April 10, 2020 | Read Time: 3 Minutes
In an effort to bring the most relevant information to small business owners, Huberty has been fortunate to get support from people that are like-minded with our client-first purpose. Here is some general information provided by Shawn Rice, Business Law Attorney:
Business owners: Hang in there. If you applied for a Paycheck Protection Program (“PPP”) loan or other SBA assistance, it appears that things are not moving as fast as promised. Hopefully, your banker is keeping you informed.
Some banks are much better than others with these applications. Prior SBA 7(a) and 504 experience and “SBA preferred lender” status is key these days.
Keep in mind that your local banker is probably swamped with applications and must wade through new and changing internal procedures and banking regulatory law updates. Moreover, all banks aren’t going to make big profits on PPP loans (esp. on small balances) because the interest rate is so low and there is no ready resale market for packaging up PPP loans like mortgages. As a result, we are hearing that many banks are tending to take care of big regular customers first to avoid defaults by existing borrowers and some are not accepting applications from new customers until current customer applications can be processed.
Don’t blame your local bank. In addition, we are hearing that some banks do not have access to enough current funds on hand to loan. We have several clients who were told the Feds did not yet address the regulatory funding and max lending limits which are preventing some banks like Wells Fargo from funding PPP (if they max on PPP, the banks can’t fund their regular loans for the next 2 years and thus make money – so rather than fail as a bank, they are going slow with PPP). The Fed/Treasury is trying to fix this system mess, but the SBA (and all government) was not ready for so much borrower demand, and, generally, commercial bankers and the SBA bureaucracy never like to rush. Several of our clients are being told of bank “approvals” of their PPP loans recently, but we are unaware of any business receiving any funds from any federal program yet.
You are not alone. The PPP is supposed to happen faster than the SBA EIDL disaster loans which will be weeks for sure. The clock is ticking for everyone. Unfortunately, besides dealing with new federal paid leave laws, we have been asked to draft WARN (mass layoff) notices because larger clients must layoff now – just in case receipt of funds from their pending PPP loans are delayed too long. Obviously, every day the state shutdown orders continue counts and re-hiring furloughed employees later may be the only option for many larger employers especially those borrowers whose loan funds are at risk of being held up, denied or not forgiven by the SBA later.
Shawn Rice, Attorney at Law
Rice Business Law
101 Falls Road, Suite 601 | Grafton, WI 53024
For more information on how the numerous new federal laws including the CARES Act could affect your business go to http://linkedin.com/in/shawnrice.