At PFM, we work with clients all over the country, with all types of practices, and with all levels of cash reserves. For this reason, our advice has never been and never will be “one size fits all.” This could not be more true in the times we face today. Each business needs its own PPP loan implementation strategy and that strategy is unique to your facts and circumstances. With this in mind, we have listed a few things to think about and guidance for all below.
If you have applied for your PPP loan,
- You have either already received your loan proceeds or will receive your loan proceeds within 10 calendar days of your approval.
- If you elected to keep all staff (or a majority of your staff) in place and on payroll, then this money is a welcome relief. Use your funds to pay staff, pay yourself, pay rent and utilities. We are not yet sure of what the loan forgiveness application will look like but a separate account for the loan amount is wise and good records on what the funds were used for will be required. Make sure to keep close tabs on any transfer from the loan account to your operating account and be prepared to present records for what each transfer was for.
- If you elected to lay off all staff (or a majority of your staff) then the receipt of cash brings a new challenge on whether to rehire staff. Because the SBA and the banks have not yet presented a clear path for forgiveness and what is allowed and what is not allowed with loan proceeds, we see little risk in leaving your staff on furlough for now. Pay yourself, pay your family (if you had done so in the past), pay your rent and utilities with the loan proceeds. Leave staff on furlough until we know more about how loan proceeds can be forgiven specifically or you can return to work or have work to do for your staff. This may result in a reduction of forgiveness of your loan proceeds. Once the SBA releases further guidance, work with your advisor to devise a strategy that works for your business. (It should also be noted that the SBA has indicated that the business will not be penalized for a reduction in staffing levels up to April 26th as long as you are back to full employment by June 30th.)
If you have not applied for your PPP loan yet,
- We have received indications from several banks and from the SBA that funds allocated to the PPP program are expected to run out by this weekend. We know that Congress is working to try and get more funds to back the program, and we hope that this will happen soon, but there is no guarantee. By waiting on your application, you are able to delay receipt of funds to hopefully match up the date of return to work more closely with the receipt of funds to maximize the loan forgiveness. It should be noted that this strategy does not come without risk. Without further guidance on PPP, it is not confirmed that full forgiveness cannot be granted for those who temporarily allow employees to remain furloughed.
Bottomline – Once you know when you are projected to receive your PPP funds, call the office and get on the schedule to talk with your advisor. This will require a one on one conversation and your advice will be different than your colleagues. We are here to devise a unique strategy for you based upon your needs, given the facts we have today, just as we always have been.