PPP/CARES update: April 5

Quick summary: 

• More banks are starting to accept applications
• What constitutes “monthly payroll” is starting to come into more clarity—re-run your payroll provider’s calculator before submitting your application
• If you have institutional investors, talk to your investors and lawyer about how the “affiliates” rule will impact your ability to take advantage of the PPP

(Don’t know what the PPP is? Read this first.)

More detail:

Applications begin to open

On Friday, BofA was seemingly the only national bank accepting applications, with a few caveats: (1) it was only doing so for current customers who also had a lending relationship with them (e.g. a credit card), which annoyed a bunch of folks, and (2) it seems that while they’d collected application materials, they hadn’t actually submitted anything to the SBA.

The only people who seemed to be submitting PPP loans to the SBA on Friday were small community banks (initial average loan size was $3,500). However, there’s been a lot of activity over the weekend, and in particular:

 
• First Republic is currently accepting applications for existing customers via email (contrary to rumors)
• Mercury plans on accepting applications for current customers and submitting them to the SBA this week
• Radius will accept applications from Pilot customers (while capacity lasts), regardless of whether or not they are existing Radius customers
• Chase has started collecting callback information from interested clients and is working on launching a full application
• Bank of America is now relaxing its requirements so that you can apply even if you don’t have a lending relationship with them already (but you still need to be an existing customer)

Note that there’s a distinction between the lender accepting your application, the lender processing your application, the lender submitting your loan request to the SBA, and the lender actually giving you money—and it’s hard to know exactly where each of these lenders are in their process.

Some stats from Friday:

• Bank of America has received 145k applications for a total of $30b requested

Payroll calculation

There’s been a lot of anxiety in the industry about the exact right way to compute “monthly payroll costs”—in particular, should it include federal taxes or not?

With the caveat that we’re not providing legal, accounting or investment advice on this point or any part of the CARES Act, and that you should contact your legal advisors or your lender with any questions: current consensus seems to us to be “yes, it should include federal taxes for any periods prior to 2/15/2020,” (based on p11 of Treasury Interim Final Rule).

Some calculators don’t yet reflect this, and you might want to re-run your provider’s calculator to get their latest take before you submit your final application.

Affiliates rule

This continues to be a very complex topic, and we think you’re going to be best-served talking with your law firm about whether or not you are eligible. Again, we’re not lawyers and this is not legal advice, but: our layperson reading is that you’re potentially in the clear on the affiliate rule if (1) no one who owns other companies owns >20% of your company and (2) no one has control provisions that let them e.g. veto actions your board would otherwise take.

If they do have control provisions, your lawyers might have advice on whether you qualify or could if you amended your documents. Here’s a longer article in Forbes with some more detail.

As always, if you have info related to the PPP that you think we should know, please email us atcares-updates@pilot.com.

If you haven’t claimed the R&D tax credit for your startup, you should take a serious look at it, since companies can get back up to $250k in payroll tax credits. Pilot has produced a guide on the topic, and a service to help claim the credit. And of course, if you need help with bookkeeping, tax prep, or CFO services, please get in touch.