PPP 10 Day Fund Disbursement Required – Friday, April 10, 2020 12:30PM

The news coming out now from SBA is that the banks are required to disburse the PPP funds within 10 days of approval.  This is good or bad news depending on your situation.  Unfortunately we won’t know until July what would have been the best answer and you need to make a decision well before then.  You have a stressful business decision to make so below are some options and scenarios to help.  There is no right or wrong answer.  The outcome is based on factors outside your control—when you can reopen and when the program’s money runs out. Since you can’t control those factors, you just need to make a decision that you feel is best and know that all options were reasonable. 


1. Apply now for a PPP loan, possibly get the money soon, spend during the next 8 weeks. That’s great and works.  But if the origination date is 4/15, by 6/15 the 8 weeks have expired and to obtain forgiveness you need to continue to have full payroll by 6/30 even if there isn’t work for the employees. This is fine if you reopen before the 8 weeks expires, which we hope.  The downside:  you’ll be paying people who aren’t working at some point during the 8 weeks.  But that was largely the purpose of the legislation.

2. Suspend your current application now, if you have already applied.  This will allow your origination date to be delayed which will, in turn, delay the start of the 8 weeks.  Some banks say they can allow this; others say no.  If not allowed, you will have to abandon your current application and start again, putting you at the end of the line.  Even if you can suspend it, there is a risk that the funds will run out, and no way to know at this point if more funds will be allocated.  Additionally you will certainly be in a cash shortage now and will have to put most or all remaining staff on unemployment, which includes yourself if you are eligible.  So instead of drawing the potential $8333 per month allowed by PPP, you will be limited to $1121 per week from unemployment or about half of the PPP amount monthly.  (Note:  Simplified figures for analysis purposes based on maximums.  Your figures could be substantially lower.)

3. Wait to apply for a PPP loan, apply when you are about to reopen.  That poses an even bigger risk that the $349 billion in funds could run out.  We might know by that point if more will be allotted, but if the answer is none, then there is real risk in this option.  

 Some scenarios: 

1. You get the funds in a week, you spend the funds on eligible costs during the 8 week forgiveness period that ends in June, and you need to pay people at the end of June even ifyou are not open. Your cost is the expense in those weeks after the loan runs out, but at least you built some goodwill with your employees.

2. You get funds, keep employees on unemployment, and don’t use the majority of the funds until after the 8 weeks. You end up with a loan that has 1% interest for 2 years to pay wages when you reopen. Not free money, but cheap working capital and if you can’t reopen for some time this working capital is probably necessary. 

3. You wait for the loan and it isn’t available when you need it. You look into taking a federal credit or other loan options that might be available.

Hypothetical case study: If you are approved TODAY

Many of you have already submitted your application.  The banks are working through them fairly quickly and approvals are starting to come down.  Many of the banks are willing to hold the funds after approval, but can’t hold them for more than 10 days.  So let’s just say you are approved today, April 10th, and the bank is willing to hold the funds.  You draw those and start the 8 week period 10 days later on April 20th.  If you want the loan forgiven, you have until approximately June 20th to spend the funds on payroll (75% of the funds must be spent here) and rent, utilities, mortgage interest.  Government bans are lifted on 5/20; your practice reopens June 1st; it ramps up to normal levels by June 30th which gives you enough patient revenues to make payroll at the end of June.  It’s really not a bad scenario.  The big question is:  WHEN CAN MY PRACTICE REOPEN?  There is more push every day for a loosening of the isolation orders because people have basic needs that need to be met.  Needs of food that require a job to earn income.  Needs of supplies and services that require businesses to be open and providing those things.  So will the orders be extended beyond May?  That’s the million-dollar question.