Congress approved $320 billion of small business rescue funds on Thursday night, replenishing a loan program aimed at salvaging jobs amid record unemployment sparked by the Covid-19 pandemic.

In the initial $349 billion of Paycheck Protection Program (PPP) funding, which ran out April 16, more than 34,000 business entities across Tennessee secured more than $6.5 billion of loans, according to government data. The loans can be forgiven if used to cover payroll and other business expenses over an eight-week period.

Now, with the government poised to uncork another $320 billion, we surveyed Nashville banking executives and business advisers about the program and asked for their advice for existing recipients and new applicants.

NBJ: What’s your key takeaway after the initial round of funding?

  • John Bearden, Renasant Bank: “The volume of applicants for PPP far exceeded expectations, resulting in a shortage of funds available for the initial round. The program got off to a rocky start as many of the rules of the program were released after the official launch of the program, but participants now have a much better understanding of the process.”
  • Bob Mendes, Sherrard Roe Voigt & Harbison: “While this process is designed to move quickly, it is taking even the most well-prepared businesses and nonprofits a concerted several-day effort from management and accountants to get through the application process.”

What’s the biggest misconception you’ve encountered when speaking with clients or prospective borrowers?

  • Arthur Van Buren, LBMC: “Many are concerned about lender or governmental oversight of their business after they receive funding. There is nothing in the law regarding this.”
  • Vic Alexander, KraftCPAs: “I am not sure that all businesses fully understand that money that is not used for the intended purpose of wages, rent, utilities and mortgage interest will have to be repaid.”
  • Fifth Third Bank spokeswoman: “Many customers didn’t understand that applying for the loan is a multi-step process. A qualified application didn’t always mean the loan would be funded, and this was obviously very frustrating and scary for business owners trying to make payroll during this difficult time.”

What’s your biggest worry with PPP?

  • Mendes: “This program doesn’t solve any systemic problems. It is a temporary lifeline. If the virus doesn’t abate or the economy does not improve within the next two months, then many businesses will be right back to having to make tough decisions. Use the time wisely to create a game plan for various scenarios.”
  • Alexander: “I am not sure how our country is going to repay the debt created by the program.”
  • Chris Holmes, FirstBank: “My biggest worry is that customers might not fully understand the program and use the proceeds in a manner that causes the loan not to be forgiven. This pandemic has created stress for everyone, especially small-business owners, and we want to make sure their loans are forgivable and that they are not taking on additional debt during tough economic times.”
  • Chad Hart, Republic Bank: “First, that businesses that really need the money will not get it before the program runs out. And, second, businesses will misapply the funds and have to repay more than they anticipated.”

What’s your advice for business owners who will apply for the second round of funding?

  • Holmes: “Borrowers have had more time to prepare this time around, and we expect the money will go quickly again. I would advise companies to have their application and all supporting documents ready. Payroll records are most important and are required to establish the amount a borrower may request.”
  • Bearden: “Be quick! All participating financial institutions have a backlog of applicants who were not able to participate in round one, and those applications are ready for submittal in round 2. In addition to moving quickly, make sure to provide an accurate application with supporting payroll of tax information that supports the average monthly payroll calculation.”
  • Alexander: “Do not hastily send in the application without checking to make sure that all of the computations are correct. That will only delay the process.”
  • Van Buren: “Do not just submit your application and wait. Make sure your lender confirms to you that they have all that is needed, and then request that the SBA application number assigned to your case is provided so that you know it is in the hands of the SBA.”

What are the top things businesses should do to ensure their loan is ultimately forgiven?

  • Bearden: “The forgiveness determination lies solely with the lender. The lenders want to make sure that the loan is clean and has no flaws in it, for fear of that it will not not be purchased by the SBA — and, the lender has a 1% loan on its books from a business to which they may have not otherwise made a loan. As such, the lender will scrutinize every detail of the requirements for loan forgiveness and are seeking legal counsel on the matter.”
  • Holmes: “The SBA has defined the timing and usage of the loans, and borrowers need to truly understand this information before applying for and accepting their loan. It’s also really important for borrowers to document all expenses as they progress through the eight-week period.”
  • Hart: “While the SBA has tried to provide guidance, we still are waiting for additional details of how clients can apply for forgiveness, and what exactly will they have to provide.”

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