You’ve probably heard about the Payroll Protection Program (PPP). Basically, it’s a program under which the Federal government will give your business a big check if you keep people on payroll.
There are very few strings attached. And applying for the check is pretty easy.
As you’ve probably heard, way too much of the PPP money is going to big companies. Not enough of it is getting to the small businesses that are the heart of our neighborhood — the restaurants, salons, coffee bars, shops, and art galleries.
A big reason for that is the way the money is distributed — it flows through banks, and a lot of those banks just don’t pay attention to small businesses. But we’ve got a solution to that.
What we are going to do in this post
We want to tell you about a locally-based (but multi-state) entity, LiftFund, that is dedicated to getting money to our neighborhood small businesses. And we're going to tell you how LiftFund can help you get a PPP check.
Like the big banks, LiftFund is handling distribution of the PPP funds, but they’re focused on small businesses like yours, and they can get a check in your hand in less than a week.
This past Friday, we spoke with LiftFund’s CEO, Janie Barrera, and with Adrian Gonzalez, the LiftFund Vice President who is in charge of the organization’s PPP program.
LiftFund is a non-profit micro-lender. For the past 26 years, LiftFund has provided loans to small businesspeople who couldn’t get funds from a standard commercial bank, either because the borrower had no credit history, because the borrower lacked formal business records, or because the requested loan was too small to be profitable for a commercial bank.
In addition to providing loans, LiftFund helps their customers develop business skills and helps them grow their businesses.
“We’re different from banks,” Barrera explained, “because we want to lose our best customers. Our goal is to help our customers graduate from us and become a customer of one of the commercial banks.”
Today, LiftFund operates in a dozen states, but it got its start here in San Antonio back in 1994. It is still headquartered here, and CEO Barrera — who has been in charge since the beginning — lives in our neighborhood.
What is a PPP loan?
A PPP loan is, practically speaking, a grant to your business from the federal government
“A PPP loan is, practically speaking, a grant to your business from the federal government,” Gonzalez explained. “The intent is that you use the money for payroll — to keep people employed. We give the money to you as a loan, but as long as you use it for payroll — and a few other defined purposes — you never have to pay it back. It will be forgiven.”
The other ‘defined purposes’ include business rent, mortgages, utilities, and interest on old business debts. Money used for those purposes will also be forgiven, as long as payroll makes up at least sixty percent of what you spend.
That rule doesn’t prevent you from using some of the money for other things, but money used for other purposes won’t be forgiven. So, for example, If you use some of the money to purchase supplies for your restaurant, that amount will be considered a loan, and you’ll need to repay it. But you’ll get five years to pay it off, and your interest rate will be 1%.
Who is qualified to get a PPP loan?
Just about any small business that was open and operating on February 15, 2020 is qualified
If you owned a business last year, and you paid employees, you probably qualify. If you worked as a 1099 contractor last year, you probably qualify. And if you’re a sole proprietor of a business that gives you income directly, you probably qualify.
“Any small business owner should be eligible,” Gonzalez told us. “Anybody who is self employed. Anybody who is a 1099 contractor. They should all be eligible. The only thing that makes someone ineligible for a PPP loan is if they defaulted on some type of government obligation in the past — on a student loan, an SBA loan, or a tax obligation.”
How much money can you get?
For most businesses with employees, the amount of your loan depends on your average monthly payroll last year. Add up your total payroll for the year and divide it by twelve. Your maximum loan will be 2.5 times that amount.
For a sole proprietorship or a 1099 contractor, where there’s no payroll, your maximum loan is based on your Schedule C or your profit and loss statement, divided by 12 and multiplied by 2.5.
So, for example, if you had total payroll last year of $120,000 (or if your Schedule C income was $120,000), your monthly average would be $10,000. Multiply that by 2.5 and your PPP check would be for $25,000.
“One thing that Schedule C filers should be aware of,” Gonzalez pointed out, however, “is that your potential loan is based on your Schedule C income. So if you expensed a lot of things to keep that number low, you won’t be eligible for much of a PPP loan, if any.”
Forgiveness of the loan
You’ll be given 24 weeks to use the money for its intended purposes. At the end of that time, you have to account for it.
