to-face meetings that haven’t been happening.
But Marks doesn’t have any employees. So from the outset, he wasn’t sure whether he was eligible for a loan.
“My interpretation was that I had to have employees on payroll in order to apply for PPP,” Marks said.
About two weeks ago, Marks heard from another business owner with no employees who received a PPP loan. So Marks applied, and the Small Business Administration approved his application this past Friday. He’s relieved but wishes he’d known sooner that he was eligible.
“If you’re not plugged in, if you don’t know what you don’t know, you end up missing out,” Marks said.
Some business owners are resubmitting applications at the last minute, even though they’ve been trying from the beginning.
“I was just like checking my email,” said Holly Dreeuws, who co-owns Waterline Pools and Spas in San Diego. “I’ve never checked my email as much in my life. Constantly checking to see if I got anything.”
She was rejected four times before finally submitting a successful application. Once because the first round of PPP money ran out. Another bank said she couldn’t apply without an existing account.
After a while, Dreeuws said, she gave up hope. She was even thinking about taking out a personal loan to keep her business running.
But last week, she applied through a new bank and got approved.
“My husband and I were ecstatic. Ecstatic!” Dreeuws said. “It’s been a very stressful few weeks for us, financially.”
Not everyone’s quite there yet. Sherard Duvall, president, and CEO of OTR Media Group, a media production company in South Carolina, has applied to seven lenders for a PPP loan without luck so far.
“It’s been a three-month slog and struggle,” Duvall said. “Frustrating is probably the best word to describe it. Upsetting, really.”
One bank did approve an application that Duvall submitted a couple of weeks ago, but he still hasn’t heard whether the SBA has approved it. He applied through another lender last week, but it’s asking for more paperwork.
“It looks like I’m going to be down to the wire,” Duvall said.
Duvall said the PPP money would help him pay employees, utility bills, rent, and invoices he still hasn’t paid. But at this point, he has very little confidence that he’ll receive any assistance.
The deadline to get the Paycheck Protection Program loan is fast approaching, with the cutoff coming Tuesday.
While the deadline for submission of the loan application to the Small Business Administration, banks and other lenders may have a different deadline — it's important to get in contact with your lender to see what their requirements are, said Bernie Dandridge with Florida Capital Bank, which has a location in Tampa.
"You better not be dragging your feet about getting your information together or getting with your bank or lender or source of PPP money," Dandridge told the Jacksonville Business Journal last week.
Many banks in the Tampa Bay region have already stopped accepting applications. Bank of America stopped taking applications on June 15. Fifth Third Bank ceased accepting applications on June 19. St. Petersburg-based First Home Bank, which has done nearly $850 million in PPP loans, stopped accepting applications on Friday to make sure it could meet the deadline.
The banks said they ended their programs when they did in order to process the remaining applications ahead of the June 30 deadline. Demand for the loans also cratered over the past several weeks for most banks.
"We are accepting applications, and the thing is, you can apply up until tomorrow but we don’t know when the SBA will cut off giving out numbers," said Rita Lowman, president of Tampa-based Pilot Bank. "So get them in as soon as possible."
Businesses looking to borrow no longer have the luxury of waiting for their lenders to provide them with an exact list of information and documentation they need. Instead, Dandridge said they should use the SBA's resources and the tips on lenders' websites to figure out what they need on their own.
While time is running out, Dandridge also said that while the program did have kinks to work out after being pulled together so rapidly, many requirements have been softened and clarified.
Changes to the program include requiring that 75 percent of funds be used for payroll to 60 percent, to allow business owners to allocate more funds to static costs like rent and mortgage. They also extended the use of loans from eight weeks to 24, as businesses brought their people back in increments.
"The guidelines for it have become less restrictive," Dandridge said. "It's become easier to do business with them."
Tom Zernick, president of SBA lending for First Home Bank, said the relaxing of the rules led to an uptick in applications over the past couple weeks.
"We did outreach here in the local market area, in Florida, and around the nation, letting folks know that the rules had changed," said Zernick, who added the bank did $30 million in loans last week. "We reached out to businesses that were on the fence and that really helped us."
Dandridge added that he doesn't believe there will be any more changes to the criteria. Lowman thought there was a chance there could be changes to the PPP in the future, although she wasn't sure what they would be. Zernick said he hoped the SBA would forgive loans under $150,000, which made up a majority of the loans processed by First Home Bank.
If you're concerned about forgiveness of the loan, Dandridge points to the instruction sheets on the Treasury Department's website and the SBA's website to help make sure businesses can put their forgiveness packages together properly.
As businesses put their applications together, they should start by calculating the average monthly payroll for the last 12 months and multiplying it by 2.5, giving the max amount that can be requested. Average payroll should be based on 2019 tax returns as well as IRS form 940, which is used to report federal unemployment tax payments and form 941 forms, the quarterly federal tax return.
Businesses that use payroll services can turn to them for help in gathering the documents and calculating payroll costs.
Businesses should set up a second account to keep their PPP money separate and more easily track how it's being used, Dandridge said. There are some other aspects to forgiveness, but record-keeping is a major component.
Dandridge still encouraged people to apply for the PPP loan if they haven't yet. The loan should be easy enough to process now that lenders are more versed in it and the SBA has clarified its rules.
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