May 07, 2020
Managing shareholder, Ren Cicalese, CPA, PFS, CGMA, gives advice to business owners that have received the PPP loan in the recent article “PPP loan forgiveness rules keep changing. Here’s the latest guidance from 5 experts.” in the Philadelphia Business Journal. He discusses the importance of thinking about your business’s long term goals and relying on your accountant for tactical guidance.
Tap into experts
While it might be seen as self-serving on the surface, all five experts said business owners should be speaking with their accountants on at least a weekly basis. The same goes for your lawyer. And if your business uses a payroll processing provider, contact them and make sure they know you will need detailed payroll cost reports for the eight weeks in question. Your accountant and banker should have a spreadsheet that can serve as a checklist of things you will need to track. Ren Cicalese, managing shareholder of Cherry Hill’s Alloy Silverstein, said make sure to ask your banker what they will require because it will ultimately fall to the lender to recommend to the SBA whether the loan should be forgiven.
“I’ve worked with 50 different banks on this program and each of them have different requirements,” Cicalese said. “Some ask for tons of info and some for very little. So you have to ask them exactly what they want.”
Forgiveness is not for every business
Many businesses are in a tough spot because they are closed due to being deemed nonessential or are operating at a severely diminished capacity. So they laid off some or all of their employees to compensate for the declining revenue. After receiving a PPP loan, the owner can rehire employees to reach the aforementioned 75% threshold. The only fly in that ointment is that under the stimulus program’s enhanced unemployment benefits, those workers could be making more by not working than they would on the job, and there is little work for them to do if they are rehired. So the business owner could forget about forgiveness and just look at PPP as a loan rather than a grant.
The risk there is that while 1% is a low interest rate, there is still a lot of uncertainty surrounding when businesses will reopen and what their revenue situation will look like when they do. In some circumstances, experts say it’s best to staff back up, but Cicalese believes not all should go that route.
“If you spend that money over the eight-week period like a drunken sailor, then in Week 9 you might not have any cash flow left to get you to 2021,” Cicalese said. “What good is doing all that if you are in danger of going out of business when the money is gone in two months.”
Stick with your bank … for now
All of the accounting and consulting experts said many of their clients have expressed a good deal of dissatisfaction with how they were treated by their banks during the PPP process. Lack of communication, poor customer service and perceived preferential treatment of larger customers have been frequent gripes that have many small business owners itching to switch banks.
“They just need to keep their mouths shut until forgiveness is decided,” Cicalese said. “Go on with your life. You got the money. My experience is that in eight or nine weeks, people’s memories tend to be short and they will forget about it.”
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