Fancy a PPP loan? Get moving, experts advise (with video)
With the application process already well underway for small businesses wishing to apply for help under the 3P provision of the CARES Act, a group of people who will help businesses through the process had a message: get moving if you want. program money.
In a webinar produced by the Truckload Carriers Association and hosted on FreightWavesTV, Michael Letsch of Bank of America (BOA) made it clear what a business seeking help needs to do: “Talk to your lender yesterday,” did he declare.
The main vehicle of assistance under CARES for trucking companies will be the Payroll Protection Program (P3), which is a roughly $ 350 billion program designed to keep people on the payroll of the l ‘business. Fred Price, chief financial officer of Akron’s JRayl Transport, said his company has already asked for help. But he added that when he asked his banker when he could get the money, Price said the banker replied that he didn’t know.
Letsch, senior manager of transport and logistics relations at BOA, said he told customers the wait time is typically three to five days to download all documents, and then another three to five days. once it has reached the Small Business Administration (SBA), which administers the program. “So it’s probably a few weeks if you got your request on day one,” Letsch said.
But after listening to the webinar team of four discuss the uncertainties of the program, it’s clear there is a lot that even these experts didn’t know. Eligibility is the main issue.
The PPP is aimed at companies with 500 workers or less. Under the P3, employers can borrow up to $ 10 million for a calculation of 2.5 times the payroll on extremely generous or no terms. Concretely, there is no obligation to repay the loan if certain criteria for maintaining employment are met.
The program is designed to help businesses affected by the current economy. Candidates must sign a certificate that he has undergone. But as Letsch asked, “How hurt must companies be to accept these grants?” “
Steven Pletcher, a lawyer on appeal for Scopelitis Garvin, Light, Hanson & Feary noted that the definition of this is “not a clear line test.” It’s about injecting that money into the economy. Beyond attestation, Pletcher added, you don’t need to show specific evidence of the impact of the COVID-19 crisis on you. “But I don’t think it hurts if you are able to know that you have lost customers or that your income has gone down by a certain amount,” he said. “So if there were any questions, you have proof that you had a good faith belief based on the numbers that we were seeing. “
Counting these employees and maintaining their status remain a challenge for companies. But this is the key. As Randy Hooper, partner of transport consultancy Katz, Sapper & Miller, said, there are four “different buckets” that can be paid for with PPP money: rent, utilities, interest on loans taken out before February 15; and payroll, which he called “the main driver.” Three quarters of loan receipts must be paid in payroll.
A common theme among the questions posed by TCA President John Lyboldt during the webinar concerned the counting of payroll and expenses. The law firm of Scopelitis, Garvin, Light, Hanson & Feary was represented on the webinar by lawyer Steven Pletcher. His firm recently hosted a similar webinar in which the issue of counting independent contractors in the payroll base was discussed. The conclusion of this webinar was that they wouldn’t count and even if a business could fit these expenses into the payroll base, it probably wasn’t a good idea because that would create the possibility of it coming back to haunt them in Ranking Battles down the line. This post was reiterated on the TCA webinar not only by Pletcher but by others.
But even with that settled, it leaves a lot of other questions. For example, what personnel expenses can be considered part of the payroll? Hooper said it included a lot of things: wages and other salaries, commissions, tips, vacation pay, health insurance and retirement payments, as well as state and local taxes.
One thing he said is missing: daily allowances. Hooper said this would not be considered part of wages and should not be included in the borrowing base.
How do you count the employees? Hooper said the standards are similar to those that would be used to count employees to determine their needs under the Affordable Care Act. “What I’ve read so far is that it’s based on an employee who works 30 hours a week,” Hooper said. If there were two employees who each worked 15 hours a week, that would count as one employee, he said. But a workaholic who works 80 hours a week would still be counted as a full-time employee, Hooper added.
With the PPP put in place to keep people on a payroll, the incentives are clearly visible for a business not to let people go. For example, Hooper also presented the scenario where a company plans to lay off 10 people to cut costs. But as he noted, given the terms of the PPP, the owner had better cut everyone’s hours to 95% of normal. Left-behind workers earn less and the size of the payroll to borrow would decrease, but they are still considered FTEs under the PPP. “If you cut yourself you are absolutely hurt so that can be a planning point,” he said.
There is also a provision that would allow a company to bring back before June 30 an employee who has been laid off and who still counts as an FTE.
The phrase “we need more advice” was heard throughout the call, but never more so than on the issue of counting to 500.
The overarching question: is the trucking company a stand-alone business with fewer than 500 employees, or is it a component of a larger entity that, when combined, exceeds 500 employees? And if so, is it eligible for PPP relief?
Pletcher noted that one of the reasons there are no hard and fast rules is that, according to the FAQs published by the Treasury Department on PPP, “they make it clear that it is the responsibility of the borrower, not the lenders, to make this determination whether you have any entities that should be affiliated or not.
He added that there are criteria set by the SBA regarding affiliations that can be consulted for advice. The SBA rules examine the question of “whether one entity controls another and whether it exercises that control.”
Hooper said the classifications may vary. For example, if a trucking company is affiliated with a company that is in an industry that has a cap of more than 500 people, consider whether that affiliation can bring a company under the higher cap of a separate industry.
What is the role of your banker in this process? Although the money comes from the federal government, it will be banks, large and small, that will lead the process. Letsch said. BOA’s policy is to serve existing customers only. But he added that the policies are “bank by bank and not uniform”.
During the webinar, Letsch said the FOB received more than 250,000 applications, worth more than $ 30 billion. There are no specific allocations bank by bank, he said; it’s more “first come, first served”. “So if you think you’re eligible and think you can apply for a loan forgiveness, I would advise you to apply,” Letsch said.