PPP: Getting the Best Out of a Not-So-Great Program
Main Street hasn't benefited as well as it should have, thanks to some big corporate greedheads But there's still time to get a loan. Just make sure you're using the funds for all the right reasons.
BY HOWARD TULLMAN, GENERAL MANAGING PARTNER, G2T3V AND CHICAGO HIGH TECH INVESTORS@TULLMAN
Every day I speak to startup entrepreneurs and other, more established, small business owners who are asking for advice on the Paycheck Protection Program (PPP). These are people living through their worst nightmares, whose dreams included the desire to be free of the demands, limitations and soul-deadening processes of the agencies and bureaucracies that dominate our government.
As the politicians brag about the deluge of dollars they claim to have released for millions of businesses and hundreds of millions of consumers, the facts in the field - on Main Street, where the rubber meets the road - are sadly different. Shuttered businesses, starved for customers, revenue, and funding are closing down permanently because the potential and promised funds are far too little and coming way too late. Business owners are completely confused about the funds availability and loan qualification criteria, disbursement procedures, spending timetables and requirements, repayment terms and conditions, and other regulations regarding the program.
The unfortunate entrepreneurs who are rapidly supposed to make sense of this morass are also supposed to be running their businesses, rehiring their laid off and furloughed employees, holding off their lenders and creditors, and trying to keep their heads above the rising waters at the same time.
Worse yet, their own attorneys, accountants, and other professionals are reluctant to provide them with any concrete and written guidance claiming, mostly correctly, that the government hasn't published the relevant regs and directives to date. There are plenty of simplistic suggestions like "take all the money you can get and worry later," and anecdotes about how to maximize PPP applications and how to minimize their repayment responsibilities. A lot of this advice borders on the unethical or worse. They're all being invited to suck it up and buy into the swamp of situational ethics and muddled morality where our Donald Trump has always lived and thrived.
There are still funds available; here are four basic things to understand about PPP:
(1) Take whatever funds you can honestly get. Cash will always be king and there's no telling how long we'll be in this mess. You're looking at a long "L" recovery, not a "V". If you eventually have to repay the PPP loan in the future at a very modest interest rate, either you'll be here and happy to do it or your business will be gone and you won't have to worry about it. New money (investments or loans) is going to be expensive and very hard to come by for the next year or two. Take the money when it's on offer.
(2) Don't let your pride get in the way of the process. No one said life is fair and there's no sin in taking what you're entitled to and what you've worked for and paid for in taxes over many prior years. Just don't be a pig; make sure your application is accurate. Keep in mind that there are two kinds of serious damage possible here and you want to avoid both. First, you don't want to do anything illegal. That's obvious. Second, you want to be sure that you don't do anything that sends the wrong message to your team about how you conduct your business and your life. Grabbing or saving a few bucks is never going to be worth the damage you might do to your company's culture and your team's morale by cutting corners or trying to be a little too inventive or "smart" and sleazy like Trump.
(3) Use the PPP money as quickly as required (about 8 weeks) BUT do it wisely and remember that you can always return what you don't use down the line. Don't rush to do stupid hires just to get your payroll re-inflated; don't create "make-work" projects that your own people know are a waste of time and money. And - in fairness to everyone - don't hire people back for a few PPP weeks, especially those already and successfully on unemployment, only to have to fire them shortly thereafter.
(4) Get some smart and up-to-speed accounting and legal help immediately so that you plan and document the way you are spending every PPP dollar you borrow. It's really important that you have a clear idea of how to honestly and accurately complete your application for the loan forgiveness, which will be required right around the corner. Here again, seek every single dollar of forgiveness that you are fairly entitled to. Don't be lazy since it's not really just your money - it's your investors' money as well. And don't fall into the trap of trying to get too much improperly forgiven. Again, it may seem easy and attractive and it may be urged upon you by various advisors and others, but it's not worth the damage it's likely to cause.
And I understand that the government isn't making things any easier - practically or morally. Treasury Secretary Mnuchin just announced (with a virtual wink) that PPP loans under $2 million typically won't face audits which - for some owners who are desperately trying to survive and feed their families - may be just too tantalizing an invitation to wrongdoing for them to resist.
We're all being slyly invited and tempted to be complicit - actively or passively - in the great new gold rush as the government turns the printing presses loose and everyone tries to grab the goodies until they're gone. The problem, of course, in rolling around in the slop with pigs and politicians is that they love it, and you end up covered in mud.