The SBA-backed Paycheck Protection Program (PPP) reopened on April 27, 2020 with $320 billion in additional funding. From what ACI has seen, the additional funds seem to have been successful in getting funding to the small firms that need it most to maintain their business operations.
More than 75% of ACI’s clients who have applied under PPP have obtained official SBA loan numbers this past week, which should confirm the receipt of funds in coming days. It has been evident that banks were able to use the time between the first and second funding round to organize their processes to get applications submitted more efficiently. They also utilized the pause to get more comfortable with the program from a compliance and risk perspective.
The PPP program also appears to have been helped by the return of loans several large companies – including Shake Shack, Ruth’s Chris Steak House and the Los Angeles Lakers – received in the first round but decided to pay back after a public backlash. Not only did this result in additional money for firms that really need the funding, but it may also have had a chilling effect on other big companies that were considering seeking funding in this round.
Ensuring clients will obtain loan forgiveness
At ACI we have seen the FinOp role continue to evolve as the economy emerges from the crisis. We are not only helping our clients successfully apply for PPP loans, we are also ensuring our clients meet the criteria for loan forgiveness in the eight weeks after the loans are received. This is critical economically, so firms do not have to repay their loans.
We are also helping clients manage the timing of incurring qualifying expenses to maximize the impact to each respective FINRA member firm’s net capital and their ability to comply with the regulatory obligations.
Getting SBA funds into firms’ accounts, however, is taking longer than expected due to the enormous volume of loans SBA is processing. While we were under the initial impression that fund disbursement would happen 24 to 48 hours after receiving an SBA loan number, in reality it is has been more like 5 to 10 business days before the funds are posted to a recipient’s bank account.
ACI working closely with FINRA and our clients
ACI Managing Partner, Jay Gettenberg, as a member of the FINRA Small Firm Advisory Committee (SFAC), has been working closely with FinOp policy at FINRA to address the regulatory implications for SBA loan forgiveness and how this will affect different types of broker dealers and their ability to comply with net capital requirements.
We expect the next eight weeks to be a critical time to ensure all firms are able to maximize their PPP loan forgiveness. We will be working diligently with FINRA and our clients in these efforts.
If you are still considering applying for the PPP program ACI is ready to help you with the process. These are the program details:
Paycheck Protection Program loans explained
The CARES Act’s Paycheck Protection Program (PPP) allows qualified businesses with fewer than 500 workers to apply for a Small Business Loan to meet payroll costs. The loan is limited to the lesser of $10 million or the company’s average total monthly “payroll costs” for the 1-year period ending on the date the loan is made, multiplied by 2.5, plus any refinanced loan under the Economic Injury Disaster Loans (EIDL) program obtained after June 30, 2020.
Proceeds from a PPP loan may be used for payroll costs (as defined), employee benefits and commissions, interest payments on mortgages, rent, utilities, and interest on debt incurred before February 15.
A business can apply for loan forgiveness in an amount equal to the cumulative amount of payroll costs, rent, utilities, and interest paid on mortgages during the eight weeks after the loan is made. The amount forgiven is limited to the extent compensation and headcount are reduced relative to a base period, and any amount forgiven will not be taxable to the borrower.
ACI will continue to provide updates on our Resources page as we manage together through this challenging time. We hope everyone is taking proactive and precautionary measures to remain safe.