By Steve Watkins Staff Reporter, Cincinnati Business Courier
Barry Peterson has some tips for Greater Cincinnati small business owners who are trying to get their share of the U.S. Small Business Administration’s new Paycheck Protection Program.
Peterson should know. He’s helped 37 companies – all of the portfolio companies in which his firm, downtown Cincinnati-based Northcreek Mezzanine, has invested – go through the PPP process.
Seven of Northcreek’s 37 companies had already received SBA approval for their PPP applications as of late last week, Peterson, a Northcreek managing director, told me.
“We’ve had the benefit of following the legislation and even helping to shape it through our industry association,” Peterson said.
Northcreek invests debt and equity to provide capital that banks typically don’t want to provide, often alongside private equity firms. Its investments focus on companies with established revenues and profits.
Most are small to midsize companies, and all are well under the 500-employee maximum to qualify for PPP funding, Peterson said.
The program enables small businesses of 500 employees or less to borrow up to 2 1/2 times their average monthly payroll. They can apply 25% of that to other costs such as mortgage, rent and utility bills to keep the business open. Loans of up to $10 million are available. The key for many companies: the loans are forgivable for the amount used for payroll, rent or mortgage, utilities and other qualifying expenses over the eight weeks after they receive the money. They have to keep all their employees on staff to get the loan forgiven. Otherwise, the loans charge a low 1% interest rate.
As of 3:00 p.m. Sunday, banks had processed $205 billion worth of PPP loan applications, according to the American Bankers Association. That’s 58% of the program’s $350 billion limit, although that amount is expected to expand.
Here are some tips he picked up while shepherding more than three dozen companies through the PPP process:
- Get started now if you haven’t already. “We’ve been advocating to everybody there’s a first-mover advantage,” Peterson said.
- Choose your bank wisely. Loan applications have to go through a bank. It’s key to identify which bank is most likely to process your loan. That’s usually the bank where you already have a lending or depositor relationship. “Your path will be quicker when you go where your banker knows you,” Peterson said.
- Open up communication lines. Along the lines of knowing your banker, talk to that person, too, to make sure you understand the bank’s particular requirements, Peterson said.
- Do what you’re told. “Follow the banker’s directions to the letter,” Peterson said. “If there’s any variation, the application is going to be set aside to be dealt with later. That’s not where you want to be. Make it easy for the banker.” Peterson said the “worst thing” that can happen is to have your application put into the set-aside pile.
- Get your financial documents together. The loan application process isn’t overly lengthy, but you’ll need some financial data, particularly monthly payroll figures for either the past 12 months or for 2019. There’s some discrepancy there. The Treasury documents tell applicants to use payroll data for the last 12 months. But other information has said most companies will use 2019 data. Ask your banker which they prefer. Make sure you have that information together. The loan amount is based on those figures.
- Be patient. Hundreds of thousands of small businesses are applying, many all at the same time. “Banks have been asked to move at light speed,” Peterson said. “It’s a massive effort.”
“I think this is going to end up making the difference in how quickly we recover,” he said. “This lifeline is going to carry us to the other side. Otherwise, we’d be in a tailspin for a long time.”