Printing Companies Test Muddy Waters of SBA Paycheck Protection Program Application Process and Funding
The federal government created a $349 billion relief fund to aid small businesses impacted by the COVID-19 pandemic – money that printing companies are lining up to request along with firms from every other sector of the economy. In applying for their loans, printers are discovering that while the generosity of the assistance deserves grateful exclamation points, the process of obtaining the cash is full of patience-straining question marks.
The source of the funding, the Paycheck Protection Program (PPP), is part of Coronavirus Aid, Relief, and Economic Security (CARES) Act, a $2 trillion stimulus package aimed at blunting the recessionary effects of the pandemic. PPP, administered by the Small Business Administration (SBA) through banks and other lenders, is designed to help small businesses keep their workforces on the job and on the payroll.
It aims to accomplish this by enabling applicants employing fewer than 500 people to borrow two and a half times their average monthly payroll costs, capped at $10 million and subject to some restrictions. Borrowers are expected to earmark most of the money for payroll, although it also can be used to cover rent, mortgage interest, and utilities.
The most attractive feature for employers is that the loans, provided by banks and federally guaranteed, are forgivable as long as the number of full-time equivalent (FTE) employees does not change and workers continue to draw no less than 75% of full salary for eight weeks after the loan is granted. Forgiveness is reduced to the extent that these requirements are not met. But repayment terms, if imposed, are gentle compared with those of other types of borrowing. (As one reader pointed out, loan forgiveness is calculated on the basis of full-time equivalent employment, not headcount, as originally stated here.)
The Paycheck Protection Program, which will be in effect through June 30, 2020, began accepting applications on April 3. Just two business days later, The New York Times reported a statement by Larry Kudlow, the director of the National Economic Council, that 178,000 loans totaling $50 billion had been approved for small businesses through the program.
This is an assertion that might surprise some of the printers who were standing at the head of the line when the PPP application window opened.
Short Stories from Long Island
Nassau and Suffolk Counties are next door to New York City, the region of the country hit hardest by the economic disruption wrought by COVID-19. Scarcely less affected than their counterparts in the five boroughs, Long Island printers have turned to PPP just as urgently as the metro firms for relief in the near term.
The owners of the four shops queried for this report submitted their applications either on the day the program launched or few days after it. All are seeking loans from banks with which they already have business relationships. The owners agree that the application process itself isn’t complicated – but only if the applicant is scrupulously well-prepared beforehand, and has a high tolerance for uncertainty afterwards.
The initial step is simple: borrowers submit a four-page application form to an SBA-approved lender. However, says Glen Boehmer, CEO of Sentinel Innovation in Hempstead, N.Y., “the fact that the process keeps changing is unnerving.” He claims borrowers weren’t adequately informed about the supporting documentation they would have to provide to the banks, which he thinks have been swamped by the volume of applications.
Frank Owad, president of LPI envelope in Bay Shore, N.Y., came to a similar conclusion when his application finally went through after being rejected twice. “My instinct is that the system was overwhelmed,” he says. But, the delay helped in that it gave him time to find out what to submit in order to satisfy the bank – the key to eventually turning the money loose.
That takes homework. “I’ve never seen so many webinars in my life in so short a period of time,” declares Adam G. Avrick, president of Design Distributors in Deer Park, N.Y., of his preparatory research. He says that he gathered an “overabundance of information” about PPP from trade associations, his accountant and his attorney, and industry colleagues.
Even so, there were holdups. ADP, Avrick’s payroll processing service, helped by compiling some of the needed input, but the bank was slow to clarify in which format – spreadsheet or PDF – it wanted the data sent. In assessing the lending program as a whole, Avrick thinks that “what could have been a lot simpler was made a lot more complicated” by the government’s haste to roll the system out.
Tom Staib, president of DWS Printing Associates in Deer Park, submitted his application online on the first day, only to be told by the bank to try again the following Monday. He says it turned out to be a “relatively simple process,” but only because his controller had fully researched and assembled everything that had to accompany the application form.
The required documentation includes payroll records, unemployment tax report forms, business income tax returns, and whatever else the lender needs to calculate the eligible loan amount. Also due to the lender are proof of full-time head count, payroll costs, and other expenses for the eight weeks following receipt of the loan.
“You can’t just go online and wing it,” emphasizes Staib. “You really have to know the numbers.” Borrowers must be prepared, for example, to show exactly to the dollar how much of the loan amount they will apply to each of the eligible expenses they intend to use the money for.
Their applications are in – but for these four companies, the actual funding is still nowhere in sight.
Trying to find out when it will arrive is “like working in a void,” says Owad. “It’s a one-way information tunnel.” Boehmer, likewise, admits he and his fellow borrowers can only guess. “With all the issues with the PPP and the fact that most of the banks were not ready, and are still not all ready, my associates figure it could take four to eight weeks to receive that money,” he says.
“It’s just a waiting game,” concludes Staib, adding that there’s no sure way to know when the funds will appear in his bank account.
But when it finally does materialize, the money should prove to have been worth the frustration and the wait. As small- to medium-sized businesses entering what is almost certainly going to be a period of recession, printers need all the economic support they can get.
“Our only expense is not payroll,” notes Boehmer. “As printers, we have money on the street” in the form of receivables that may become hard to collect. He’s seeking an additional cushion in an Economic Injury Disaster Loan (EIDL) advance, an SBA grant of $10,000 that does not have to be repaid.
Boehmer admits that in the printing business, a sum like that will not go very far. But, the payroll-based formula of the Paycheck Protection Program promises real relief. As Avrick says, “This is not chump change. This is real money that can do a lot of good for a lot of people.”
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