Despite the announcement that banks would be ready to accept and process Paycheck Protection Program applications today, in reality, most institutions are far from it. From unexpected information being required from the SBA system, to banks not having the ability to process applications (due to technology or other complications), to use John’s words, “it’s pandemonium.”
Hi, John Geraci, Managing Partner at LGA here. Just wanted to give another PPP update, a Paycheck Protection Program update. Wow. So April 3rd was supposed to be the date that banks were able to process these applications and submit them into the SBA, um, portal. Unfortunately, there’s a lot of challenges that banks continue to experience with the with, the actual process of submitting these. There seems to be more information requested inside of the SBA system than the banks were even aware of. So they haven’t collected all this information from the businesses in order to, uh, reply and respond appropriately inside the SBA system. Some banks can’t even actually process applications right now. A lot of banks are creating their own online system for businesses to input this information into an application. They’re not ready to do that yet. So I use the term pandemonium, pandemonium. It’s pandemonium out there.
People are beside themselves, banks are scrambling, businesses are scrambling, and so everyone’s trying to do the best they can. Last night the SBA actually came out with some additional guidance in the form of a Q. And. A. It did answer some questions. One of the things that was hanging out there was whether or not businesses could include um, 1099s from some of their independent contractors in their payroll cost calculation. And there was some that were saying yes, some that were saying no and they did clarify that last night and said no. Since independent contractors have their own mechanism to apply for their own funds under the program, businesses can’t obviously be redundant and include them there as well. One other thing that was questionable was whether or not the payroll would be based on a trailing 12 months, which would imply Q2 through of 2019 through Q one of 2020 or whether or not we would just be able to use the 2019 year-to-date payroll.
The application on the SBA form actually said that you could use 2019 payroll or the most businesses would. So it seemed to be acceptable. Last night’s guidance had conflicting reports. One section of the guidance referred to the fact that you need a trailing 12 months or, or the prior 12 months worth of payroll to compute your average payroll costs. And another section of that same document, a reference that you, a, the bank should be verifying the monthly average payroll cost based on 2019 payroll. So, so much confusion. We’re trying to stay abreast of it and continue to communicate with all of you. So we’ll continue to keep you updated. It’s a, it seems like it’s changing. We used to say it’s changing daily. It seems like it’s changing hourly as of this point. So we’ll update you as we know more. Take care.
by John Geraci, CPA, MST