This is a sequel to two popular articles: “COVID-19 Crash Course for Small Biz Payroll Protection Plan Applicants,” and “A Quick, Easy Update on the CARES Act”

EDITED BY GEORGE W. HIGHTOWER

The Paycheck Protection Program (PPP) under the CARES Act could be a crucial lifeline for many Massachusetts small businesses including retailers, bars, sandwich shops, and restaurants. Unfortunately, these businesses may face an unintended conundrum.

There is a finite amount of loans to be granted, and so businesses must act fast. We anticipate more banks coming online this week. In addition, many merchant cash advance firms (I am not a fan of MCA transactions) may be applying for permission to issue or broker these loans.

However, once an “eligible recipient” receives a PPP loan, the business has only eight weeks to use it for payroll costs for the loan to be forgiven. Many small businesses in Mass that are most adversely impacted are closed by government order, or unable to operate in their intended manner. Hence, using the funds for payroll during these periods is counterproductive. You will need the PPP funds for when you re-open. Al of which leads to one of two courses of action:

1 – Apply for the loan, but upon approval ask your banker to delay final execution of the loan until your business has re-opened. If your business might reopen with a limited crew for the first week, you may want to wait a week before receiving the funds. Once you receive the funds, you have eight weeks to use it for payroll. And be strategic. Getting the funds quickly might make you sleep better and reduce some of your anxiety, but when you realize it could impact and reduce your ability to have the loan forgiven, the knots in your gut might return. Plan accordingly.

2 – The second course of action, which everyone impacted should do, is to spend 15 minutes and contact your US senators (Warren and Markey), as well as your US Representatives and ask them to immediately file legislation as follows to fix this issue (just copy and paste below):

SEC. 1106 LOAN FORGIVENESS, (a) Definitions, (3), is changed by inserting the words “the period starting on the later of 7 days following the lifting of any state or local government order requiring an eligible recipient to close or” after the words “the term “covered period” means.”

Ultimately, the definition should read along the lines of:

“The term ‘covered period’ means the period starting on the later of 7 days following the lifting of any state or local government order requiring an eligible recipient to close or the 8-week period beginning on the date of the origination of a covered loan …”

In the heat of the PPP loan chase, let’s make certain you don’t inadvertently trip on a pothole.

David Rabinovitz is a business consultant and contributing columnist for DigBoston. Connect with him on LinkedIn or contact him by email at [email protected].

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