A Time Traveler’s Guide to Pursuing Paycheck Protection Program Loans: Lessons From the Past Before Applying for Your Organization’s PPP Funds

December 23, 2020

Your email box is being flooded right now with a recitation of jargon, interpretations, and speculation about the newest stimulus package and the resurrection of the Paycheck Protection Program that passed through the House and Senate over the past few days. This morning as I flipped through the New York Times and Washington Post on my phone, I found myself asking, “What good advice could I give nonprofits and associations TODAY, based on what we learned from the first and subsequent modifications of PPP funding earlier this year?”

I realized that the loan details (the jargon, interpretations, and speculation– which were often clarified, modified, or thrown out altogether) were not the things organizations needed to know MOST in late March and early April. They needed to think critically about their banking relationships and application process, strategic plan, and communication with stakeholders. And if I could travel back in time, I might say some different types of things to them than I originally said in March and April. Fortunately, we have that opportunity now:  If your organization is considering applying for the newest round of PPP funding, here are the things your management and board should consider NOW to save you headaches later…

1.) Examine your banking relationships and the application process

My observation from “Round 1” was that clients who communicated early and regularly with their banks had the best chance to access funds when the “loan portals” were opened. 

a. Make sure communication is clear, make sure you have details for the application, make sure you understand how your banking portal works, and make sure you understand your bank’s system for processing applications.

b. In some cases, local and regional banks were able to process applications for small to mid-sized organizations when other banks were not. It may be worth considering what your current banking relationship can offer and if a change in that relationship will benefit the long-term health of your organization.

2.) Talk with your board and build a strategic plan

a. If obtaining the loan is your goal, are you willing to take on the commitments for loan forgiveness (ex. Maintaining the number of full-time equivalent employees through the loan deferral period). While the funds provide short term liquidity- it was amazing to witness how quickly organizations spent down the funds because cash flows were impaired in other areas of their operations.

b. What will you do when the PPP funds run out? Will you apply for forgiveness or treat the loan like a short-term loan with an interest rate of 1.00%? (very favorable terms, even in today’s market!)

c. What if the forgiveness application process is more difficult than you anticipate- do you have a team of experts to assist with the application (CPA’s, lawyers, etc.)?

3.) Communicate with your stakeholders

a. What will your stakeholders think if you decide to apply for a PPP loan- will it promote optimism about the future or cast doubt on your ability to continue to carry out your mission?

b. Emphasize integrity and responsibility with these funds, in appearance and fact, with stakeholders inside and outside your organization. The reputation risk that comes with any abuse (or perceived abuse) of funding could have a lasting impact on your organizations’ legacy.

The next few days and weeks will be flooded with updates, details, and maybe even some guesswork about the newest round of PPP funding.  Take a lesson from the past: make sure you use this time to consider your banking relationship and application process, strategic plan, and communication with stakeholders.

For additional guidance and resources on PPP loans, visit our COVID-19 Resources Hub or contact our COVID-19 Advisory Team at 240.630.0702.