Many business owners in the US, including myself, are in the confusing and stressful process of applying for PPP or EIDL loans and funding. There seem to be more questions than answers. Hopefully the following will help.
This is an interview I conducted with Christina Honchell, Parish Administrator for All Saints Episcopal Church, Pasadena, who was able to obtain a PPP loan for the organization out of the first tranche of funding. Both for-profit and nonprofit entities are eligible for funding through these programs.
Kimberli: Just to give it a little bit of background, what's the annual budget of your institution?
Christina: Just slightly over 5 million.
K: And about how many employees do you have?
C: Well, that's one of the questions they ask. Like many organizations, it's a fluid number. The number we used is 44. That includes 30 full time employees, which for church purposes is 20 hours a week or more, and it also includes our part time child care workers. It does not include contractors.
K: Christina, you successfully secured a PPP loan for your organization, which is quite an achievement these days! How long did it take to secure the loan? How long did it take to fill out the documentation?
C: I started emailing my banker and reaching out to a couple attorneys in the parish on the 30th of March. They sent me the first application form on the 31st. And the applications were supposed to start going in on the first. I got word that we were accepted on the 18th of April.
We're talking almost three weeks before it was over. I filled out 10 iterations of that application. What they sent me on the 31st turned out to be wildly different from the final one I sent in. I sent in the last application on April 8th or 9th. And, bless their hearts, the bankers were having the rules change hourly and the SBA was totally unprepared. That's very clear. I think the banks were on it, some of them more so than the SBA was, but they were totally at the mercy of the SBA. The SBA would change a form and I'd have to fill it out and run to my little scanner in the bedroom again. It was the craziest thing I've ever experienced.
I don't think I slept for a week and a half. There were a couple of nights when our banker was on the phone with me at one in the morning with her baby. It's no exaggeration to say she was handholding me. I was afraid to go to sleep, and, everyday when I got up I thought; oh, no, what now.
She was handling many loans, but the way she came through was pretty amazing. The hardest thing was not knowing what they wanted. The application was one thing, It is actually pretty simple and straightforward, but you have to figure out what an average month of payroll expenses are for 2019. So, that required a lot of back and forth. What is allowable, what isn't, what can you use, what don't you use? And then, you multiply that by two and a half and that's the amount of the loan. So in all those 10 applications I did, there was a different amount on every single one. Again, the rules were changing moment to moment.
Then, after you get the money, up to 25% of it can be used for mortgage, rent, utilities. But none of that goes into the original math problem. It is a giant math problem, and it's a crap shoot, frankly. I have no idea if the amount of money we got is enough or too much. It just really comes down to lots of spreadsheets. And then the bottom line is you're guessing.
We use ADP for our payroll processing, and they finally got in the groove a little bit and put a report on their website that generated the information we needed. So after a week of trying to do it ourselves, which was insane, we were able to push a button and get a report from them.
I think they were behind the eight ball too. They were not on top of it immediately and I'm sure that held a lot of people up. It would've made it a whole lot simpler if the payroll processing people could have done the calculations. And I know that a lot of small businesses and nonprofits don't even use payroll processing. So, you know it’s much harder for them to come up with the right numbers.
K: You bank with a smaller bank, right?
C: With City National. They call themselves a community bank, but they're a national bank. When I looked them up, I think it said they're the 38th largest bank in the country, so they're a medium bank.
And my understanding is that people had a better experience with medium sized banks than with the really large ones or with credit unions, who really weren't prepared. I know some places who bank with small, community banks had a lot of trouble with their banks not being certified by the SBA. Your bank has to be part of the process. I feel like we were really lucky that for a nonprofit, we have pretty large deposits, and, I think that's what got our bank's attention. I'm sure they're altruistic and wonderful, but the reality is they took care of us because we're a good customer.
K: I’m sure. I struggled because I bank with Wells Fargo and also with a Credit Union. I was in this no man's land since Credit Unions are not certified to do SBA loans, and Wells Fargo shut down their program after one day. I know a lot of people who are very frustrated with Wells Fargo. It was very difficult. My individual banker has been great, but on an institutional level, they've been horrific.
What was the most difficult hurdle through this application process?
