How and Why to Apply for the PPP

Apr 23, 2020

As a small business owner and independent retailer, you’ve likely heard and read “PPP,” the acronym bouncing around TV, news sites, and social media feeds, but what is PPP and why should IGA retailers pay attention?

PPP is a Paycheck Protection Program created by the Small Business Administration (SBA) to provide forgivable loans to small businesses to pay their employees during the COVID-19 pandemic. Specifically, over $300 billion in forgivable loans. Let that sink in.

"This is the largest round of government funding we will likely see in our lifetime," said Jon Cline, COO at FMS Solutions, who have been helping retailers secure tens of millions of dollars in PPP loans. Cline and Matt Short, vice president of operations–integrations at FMS, led two IGA-sponsored webinars, Help for Securing Your PPP Loan, this week discussing the PPP loans.

During one webinar, an attendee asked what many grocers may be thinking: with revenue up due to COVID-19 stay-at-home orders, why would a retailer file for paycheck protection? While every small business owner must consider their needs and values, here are several reasons retailers might want to apply.

  1. While revenues are up now, what happens if something goes wrong?
    As a small business with limited employees, how will your operations be affected if key employees get sick with COVID-19? For example, if your butcher falls ill, you may need to shut down the meat department until they recover, which could result in a significant loss of revenue. Or what if a second wave of the virus is worse than the first, and stricter regulations of grocery store shopping cause your business to take a hit? 
  2. Have you incurred new expenses? Cline noted that your labor costs may be substantially higher than they were before the pandemic, with more overtime pay, raises, and bonuses for key employees. On top of that, retailers have purchased masks, gloves, and Plexiglas barriers to protect employees and invested in social distancing signage, delivery options, and eCommerce for shoppers. Much of the new revenue coming in is going right back out to protect employees and shoppers from COVID-19. "Your top line has definitely improved, but sales will soon begin to normalize. Expenses may not," Cline added.
  3. Does your business pay mortgage or rent?
    In addition to payroll expenses, PPP loans can be used to help businesses pay mortgage or rent. If your store incurs those business expenses and you receive a loan, you will be asked to prove the payments went to those expenses in order to be eligible for loan forgiveness.
  4. It doesn’t hurt to apply.
    You can always apply for the loan. If you receive funding and you find you don’t need it, you can give it back before the interest begins to accrue. You can also immediately pay off any loan amount that wasn't forgiven to avoid extra interest. 

If you decide to apply for PPP, there are a few key items to understand:

  • Why you must apply now
  • What the loan can be used for
  • What you need to do for loan amounts to be forgiven
  • How to apply—before funding runs out again
Why Must I Apply Now?

There are several reasons to gather your paperwork today and visit your local lender tomorrow (and we mean that literally—see number three):

  1. The first release of the PPP ran out of funding on April 16, 2020 after just 14 days, with the SBA approving over 1.5 million applications in less than two weeks. This money goes fast.
  2. Congress passed a new round of funding today, which includes $310 billion for the PPP. Robert Yeakel, director of government relations at NGA, said the SBA may be accepting new applications as early as Friday, April 24, pending passage by the House of Representatives and a signature from the President.
  3. This next round of funding will be distributed on a first come, first serve basis and is expected to run out  sooner than the first round of funding—possibly within a matter of days. "Time is of the essence with this," Cline said.
What Can I Use the Loan For?

The loan is intended for small business assistance for operational costs, including:

  • Payroll
  • Rent/mortgage
  • Employee health benefits
  • Insurance premiums
  • Utilities 
How Can I Ensure the Loan is Forgiven?

Once your small business receives approval for the loan, it’s important to track your spending to be eligible for loan forgiveness. Based on the date of funding, retailers will have eight weeks to spend the loan money on qualified costs for forgiveness, including: 

  • Payroll costs 
  • Payment of mortgage interest incurred before February 15, 2020
  • Payment of rent under a leasing agreement established before February 15, 2020
  • Utility services (gas, electric, water, transportation, phone, internet, etc.) that began before February 15, 2020

"As of right now, the SBA has cautioned loan recipients that no more than 25 percent of the loan amount used for non-payroll expenses will be forgiven,” Yeakel said, further noting, "But that figure could change."

Keep in mind that retailers can use the loan on business expenses not listed above, but that money used may not be eligible for loan forgiveness. For example, payments on mortgage principal (not interest) may not be eligible for the loan forgiveness, in which case you would be required to pay that money back with interest. Annual salaries over $100,000 are also not eligible for loan forgiveness. For more information on what payments fall under the loan forgiveness eligibility, watch the webinar below (at the bottom of the page), paying special attention around the 18:00 minute mark.

What Should I Do to Apply?
  1. Call your local Small Business Administration lender and ask what materials you’ll need to gather. FMS recommends working with a local bank if possible, as Cline noted they have proven more nimble than the larger banks. "We have seen the smaller, community banks way outperform the big banks in terms of getting applications through," he said. Yeakel agrees. "Reach out to a lender that you have a previous relationship with," he said. "They're going to be your best source for the specific requirements or paperwork you're going to need and they're going to be your best bet in terms of being able to process your application as quickly as possible."
  2. Gather your documents. To calculate your average monthly payroll, refer to the webinar (available to watch at the bottom of this page), starting at the 9:00 minute mark, and reference this spreadsheet created by FMS as an example. 
  3. Meet with your lender, documents in hand, and complete the application

With such a large sum of money available to help small businesses who are affected by COVID-19, many retailers already submitted applications for the first round of PPP funding. If you didn't but are considering applying for the upcoming round of funding and missed this week's webinars, watch the presentation below and contact FMS with any questions you might have.

You can also find more information in these resources:


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