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COVID-19, Tax & Assurance Guidance

Who Got What in the CARES Act Lending Program? Prepare for the Next Round of Funding!

Posted on April 22, 2020 by

Tim Hilligoss

Tim Hilligoss

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The CARES Act loans caused a flurry of activity among SBA-approved banks and credit unions, as small businesses (the definition of which has irked many would-be borrowers) sought Paycheck Protection Program (PPP) and Economic Injury Disaster Loans (EIDL) under the CARES Act stimulus beginning on April 3.

Based on my anecdotal experience, it appears that those who applied the fastest were more likely to receive the loans. Now it makes sense; it truly was first come, first-served. Kinda like toilet paper… who would have suspected they would run out?

Some interesting observations on the lending process. The PPP program was designed with the idea that business borrowers would go to their current lending institution for loans, and of course, many did. Not all financial institutions are approved SBA lenders (or SBA fans), and with some of the largest banks subjectively limiting who could apply, or experiencing well-publicized tech glitches that took them out of the running, frustrated long-term borrowers’ loyalties were stretched.

Frustrated business owners, professional service firm leaders, and even non-profit executives scrambled to find a new lending source to obtain coveted funds to make payroll and cover other approved operational costs. For some, the pivot to another lender was a temporary, desperate move to get funds. Others, feeling abandoned in their hour of need, vow to switch banks permanently if and when they dig out of the pandemic intact. Interestingly, there were those who found funding assistance (and answered phone calls with real live people on the other end) at small credit unions, local banks or asset-based lenders and, believe it or not, PayPal.

Here’s a look at a round-up of experiences I’m personally aware of:

  • A local steel servicing center, eligible for the PPP loan and ready to apply – only to be told days later they are too big for their Big Bank; they got their PPP loan from a small local bank.
  • A larger multi-national auto supplier submitted their application to their big bank at 8:30am on April 3rd only to be told, “Oops not sure what happened.”
  • There are also dozens upon dozens of stories about a seamless experience.

At no time in my career can I recall such anxiety among professionals and entrepreneurs. In defense of the less than successful circumstances, the financial information, process, qualifying criteria, and the application changed every day. A moving target that just would not slow down. Indeed, yesterday’s news is ancient history. Sometimes, this morning’s news is too.

We are seeing funding begin. For those with loan approvals, there may have been a big sigh of relief. However, now comes an equally critical task, tracking the use and maximizing the forgiveness on your PPP loan. And yes, the criteria for forgiveness will be changing every day.

As I sit in my home office writing my first blog, the Senate just passed the Expanded PPP Funding Bill. This will put additional money into the now empty PPP loan program for another round of funding. If and when there is a round two of funding and you plan to apply, consider these tips:

1. Act with a sense of urgency to apply for the loan.

2. Understand whether you want to apply for the PPP loan or the EIDL – or both; each has a distinct purpose and application process. Both may have new language and guidelines in their next iteration.

3. Rely on the assistance of your CPA or a trusted attorney or business advisor to help you through the process.

4. Have the proper documentation readily available; know what your SBA lender wants. Every SBA lender is different. Some want your payroll tied-out to the penny, some want a health insurance bill or bills, and some want your Articles of Incorporation, operating agreement, multiple signatures. You need to know this today.

5. Get your application and the required support approved by your bank’s underwriters or credit team NOW.

6. Be persistent in following up with your lender. We learned from the last round that going-dark results in disappointment.

The above represents our best understanding and interpretation of the material covered as of the date of this post. Things are moving at a rapid pace, and as such, information is subject to change. This information is provided for informational purposes only and is not intended to be a substitute for obtaining accounting, tax, or financial advice from an accountant.

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Tim Hilligoss


As a trusted advisor, Tim guides clients through business transactions, tax issues and international expansion.

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