C: Not knowing exactly what they wanted. And that's my hope for the people going through this the next time. That it will be clearer, that banks will know what they need. I can't tell you how many times Cheryl, the woman I was working with, came back and said, well, I don't know if this is what they want. Let's try it. And if it's not, we'll try something else. She was working with her underwriting people at City National and with the SBA. Everybody had different expectations and needs. And the value in working with a bank that knows you really well is they know who you are, so underwriting is not an issue.
There's a credit form, but it's not onerous. There seems to be a lot of trust in this process, from the SBAs point of view, which is interesting. But the hardest thing was just finding out exactly what they wanted and putting it in the format that they wanted. Their forums ended up being very basic and simple. But, Cheryl kept saying to me, if we get something wrong, they'll reject it. So you really have to pick one. Either the PPP or the Economic Injury Disaster Loan (EIDL). You can’t do both.
K: And, self-employed people have to choose one: PPP, EIDL, or Pandemic Unemployment Assistance.
C: All the programs are really to make up for lost income, I think.
K: So what do you wish you had known before you went into this process?
C: They were literally inventing it on the fly. So there really wasn't anything I could have known. I'm grateful for the staff we have that were helping me. And I'm grateful for our relationship with the bank. Obviously your books need to be in order and you need to have information that you can pull quickly out of your payroll system. But I really hope that this next go round people will get much clearer information. I can't see how that wouldn't be the case.
K: So what expertise did you find helpful in the process? I know you have access to more help than a small business owner with 4 or 5 employees, but what expertise did you find invaluable in the process? Is there one thing that you would recommend for a small company that doesn't have that breadth of resources?
C: It's all about the relationships with the vendors you use. ADP was helpful; invaluable. The bank was invaluable. My IT manager, I mean we're doing all this from home, with sketchy internet and trying to pull reports, so I'm really glad that I was doing it as part of a team.
I talked to my personal CPA the other day and he said, they’ve been working with a lot of our clients on PPP applications. So I guess the best advice is to reach out to the professionals in your life who can help; your auditor, your CPA, your attorney. It's not rocket science. It really isn't. The most difficult part for us was the not knowing. So hopefully, it's become a much more straightforward process. And I do fear that this next pot of money is going to go really fast. There are a lot of people in the pipeline waiting for it. So I guess the best advice would be get it all done as soon as possible.
Have everything that has to do with payroll and benefits for 2019 and for the first two or three months of 2020. I think we ended up using two months of figures. It's much easier if you continue to pay your employees and you don't have to hire them back and then justify that, because the whole intention of this is that is to support organizations that have kept their employees on the payroll.
K: I’m sure many business owners wish it had come a few weeks earlier so they didn’t have to lay off or furlough employees.
C: It’s so difficult for a lot of people. They're scrambling now to show that they're going to hire their staff back. And I hear about these wrinkles with unemployment. The extra $600 in unemployment a week, which for some people is pretty substantial compared to what they're getting from the state.
K: Let's face it, $600 a week in Los Angeles is not very much.
C: For minimum wage, it might be. So that's the hard part. Thankfully, we had committed to paying all of our staff their regular salaries for the reminder of the year.
K: Thank you. I think that's all of my questions. Is there anything else that you would want to impart to somebody going through this process that I didn't ask?
C: Just breathe. It can be a very stressful process. It's all tied up with the anxiety about what we're going through in terms of health and safety and all the anxiety about your business surviving. So don't be afraid to reach out to people who can help you. And, remember that if it doesn't happen, it doesn't mean you're not a good person or a good business person. In a lot of ways, the system is rigged. It just is. I think we've all seen that and, let's hope that this next round, the money ends up with people who really need it. It just breaks my heart thinking about people who have built businesses, put their entire lives into it and all the harm it's doing to them. It’s really heartbreaking.
K: It is heartbreaking. And hopefully this bright light that's being shown on our lack of a social safety net will bring about long term change in the system. I hope so. It's really scary. We can't have a strong economy without supporting our people and small businesses. Thank-you, again, Christina!
And, please share this! The intent is to help people!
In addition to this interview, Once a week, I send a musing about leadership, business, finance and life. You can subscribe at www.kimberlihudson.com/blog.