Editor’s note: North Carolina-based Scale Finance has provided flexible finance and accounting solutions to help companies scale since 2006. Currently serving over 120 entrepreneurial companies, the firm says it delivers “pragmatic, affordable accounting and corporate finance support.”

RALEIGH – Having trouble applying for Paycheck Protection Plan loans or emergency loans from the Small Business Administration? Raleigh-based Scale Finance offers these tips to firms needing advice on how to naviagate the process, which has been fraught with a variety of challenges since its launch earlier this month.

Making matters worse, funds for the program are running out quickly.

Scale Finance has a team of 35 professionals at CFO and Controller level that “has been working intensively in the trenches on behalf of small and midsize client companies for several weeks now, as these businesses work extremely hard to survive the crisis,” the firm says.

Lessons learned:

  • Organize your data and apply

Some businesses have been paralyzed by hour-to-hour rumors, all the changing “he said – she said”, and fundamental uncertainties as the government has worked with banks to clarify countless details and complexities in these programs. You’re way better off if you ignore all that and simply follow the real-time guidelines available on SBA.gov, follow the guidance of your banker and advisors, and submit a valid and complete application.

  • Pursuing both EIDL and PPP in parallel can make sense

Phase 2 federal legislation enabling the Emergency Injury Disaster Loans (EIDL) preceded the phase 3 Coronavirus Aid, Relief, & Economic Security Act (CARES Act) legislation, of which Paycheck Protection Program (PPP) was a major element. Naturally, some businesses focused on EIDL with a sense of urgency beginning on March 30.

Small business loan funding running out fast, warns head of NC Bankers Association

As it turns out, the basic terms of PPP loans are more attractive in some important ways relative to EIDL loans (e.g. 1.0% interest rate versus 3.75%; no payments for 6 months; up to 100% forgivable versus 0% for EIDL). Moreover, the PPP loan application is a more simple process, and may actually be funded more quickly. Plus, PPP is a first-come, first-served program, so getting in the queue early is important.

That said, EIDL has promised to fund a $10,000 Emergency Advance amount within 3 days, followed by up to $2 million in cash with final approval, so the reality of average funding timelines are still not known.

Also, EIDL loans can be spent with more flexibility, can be paid over 30 years, or rolled into PPP loans to take advantage of more attractive terms (only for EIDL loans issued through April 3).

In the final analysis, there are trade-offs that should be thought through for individual companies and applying for both can make sense in the meantime.

  • Ask for help

The complexity of the legislation coupled with high anxiety and ever changing guidance has left even the experts uncertain of the correct steps to take to attain financial relief.  Small business owners already have an enormous challenge in caring for their families, employees, business, cash flow and health.

Researching and digesting complex and unclear government legislation may be unattainable in these chaotic times.  Reach out to your banker, accountant, lawyer or other business owners for guidance.  Also, experienced support can help companies stay in compliance with how loan funds can be spent and maximizing forgiveness ultimately.

  • Don’t give up

If the first option of financial relief fails, seek out a new option.  That might be in the form of finding a new SBA lender due to your bank maxing out their lending capacity.  There are many regional banks that are working incredibly hard to ensure their community businesses have a chance to succeed.  Stay alert to new programs that become available.

For example, for businesses in the Charlotte, NC area, Mecklenburg County just authorized a $5M loan package for small businesses that might have been left out of the initial SBA PPP program.  Expect other opportunities for funding and seek them out.

  • Leverage relationships with at least two banks if possible

As SF CFO Bill Schiffli’s experience with Wells above illustrates, companies can increase their probability of success on the tightest timeline possible, by leveraging pre-existing (and hopefully deep) relationships with more than one bank. In his case, the client also had a long-standing corporate credit card relationship with PNC which served as an important second “shot on goal”.

  • Consider working with a community bank

These smaller banks exist for a really good reason. Many business owners long ago recognized the enhanced relationship quality and often highly differentiated service levels that come with a local, smaller scale bank relative to the big-brand, global, massive institutions. The existing chaotic environment around emergency federal programs is fertile ground for community banks to demonstrate that same differentiation since you can often work with them efficiently, pragmatically, and without internal bureaucracy.

  • Stay real-time in terms of government guidance

The complexities of implementing EIDL and PPP are such that clarifications and new and better guidance has been rolling out on daily, sometimes hourly basis. There is no substitute for plugging in to sba.gov and monitoring information flows real-time. For example, the Interim Final rule at https://www.sba.gov/document/policy-guidance–ppp-interim-final-rule answered a lot of questions early the week of April 6 and was very helpful in avoiding mistakes on applications. Sometimes, it’s as simple as making sure you’re using the correct, most up to date form.

(C) Scale Fianance

Reprinted with permission. This blog was originally published at https://scalefinance.com/lessons-learned-from-the-eidl-ppp-trenches/