Following up on last week’s video, John reflects on the first week of the Paycheck Protection Program (PPP) application period. Both large and small banks have encountered challenges in processing these applications, ranging from some initial confusion around the loan criteria, to needing to create systems to accept and review applications in an efficient way. Unfortunately, this has led to delays and bottlenecks that may result in some businesses not receiving the full amount they were expecting.
Good morning. John Geraci, managing partner at LGA. Just wanted to talk to you today about sort of where we stand with the PPP, the Paycheck Protection Program application process. It’s been an interesting week. We thought last Friday the banks would be able to start processing business applications and sole proprietor applications. That was significantly delayed due to the fact that they still didn’t have a lot of guidance from the SBA with respect to how to put through the loans, some of the criteria that they were going to be required to meet, the information that they were going to need from borrowers, so that, a lot of that got cleared up in the early part of the week. A lot of the big banks wanted to automate the process and so they weren’t processing applications until basically Wednesday or Thursdays. They were putting systems online for businesses to enter their information directly.
So all that’s sort of been happening. Meanwhile, the local banks or many of the local banks have been actually actually processing applications since last Friday. And we’ve started to hit sort of a, a roadblock where even the local banks, the smaller banks are sort of reaching the limit with respect to what they feel comfortable putting through the program. So as we sit here today, we have a lot of frustrated businesses who if you’re working with a larger bank, you’re frustrated just because your application hasn’t even been submitted yet and you don’t have a confirmation from the SBA that funds have been allocated. And if you’re a smaller business, you’ve got your loan application in early. But the banks were obviously, understandably, backlogged and so your application may not have gotten in and now since it hasn’t gotten in and they’ve reached these limits, they’re starting to tell some of their, their applicants that they’re not going to be able to either process their loan or they’re only going to be able to process it at a certain, at a certain limit and not let them get the full amount under the, the maximum borrowing calculation.
So it’s going to be very trying for these small businesses and they’re going to be very frustrated. So, we continue to talk to different banks and try to understand their position and communicate with our clients and figure out what the best options are. Some, some businesses are talking about switching banks and, and moving their, their applications to another bank and potentially moving their accounts. It’s, it’s difficult to advise during this time because we’re not so sure that other banks are going to be willing to take non-clients non-bank customers and process their applications. And then even if they say they will and you start to switch your application over to another bank, um, what if they end up ending up in the same exact situation where they’re sort of capping out and they’re reaching their limits. And so after you’ve moved your application, they’re not going to process it and are limited anyway.
So, we’re going to continue to sort of monitor it and communicate. We’ll send out emails with updates as, as it becomes known. Today is also the first day that the, uh, you can apply for a PPP for independent contractors and self employed individuals. We don’t have much guidance on that. There’s still a lot of uncertainty with respect to what is going to qualify, what is going to be the basis. You know, for businesses it’s been payroll for self-employed and independent contractors, it’s really their own income. So there’s this, this, this sort of tug of war between a gross concept, the amount that they’ve actually earned from their customers versus the net concept being the self self-employment earnings reported on their schedule C. So a lot of unknowns. I don’t expect many of those applications to get processed today, but we’ll again, we’ll continue to monitor it and communicate as we know more. Thank you.
by John Geraci, CPA, MST