Monday, July 6, 2020

19. Convince me a PPP loan is not for you.

Jovita Carranza, administrator of
the Small Business Administration
Calling all roasters who have not already applied for a Paycheck Protection Program (PPP) Loan - please convince me, 'why not?'

Over the past month, the U.S. Treasury has made several dramatic changes which, in my mind, wipe out almost every good excuse I've heard so far about why a roaster would not apply for a PPP loan.

A. H.R.7010, the Paycheck Protection Program Flexibility Act of 2020 passed on June 5. This made the application for forgiveness of the loan much, much simpler. (There is now an EZ form similar to the EZ form for your taxes.) See our blogpost on that act.
B. The PPP Flexibility Act act also clarified many vague technicalities that had some companies worried - including the 8 week "covered period." In short, the government recognized the 8 week period was irrelevant for most businesses and offered a second option, the 24 week covered period.
C. On July 3, the PPP Extension Act was signed into law, extending the deadline for application for a PPP loan out another month, to Aug. 8, 2020.

These changes and clarifications eliminate excuses for roasters who hesitated because, "what if I can't bring back my people until September or October?" Now that will be fine. I also heard the legitimate concern about, "will the loan actually be forgiven? I'm not signing up for a debt if the rules for getting out are not clear." Makes perfect sense. But now the rules are clear and they're not that hard to follow. If you find them confusing, no worries! Please contact us about our Loan Application Assistance for Roasters (LAAR) program!

Also, now it is relatively easy to find a bank that will work with you on your loan. Early on, it was difficult for some businesses to find a bank to make the PPP loan. Businesses cannot go directly to the Small Business Administration (SBA), they must apply via a bank. Now on-line banks like Paypal and Nav offer them, so almost every business can access the PPP, even if they have their business account at an isolated, small town bank.

Private-investment owners
The one excuse I've heard that does appear to be a show-stopper is when a roaster is part of a larger investment/equity group. There are prohibitions in the original law creating the PPP against lending to businesses owned by these groups. Data released on Monday, July 6, from the SBA indicates that many large restaurant groups did receive millions in PPP loans. However, the SBA is requesting these funds be returned.

"Companies applying for the money were required to certify that the money was “necessary to support the ongoing operations,” while taking into account “their ability to access other sources of liquidity,” the SBA’s website states. 

Industries receiving the loans
The new data released by the SBA this week indicates about half the loans went to five industries, according to a Washington Post report. They are:
12.9% health-care and social assistance industry received
12.7 % to professional and technical services; 
12.4% to construction; 
10.3% to manufacturing; and 
8.1% to hotels, restaurants and other food service employers.

My guess is many roasting companies belong to the latter two groups. If you have not already, consider whether now you have any excuse. With PPP you can essentially receive grants to help pay yourself and your workers and keep the specialty coffee industry alive.

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