Larry Sprung, president of Mitlin Financial in Hauppauge, New York, was able to begin the application process at Bank of America when the Paycheck Protection Program started on April 3.
A forgiven loan program, designed to help ailing small businesses, has been criticized amid delays, confusion, and frustration.
But some small business owners have successfully applied for the loans, provided through the new Paycheck Protection Program, with hardly any hitch.
These entrepreneurs seem to have something in common: relationships with representatives within their bank who guided them through the process.
Lawrence Sprung, a certified financial planner and financial adviser, was one such owner.
Sprung, the president of Mitlin Financial, based in Hauppauge, New York, applied for a $ 50,000 loan on April 3, the day banks began applying for applications.
Others were less fortunate. Many were excluded due to the large volume or lack of relationship with a bank identified as part of the loan program.
And time is of the essence: The program has reserved up to $ 349 billion for small businesses on a first-come, first-served basis, which many fear that there will be no money for them.
“At the current rate, we are out of money,” said Larry Kudlow, director of the National Economic Council, said Tuesday on Fox Business Network. Indeed, the money may run out as early as Wednesday, CNBC reported.
Sprung has both corporate bank accounts and existing credit with Bank of America, which gave him an immediate benefit as many banks initially prioritized such clients.
He also has a relationship manager at Bank of America. The banker informed Sprung in advance what information and documentation he needed. The morning of April 3, she sent Sprung a link to the application portal and he came through quickly.
A few days later, the banker called Sprung to notify him of a website update and that he had to upload additional documents – something he might not have discovered for days if not for that phone call, he said.
“It was a great help to be prepared for it,” said Sprung of the application process.
He is still waiting to hear that the application has been approved.
Processing of applications
Many banks have managed the process differently with regard to the paperwork needed to apply for a loan, said Frank Fiorille, vice president of risk, compliance and data analysis at Paychex, a contracting firm.
The two most required items are two federal tax forms: Form 940 (an annual filing) and Form 941 (a quarterly filing), Fiorille said.
Businesses may also need proof of benefits, such as the amount of employers’ contributions to health insurance, he said.
Some of the under-the-radar items needed to complete an application include: a six-digit North American Industry Classification System code from the company and the exact start date of their company, according to Brock Blake, founder and CEO of Lendio , an online marketplace for small business loans.
Those who own less than 20% of their business should be willing to have another co-owner also put their name on the application, he said.
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These finer details are not easily understood by laymen. Small businesses that cannot find anyone to guide them during the process run the risk of having their application sent back to them.
“By far the main reason why requests are delayed or denied is the incomplete package and information,” said Robert Katz, general manager of the financial advisory group at EisnerAmper in Philadelphia.
Having a team that can coordinate with the bank is useful, especially since banks request supporting documents.
“They are tax returns and financial statements, both business and personal,” says Katz. “When a customer calls and says the bank wants these three or four extra things, we have a team that can turn it around in a few hours.”
When access makes the difference
Entrepreneurs Fred and Marcia Puente are arguably the best example of how entrepreneurs do it while seeking funding through the federal Paycheck Protection Program.
Fred, president and CEO of Maryland-based Blind Industries & Services, applied for part of the $ 349 billion loan program for his Baltimore-based company.
Blind, a 501 (C) (3) non-profit organization, produces textiles for the military, as well as hand sanitizers. The company, with annual sales in excess of $ 100 million, has laid off 36 of its 495 employees.
“We’ve been working at our bank for 25 years and they just came up to us and said ‘This is what you should do,'” said Fred, whose regular bank is with Bank of America. “They came here to help us get the information to the right people.”
In addition to working with Bank of America, Fred also coordinated with Katz from EisnerAmper and Blind Industries’ internal accounting team.
Marcia, on the other hand, has a franchise that specializes in truck beds. She has had to look up her company’s payroll, which has about six employees, and work with her company’s external CPA, Fred said.
“There is no doubt that Blind Industries is a large small business,” he said. “In a really small company of five or six people, it all falls on one person.”