8 Tips on the Small Business Loan Assistance Program also known as the Payroll Protection Program (PPP).
For small businesses, getting your payroll protection plan approved is time sensitive, and can be daunting. With so many companies trying to submit their stimulus package applications, and limited SBA funding, I wanted to provide tips to strengthen your stimulus package application. The following insights were collecting from my direct conversations with small business lenders who are actively reviewing applications just like yours.
THE DOCUMENTATION
ADP actually has a report with all of the information the government is asking, with all the calculations completed. If you’re using payroll or paycheck software or services, look and see if your payroll company has a CARES ACT report.
Submitting that report as a part of your documentation will dramatically set you apart from other applicants. The people reviewing your application won’t have to worry about if you’ve calculated vacation time or not, excluded salaries in excess of $100,000, or factored in payroll taxes.
The CARES ACT report has it already broken down. Including it, if possible, will make it easier for the person approving your stimulus package.
It’s better to have too much information ready, rather than none at all… or not enough. Even before you’re asked, go ahead and prepare a voided check, drivers license, payroll information, tax returns, corporate formation documents, articles of incorporation, statement of information, LLC-1, etc. If you know (or think) you’re eventually going to be asked for something, get ahead of the ball.
I’ve had clients submit 941 payroll tax returns, and asked if there’s anything else he needed to provide. The bank said that was enough, only to follow up two weeks later for tax returns. In hindsight, the best course-of-action would have been to submit both at once, even though it wasn’t explicitly asked.
Choosing the Right Local Bank or Credit Union for Your SBA Stimulus package
The most important step in getting your SBA stimulus package or Payroll Protection Plan is also the fist part of the process—choosing your bank.
Finding a local bank or credit union is crucial. This is because local banks will likely have less customers, and also be more personable. The goal is to make sure you have a chance to speak with a real person at some point during the stimulus package application process.
Aside from being friendlier, local or community banks can give you more attention relative to the amount of funding they’re receiving compared to a larger national bank.
Develop a Personal Connection with Someone at Your Bank
Utilize your network. Do you know any small business lenders? Maybe your mortgage broker knows a lender? Get the word out to both your professional and personal contacts, to see if you can get an introduction or connection at the bank of your choice.
If someone can follow up for you, or make that in-person meeting happen sooner, it will make a huge difference. While it’s realistic to understand your application will be one of thousands in a pile, make your case stand out… or at least to attach a name and face to your file.
Personal connections are also important, because you can get detailed feedback. A lot of digital only or web based services are rejecting initial applications, and all you’ll receive as a business owner is a digital rejection notice which may not tell you why.
Talking to someone face-to-face at any point throughout the process is paramount.
Look For Newly Added Small Business Lenders at the SBA
Check regularly for newly approved lenders. New small business lenders will be added to the SBA’s approved list frequently. These new lenders won’t immediately have the backlog others in the PPP program do, so it’s worth the effort to be first in line.
For example, On Deck was recently added to the PPP program just over a week ago. They will nationally have a significantly lower backlog of applicants compared to firms who have been part of the program longer.
Sole-Proprietors DO Quality for SBA Stimulus packages
Do you own and operate a barber shop? Hair salon? Sole proprietors actually do qualify for this SBA stimulus package. While the program title can be confusing, since most sole proprietors don’t use ADP or similar payroll systems, your business absolutely qualifies.
Any business owner that collects money, pays their expenses, and saves the profit for themselves will qualify for the PPP program, even if they don’t use paycheck systems.
A good friend of mine came over to my house recently. He’s a hair dresser, and as the topic naturally shifted to the SBA stimulus packages, his first comment was “I can’t apply to the program, I don’t have a payroll”. In the weeks since shutting down, not being able to open his salon, he had been living off of cash advances from credit cards.
Even in my non-professional life, I run into too many business owners that believe they’re not eligible for the program, when they are who the program was designed for.
The money you pay yourself will count as payroll. You will likely have to prove this with tax returns and other documentation, but if you’re a sole proprietor whose struggling, don’t let that discourage you from applying to the PPP program.
Work With Multiple Banks or Credit Unions For Your SBA Stimulus package
Until a bank has actually submitted your stimulus package to the SBA, talk to as many banks as possible. Keep a few irons in the fire at the same time. Like I’ve previously mentioned, each bank or credit union will have their own backlog to work through, and your own personal connections or ability to meet face-to-face will vary. You don’t have to sit on your hands, and hope the single firm you’ve gone with will submit your stimulus package application in a timely manner.
Once funding runs out, the SBA will stop accepting new applications. So go with whichever bank can submit yours first. (Keep in mind, once that happens inform any other banks you worked so you won’t have multiple applications being submitted, as that can cause delays).
