PPP For Startups – What We Have Learned the First Week

The Paycheck Protection Program (PPP) is a week old.  This is what we have learned in the first week:

• The fever pitch has subsided – there was a lot of anxiety about this being a “first-come-first-serve” program and $350B would not last long.  As of today, there was about $125B committed and DC is working on appropriating an additional $250B.

• The payroll companies finally fixed their reports to correctly calculate the loan amount.

• Most of the banks got their act together and worked out the kinks in their systems.

• Seems to be momentum not to take the PPP money if a Company does not need it – VCs leading this movement and it is building steam.

• A lot of businesses are developing strategies to maximize their “forgiveness” amount/period by delaying their PPP Note until they are ready to recall their employees (unemployment amount was “juiced up” by $600 per week, so many workers are making more money unemployed).

• A lot of businesses are developing strategies to coordinate the SBA EIDL loan and PPP.  First $10K of EIDL is forgiven, no questions asked.

• A lot of application problems if there is a 20%+ foreign shareholder without an SSN or ITIN.

• Many firms have submitted more than one application – a cardinal sin.  Lenders have been good about pulling the application if contacted, though, as most have not submitted it to the SBA, yet.

• Not much guidance available yet for independent contractors/sole proprietors.  They can start applying on Friday, April 10^th.  Many questions on the present online applications make no sense for independent contractors.

• The following very interesting reps were in our BOA PPP Note that we just received:
  • Borrower will not outsource or offshore jobs for the term of the Loan and two (2) years after completing repayment of the Loan.
  • Borrower will use the funds of the Loan to retain at least 90% of its workforce, at full compensation and benefits, until September 30, 2020.

• Hearing about more banks allowing non-customers to apply for the PPP with them.  If you are looking for one, shoot us an email.
  • Our prediction: in a few weeks there will be tons of banks advertising for this business.  They get 5% for most of these loans.  So, the program should grow to $600B – at 5%, banks will receive about $30B in fees for a 100% guaranteed loan that will probably be forgiven in 90 days.  They never lose!

• Let us know if we can help.