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NCTDA Distributes Borrowing Tips for Small Businesses

The North Carolina Tire Dealers Association has distributed a list of tips on properly preparing a business for borrowing, especially in light of the coronavirus pandemic. Tips include:

  • Learn what you can: Borrowers should try to learn as much as they can about the PPP program, and have their financial records ready before going to bank portals to apply for the relief loan.
  • Do not apply at several banks: One borrower should only have one application with one lender. If the borrower has several businesses under the same controlling ownership, that’s a different story. The beneficial ownership requirements will be approved by the lenders and could be reviewed by the SBA at a later date but for now, one company, one loan.
  • Incomplete submissions: They will delay processing your loan. While lenders are going in with customized processes, several banks have already set up a system that kicks back the application to a banker when the form is incomplete, even if the online portal notifies the small businesses that the application has gone through. Banks are likely to contact small businesses for additional details which obviously will delay the loan process.
  • You cannot use IRS 1099 workers as your employees: While this may not be an issue in the front-end when applying for the loan and calculating the relief amount, it may become an issue when small businesses are asking for the loan forgiveness down the road. Double-check your payroll calculation and total number of employees. On April 10, the SBA will allow independent contractors and self-employed individuals to apply for the loan relief program. Typically, those entities file their taxes using 1099 forms.
  • Do not start new entities and apply for loan: Because the PPP program allows businesses to separately apply for a loan for every business where a person/persons may have a beneficial ownership. The law has a cutoff date – Feb. 15. All entities under one beneficial ownership must have been an active business by that February date.
  • Sum of your holdings cannot go past 500 employees: This provision is complicated. Hotels and restaurant chains are exempt from this rule, and late last week the SBA added franchise owners who employ more than 500 people to that exemption list as well. The only caveat: No single outlet could employ more than 500 people. For every other business, the 500-worker maximum number is in play.
  • Don’t miscalculate: Complete your own calculation ahead of time to make sure you borrow as much as you qualify for the PPP relief. Remember that in the event some of your loan is not forgiven in the final calculation, it will end up being a 1 percent loan for a few years — still not a bad deal.

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