Now it’s time to put the money to work in ways that’ll position your business to qualify for having the loan forgiven, essentially converting the loan into a grant.
While the SBA hasn’t issued full guidance for how businesses will need to apply for forgiveness, here’s what the conditions included in the CARES act along with advice from SBA-lending experts indicate business should be doing now:
Document, document, document. To have the loan forgiven, you should be able to document that:
Use it sooner rather than wait. The guidance is that for forgiveness, the funds are to be used over the 8weeks after the loan is made. Once you have the funds, put them to work for the following 8-week period. If you don’t need all of the funds under the75%/25% requirement, you can repay immediately with no early payment penalty.While the loan forgiveness is a valuable component of the program, it’s also good to remember this is a very low-interest rate loan, so it may be worth using this instead of your regular line of credit, if you anticipate needing to tap your line or other lending source for cash flow later this year.
Evaluate your baseline payroll period for comparison: The rules leave it up to the borrower as to which time frame they use for their comparison. The amount eligible for forgiveness will be reduced (i) proportionally by the number of full-time equivalents per month during the “covered period” divided by the average number of full-time equivalents per month employed between February 15, 2019and June 30, 2019 or January 1, 2020 and February 29, 2020 (at the employer’s option). So, do the math now and compare it to your current staff and payroll to determine which timing is best for your business situation.
Lean on your payroll provider or CPA.Talk with your payroll provider (if your business uses one) to get help with documentation. Similarly, enroll the support of your CPA, your landlord and utility provider to ensure you have the documentation now that you’re likely to need later.
Update your business scenario planning. You’ve just gotten a short-term cash infusion of 2.5 times your payroll. Now’s the time to re-evaluate your what-if scenarios for the balance of 2020. How does this funding position your business to weather the various effects of this public health crisis? Are you now in a position to think about what you can start doing rather than what you have to cut?
“Thinc Strategy understands how to match culture with goals. We tried acquiring companies on our own. We had limited time and expertise to successfully move through all of the stages in the process. We brought Thinc in to assist us and later realized, we need to let them guide our efforts. Three transactions later, we are more valuable, more profitable and still growing.”
“Several years ago, Thinc Strategy sold my company for me – handling every aspect from preparing a list for me to accomplish three years before the sale to handling all the issues after the sale. My broker informed me that it was the best deal he had ever seen, all due to Cindy’s expertise, critical thinking, and superb negotiating skills. I welcome the opportunity to talk to anyone that would like to learn more about Thinc Strategy and Cindy’s remarkable abilities.“
“It is so nice to have an advisor that has my company’s best interest in mind. Thinc doesn’t try to “sell” us on anything. Thinc elevates the conversation. They are an integral part of our leadership team.”
“The achievements of an organization are the results of the combined effort of each individual.” Vince Lombardi
“You don’t have to hold a position in order to be a leader.” Henry Ford
“What you do has far greater impact than what you say.” Steven Covey
“It’s fine to celebrate success but it is more important to heed the lessons of failure.” Bill Gates
“Outstanding leaders go out of the way to boost self-esteem of their personnel. If people believe in themselves, it’s amazing what they can accomplish.” Sam Walton
“Leadership is a matter of having people look at you and gain confidence, seeing how you react. If you’re in control, they’re in control.” Tom Landry
“Never make decisions based on money alone.” Cindy Anderson