GETTING STARTED
Make Sure You Get In Line
Some banks are saying they’re not accepting new applications at this time. Others will say they’re not submitting yet, but they’ll help get all your documentation ready. When you’re looking for a bank, choose someone that will give you a chance to get in line.
When submissions open, you’ll want to have your stimulus package application already put together. It’s a race, and you’ll want to have as much of a head start as possible.
Another related tip is not to wait to start the process. I’ve heard some business owners say lamenting about pulling all of their tax information, and getting other documents ready before they even begin the process.
Don’t wait. Start the application process now. Get a date on the application.
H2 THE APPLICATION
H3 Avoid Rounded Numbers
Avoid rounded numbers on your application. Doing so can produce suspicious and heighten the chance for review— which will cause delays. Rounded numbers might not be considered real, and the SBA won’t know if you’re rounding up, or by how much.
Stating that your payroll for 2019 was $90,000 might raise red flags, compared to an application listing payroll for 2019 being $89,374.
Specific numbers that are clearly the result of calculation, will be trusted with less review than even or rounded figures. In the effort to make things look simpler, to speed things along, you may inadvertently cause your application to drop to the bottom of the list by artificially rounding.
When looking at your payroll forms, make sure you’re calculating it correctly. Be exacting in your calculation of how much you need.
4-Digit Zip Extensions and Your NAICS Code
The SBA will use your four digit zip code extension for your address, so make sure to include that entire number on your application. Moreover, include your NAICS CODE as well. It is found on the front of your federal taxes, and informs as to the type of industry you are in.
The SBA wants to keep track of how many dollars they’re lending to the retail, food, manufacturing, etc., industries; even if it’s not explicitly asked of you on your application, it will be required down the line. If you don’t provide it, the person submitting the application will have to stop to look it up.
Imagine a stack of hundreds of applications. Including your zip code extension and NAICS CODE might mean the difference of yours being shuffled to the bottom, or placed right at the top.
Continuing on this theme, do everything in your power to make it easy for the person submitting your application. Try to type all of your information, and don’t skip any lines. Even if a specific field doesn’t apply to you, leaving it blank might cause your application to be filtered to the bottom as it appears to be incomplete.
Rather than leaving fields blank, type “N/A”, “Zero”, or otherwise clearly states you didn’t forget it. If you can’t type out your documentation, write it neatly and in black ink.
Present your application the way they want to see it.
If your bank says to submit tax returns, payroll documents, a copy of your business license, etc. then that’s how you should submit your paperwork. Be clear to number your attachments in the same order they were requested, and titled using the same nomenclature.
Unless you’re requested otherwise, create a separate PDF for each document. Remember, these firms are working diligently to submit as many applications as they can, as quickly as they can. They don’t have time to scroll through a lengthly PDF to find what they need.
Just as you are looking for a personable experience from the bank or credit union for your SBA stimulus package, remember that the bank would appreciate the same. They’re going to prioritize their own customers. If you’re coming to them asking them to work with you, extend that sentiment. Open an account at the bank or credit union if you haven’t already.
Also, please disclose any prior SBA stimulus packages. The system knows if you’ve had a previous stimulus package or not, so don’t try to hide it— it’ll only hold up the process.
Providing documents one by one, waiting to be asked, takes up too much time. During that time, more applications will be submitted, approved, and the current round of SBA funds will be diminished.
THE FOLLOW UP
The last think you want is a response sitting in your junk mail, and you miss it. Once your application is in and you have someone at your bank or credit union assigned to you, give them a call.
Do what you can to make yourself more than a number in a stack. You may not be a large company backed by venture capitalists with multiple high level personal connections that can push your applications through… but don’t give up.
Make the effort to place a call, set up a virtual video meeting, or send a friendly e-mail. As a small business owner you’re proud of how you treat your customers and the dedication of service you provide to them and your community. Take that energy and use it to carry you though the SBA stimulus package process.
Don’t get discouraged. Even if you hear the money ran out, remember there’s still talk of a third round of financing for small business.
About Diane Johnson, Certified Financial Planner™
Diane Johnson is the lead planner and the founder of Blackhawk Financial Advisors in the Danville/San Ramon area. Ms. Johnson works with the some of the Bay Area’s leading entrepreneurs and high net worth clients. Using her unique background in law, financial planning, and investment banking, Diane leverages creative solutions that increase her clients’ wealth and save on taxes.
Diane earned her law degree from Hastings College of Law and holds a B.S. in Business from San Jose State University. She’s also a die-hard Warriors fan.