APRIL 23, 2020

News Roundup for Small Business Owners

The latest news about relief efforts for small businesses, particularly via the Paycheck Protection Program (PPP) and Economic Injury Disaster Loans (EIDL).

• The Treasury Department issued new guidance in the form of FAQs today. I would encourage all who have received PPP loans already and those who will be applying under Round 2 to review this document. (Department of the Treasury)
• In my read of this document, the two biggest pieces of clarification provided is in questions 20 and 31. In question 20, they clarify timing on the eight-week forgiveness period. That period begins the date of the initial disbursement of funds by the lender.
• In question 31, they are clearly responding to the criticism of large companies receiving PPPs. The applicant should not have the “ability to access other sources of liquidity sufficient to support their ongoing operations in a manner that is not significantly detrimental to the business.” It goes on to say, “it is unlikely that a public company with substantial market value and access to capital markets will be able to make the required certification in good faith.” However, any company who repays the loan in full by May 7 will be determined to have acted in good faith. Expect to see repayments — i.e., Kura Sushi, Sweetgreen, Harvard, It Works! — of Round 1 loans.(Restaurant Business, Forbes, Fox News, PR Newswire)
• What does this really mean? No changes were actually made to the program; this is updated interpretation of the language in the original bill. Obviously, time (and more than likely the courtrooms) will tell. My cynical view is that this is just a political move to save face. And clearly this doesn’t go far enough, as it still leaves a lot open to interpretation. For example, they still haven’t clarified what “sufficient liquidity” is and whether companies who have saved money will be punished for using PPP loans instead of their cash reserves first.
• The “ability to access other sources of liquidity” issue is another area that isn’t clearly explained here. With the clause “detrimental to the business” I’d assume that a hard money high interest loan wouldn’t count as another source of liquidity, but if you have an open line of credit or term sheet with an investor that could imply other sources of funding, I might think long and hard about utilizing that opportunity before using the PPP funding.
• Companies who received PPP loans in Round 1 should be keeping very clear documentation to prove that the PPP spend is “necessary for ongoing operations.” I think a good rule of thumb is to remember that this is relief money. I would create a simple weekly spreadsheet that shows revenue and expenses and keep a tally of how the PPP funding was used. A lot of this still comes down to “good faith,” and to me, that implies doing your best to be honest and transparent about how you use this relief money, which means documentation.(Inc.)
• If you have yet to receive a PPP loan and are applying for one during Round 2, I would be sure that you can defend that the loan is necessary before applying in Round 2. And then once you do get it (fingers crossed), keep those “good faith” records.
• I’m going to continue monitoring Twitter and stories like this one from Forbes that seem reputable and will update as I learn more. We’re all trying to piece this together and it seems that every time we get answers, it just raises more questions. (Forbes)

Previous Entries:

Tuesday, April 21 | Monday, April 20 | Friday, April 17 | Thursday, April 16 | Wednesday, April 15 | Tuesday, April 14 | Monday, April 13 | Friday, April 10 | Thursday, April 9 | Wednesday, April 8 | Tuesday, April 7 | Monday, April 6

Masterplans is a veteran-owned business that specializes in providing the highest-level business development consulting located in Portland, Oregon. For 17 years we have helped thousands of entrepreneurs launch new businesses and put their ideas in motion. Now, more than ever, we want to see these same businesses survive the largest economic disaster of our generation.