If you can demonstrate that you used it all for intended purposes — primarily payroll — the entire loan is ‘forgiven’. That is, you don’t have to pay it back.
Any money that was not used for those purposes will continue to be a loan, and you’ll be obligated to repay it over the next five years at a 1% rate of interest. There’s no penalty for paying it off early.
How do you apply?
So, now that you know what it is, how do you apply for a PPP loan?
The most important thing: ACT NOW!
The government’s deadline for applications is August 8, but before your application can be submitted to the government, it must first be reviewed, approved, and packaged by LiftFund. LiftFund, therefore, has set a drop-dead date of August 6 for submitting your application to them.
However, DO NOT WAIT THAT LATE!
If LiftFund gets a deluge of last-minute applications — or if the package you submit is missing things — your application may not make it in time.
The bottom line: The process is easy, so start right now.
What's the process for applying?
The process is pretty simple, and LiftFund staff will help you where you need help. But basically, here’s the process — the numbered points in our list match the numbers on the illustration:
Go to the LiftFund PPP Resource Page, where you’ll find links to everything else discussed in the points below.
On that page, download and fill out the LiftFund PPP Worksheet, an Excel spreadsheet which will calculate how much of a loan you can receive.
Fill out the SBA’s application form (it’s a fill-in-the-blanks PDF document that you can download)
Go to the Documentation Requirements page to see what documents you need to collect and submit with your application
Fill out the LiftFund application
Upload the documents you’ve collected to your application
If you are missing any of the documents, or if you don't understand some of the requirements, call LiftFund for help at (888) 215-2373.
“We have nine dedicated people here in Texas just for the PPP product,” Gonzalez told us.
“If we get a phone call, the person answering the phone may not be able to answer the questions, but they'll get an email out to the PPP team. And someone on the PPP team will reach out to that person and answer their questions.”
“We try to respond within 48 hours,” Gonzalez says. “That's what we normally attempt to do. There was a period of time, especially with the PPP application where we had hundreds and hundreds of applications. It was just taking a little bit longer to respond, but the normal response is within about 24 or 48 hours.”
Once your application is submitted, you’ll be assigned to a loan officer. That loan officer will hold your hand and make sure your package is in good shape. And that’s another difference between LiftFund and a big bank.
As an example, Gonzalez says that many small business owners don’t know how to prepare a profit and loss statement, which is a required part of the documentation.
“We’ll help them with that,” he says. “Our mission is to provide that business education to those small business owners, to help them run their businesses better, manage their businesses more effectively.”
Once your package is complete, internal LiftFund approval takes about a day. Note that LiftFund’s underwriters, as part of the approval process, will pull your credit report. However, this is NOT a check on your credit score. There is no credit requirement for a PPP loan, Gonzalez says. The credit check serves two purposes — it proves you exist, you’re a real person, and it shows whether you’re in default on any government loans.
Once you’ve been approved, you provide your bank account information to LiftFund, and, within a few days, the money is deposited directly into your account.
Forgiveness and repayment
At the end of the 24-week period for using the funds, you’ll fill out a simple form that certifies how you used the money. Based on that, LiftFund and the federal government determine which portion of the money is forgivable and which portion is a loan that you’ll repay.
“It’s basically certifying that you have used the funds for the required purposes. You’re certifying that you did that. We're also going to ask you to provide payroll information, cancelled checks, et cetera, to support that, so we can see that those funds were used for those purposes.”
You can actually fill out the forgiveness forms as soon as you’ve used the money — there are some forms available now for that purpose. However, Gonzalez says those forms have already been revised once, to simplify them, so he recommends waiting for the end of the 24-week period. It’s possible, he said that the forgiveness process could become even simpler.
If you're a business owner or a 1099 contractor, you should apply for a PPP loan.
For most owners, this will be a grant, not a loan. You won’t have to pay it back. And for any portion that you do need to repay, the terms — 1% and five years — are very, very good.
And there's no better route to go than through LiftFund.
LiftFund is dedicated to helping small business people. Unlike large banks, they want to work with small businesses and small loans. And unlike large banks, they will take the time to help you through the process.
LiftFund has already distributed 166 PPP loans in San Antonio. Throughout Texas and in New Orleans, the number is 827 loans totaling more that $22 million. They’d like to add you to that list.
But you need to act quickly.