Why is the Paycheck Protection Program Delayed?

We are working with many of you on the applications to be submitted for the Paycheck Protection Program (“PPP”). As expected, the process is not going smoothly, not just because of enormous volume or technology glitches, but also due to some major underlying provisions of the program.

Below is the information I have received from one of SBA lending specialists that I wanted to share with you.

“The latest news is that there is an issue with the agreement between banks and the government regarding the buy-back provision that the government was supposed to perform. Under the initial loan program, the PPP loan was 100% guaranteed by the government, and a 100% guarantee to buy the loan back from the bank after the 4 month forgiveness period ended. However, last night’s rule changed that dynamic, eluding that the banks may not be able to sell the loans back to the government at a 100% commitment as soon as the forgiveness period arrives. The banking industry is working with the gov’t right now to resolve the issue and hope to have direction shortly.  Additionally, it appears that there may be a 3rd revision to the application.”

As you may know, some banks have opened up their application portals and some of you have actually been successful in submitting your applications.

However, after speaking with 3 major banking institutions in the U.S. – Wells Fargo, Chase and Bank of America, please understand that even though you have submitted your application it does not mean it is going to be processed and it certainly doesn’t mean that you will get funded the next day.

To the best of my knowledge, lending institutions that have received your applications are not processing them but simply holding your data until the process is ironed out between SBA and the lending community.

Please also understand that there is no favoritism when it comes to your business or personal relationship with your banker, your CPA, or your financial advisor, etc. You will see a lot of “fake news” floating around and I trust in the intelligence of my clients, their trust in us, and common sense.

I understand the sense of urgency and I can appreciate the anxiety everyone is feeling during this crises but acting on emotions will not result in a favorable outcome.

I know that everyone is worried that the money will run out, and for a good reason. The total fund we have is $350B dollars and there are approximately $6M private businesses in the U.S., which means every business would get an estimated $58K in forgivable loans. Yes, the stakes are high and you need to be in front of the line but we need to do this the smart way.

As a result of the above items it seems prudent to hold off sending out the information needed to submit an application and the portal link, as it is highly likely whatever we would send now most likely will change yet again, just as it happened with the SBA Disaster Loans.

The only loans that are being funded currently are SBA Economic Injury Disaster Loans (“EIDL”).

If you trust us, I would hold off on any action until Monday. And I pray to God I am right.

Our team at CPA Solutions have only the best interest of our clients at heart. I wish everyone a calm weekend.