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Q&A with Paul O’Reilly on the SBA Loan Process and the PPP

April 7, 2020

1. How has Shulman Rogers been assisting its clients with the loan process? 

Most companies have never applied for SBA loans before and need to figure that out as the world changes around them. 

At NEXT powered by Shulman Rogers, we made it easier for companies in two ways.

First, we launched what may be the country’s only fixed-price legal service package for this situation.  The pre-scoped, pre-priced package is designed to help companies assess and apply for SBA loans with the guidance of very senior business lending lawyers, at reasonable fixed-fee pricing.  You can read more here.

Second, we’ve selected specific lenders to work with our clients, from a network of lender banks that we’ve cultivated over 25 years of advising on federal loans.  I’ll share more about how we selected our lenders below.

2. What are some things you’ve learned about PPP loans and the difficulties submitting applications?

We should first recognize how massive this program is and how quickly it came together.  If you’ve ever launched a product, you know how hard it is to coordinate communications through your channel partners. 

Now more than ever, don’t waste time with robo-lenders where you can’t reach a human being to help you.  Also, don’t work with a lender who relies on an intermediary lender. Given how new and fast-moving this is, you don’t want to fall victim to “telephone game” misinformation.

More tactically, we analyzed 10 lending banks in our network to see how they’re applying SBA guidance.  We learned that each bank interprets the SBA terms slightly differently. For example, some lending banks require payroll records for 2019, while others base their decisions on the trailing 12 months. But if you provide the wrong period, your application may be delayed. 

Some of this confusion arose because this program came together so quickly.  This will straighten out in the coming weeks. But for now, we are advising clients to prepare two sets of figures on the average payroll costs because the lenders vary on what they want submitted This is critical to have so that your application will survive regardless of which approach a lender will require. Most firms would charge double for analyzing multiple approaches to keep clients flexible while the SBA determines how it will proceed. Our fixed-price approach lets us focus on doing the best job possible for clients.

3. What do you think the government could have done differently to make this loan application process smoother?

Again let’s remember how quickly this massive program came together.  That being said, we have all learned a lot this past week and we can expect the system to improve. We particularly expect the government to clarify the affiliation rules (important for investor-backed entities), and to harmonize the payroll reporting requirements discussed above.  There are also technical points about tax characterization of LLC distributions that have yet to be resolved and other technical issues that professionals are closely focused on.

4. In the end, do you think the PPP loan will be beneficial to small businesses who need assistance asap?

We have no doubt the program will be beneficial.  This program is truly incredible. We expect to start seeing multi-million dollar checks land in many of our clients’ hands within the next two weeks.  

5. What are some other downfalls you’ve heard about with the PPP loan process?

We need to remember that the alternative here is even larger mass layoffs, greater unemployment, and deeper business stagnation.  We don’t expect to look back at this and point to the SBA’s downfall. There’s always room for improvement and we’re proud to be doing our part.

6. Any other comments?

It’s not too late to apply.  Many lending banks have just started accepting applications.  The lenders who opened last week had to reject many applications due to ineligibility or incomplete applications.  We expect next week to be the last big chance for now. Read more about us here