Qnity's Tom Kuhn Explores the Confusion Behind the Payroll Protection Program

My image for the day is one of Confusion, which has reached epic proportions for small and large businesses due to the Payroll Protection Program “rollout”.

I’m Tom Kuhn, CEO of Qnity, along with my partner Erin--our team tries to make small business finances simple, visual and actionable. Our mission is to level up the collective financial intelligence for the small business owner, which is needed now more than ever.

With this blog, I’m going to first share my perspective, updates and tips on government relief, including the Payroll Protection Program. Secondly, I’ll provide tips on financial sustainability stressing the importance of getting financial education and winning the long game.

First, government relief. We’re doing our best to get you the most recent and accurate information regarding relief and assistance for your small businesses and your teams. While we are not tax experts, financial lenders or employment attorneys--we are committed to making this information more digestible and presenting it to you as simple as possible.

It seems like every small business owner in America contacted their bank to apply for the Payroll Protection Program on Friday. Almost all were left frustrated and still in financial limbo heading into the weekend.

Here a couple examples of areas of the confusion and volatility going on now:

First yesterday, one of our clients, a small business owner in the Bay area was notified that the $379,000 Disaster loan she was approved for on Thursday, was just capped at $15,000 – that's a $364,000 difference. The relief she was counting on just “changed,” and without warning.

Secondly, I was in an email chain with leaders in the franchise community over the weekend – they represent hundreds of thousands of small businesses from a multitude of industries. Very smart and skilled professionals – and even they were confused on the technicalities of the Payroll ProtectionPprogram trying to make sense out of what makes no sense with payroll calculations. They’re like many are trying to figure out,"Why is it so hard to develop a  universal calculation of the amount a business can borrow?" This is vexing even the smartest financial minds.

In previous videos we advised you to expect weeks of chaos before participating banks, unemployment agencies, tax professionals and the government are ready to fully process every detail of small business relief programs such as the CARES Act. As we said in the last video, although banks were able to start funding PPP, that does not mean they are ready. So honestly, I am not surprised.

The Payroll Protection Program through the CARES Act has been touted as a lifeline for small businesses who have been forced to close or drastically reduce their business due to the Coronavirus. However, information regarding the program is ever changing, inconsistent and downright confusing.

Frequently changing guidance from the Treasury Department, including an "interim final" update published only hours before the deadline that banks were given to begin accepting loans, left many lenders unsure of how to proceed.

The Payroll Protection Program was rushed through the implementation process and was pushed live before banks had the ability to create stable processes for accepting and funding these loan applications. The SBA, Treasury Department and the Federal Reserve were tasked with completing the process that normally takes months to implement in just seven days, and now banks are expected to execute it.

Major banks, including Wells Fargo and Chase, publicly said on Friday that they weren't yet ready to accept loan applications. A top exec from Bank of America said “It’s like building an airplane while you’re flying it.”

Lenders have stated that the SBA and Treasury Department have failed to provide them with the necessary guidelines, set unrealistic deadlines and set requirements for the loans that are unworkable. The effective lack of regulations and detailed guidelines (including the extent lenders might be held liable for loans) has many scratching their heads. As we navigate this confusion at the same time as the banks, here’s a few tips for PPP:

Tips for The Payroll Protection Program - this is based on what we know now Sunday 2pm CST and for those that intend to apply.

1.  Your ability to get to the front of the line likely depends in part on having a good relationship with your lender. Of course, try that approach first.
2. Apply for your paycheck protection loan through multiple banks, in the hope that one of them might be able to process your application first.
3. Don't assume that because you've applied, your application will be processed or funded. A number of online financial firms, for example, are collecting applications. But many haven't yet been approved to make paycheck protection loans themselves.  In the meantime, many companies are packaging up applications hoping to sell them to banks in bulk.
4.  Beware of loan scams, especially from people who say they can get you a loan faster for a fee. You shouldn't have to pay a cent to submit a paycheck protection loan application.
5. Remember – the “rules” can change, as we’ve seen before.

I also want to share some lessons, and some further tips as it relates to overall financial sustainability, call this a long view.

Tips for Financial Sustainability:

1. Don’t depend on any aid. You can’t count on it. And it cannot be a panacea. Don't be guilty of not taking other action. Now, is the time to level up your financial know-how. Relief or no relief your current financial situation will be stretched and you need a new, smarter financial mind for the long haul. Many of our clients are taking this to heart and it gives me joy to see them taking time every day to learn and become better equipped for making good financial decisions.
2. Much of the aid is outside your control. What you can control is your brain and financial smarts. Few SBO invest time in learning the financial part of the business. It’s going to be more important than ever. Level up. Watch for our videos to help make this simple and visual.
3. Use this time to upgrade your financial practices. Be ready to be an expert and nimble small business cash flow planner. This includes but is not limited a budgets, forecasts and projections. Whether or not the government or lenders request it you’ll need to get very good at forecasting, with frequent changes to the assumptions based on unprecendented uncertainty.  
4. Take the long view. This is a great time to learn more and take greater control over your financial acumen. Above al,l I’m an educator and I love seeing the light bulbs go off when hard working non financial Sbo’s are able to better understand and implement the next level of financial practices to survive and then thrive.

In closing -  small business is the engine of our economy. You may be confused, stressed out, frustrated. It’s understandable. You’re carrying a lot of weight and tasked with making really big decisions. Your mental, emotional and physical health are incredibly important.

Be sure to ask for support and seek guidance when you need it, because we need you, and I know you have the strength to get through this.

My partner and daughter Erin will have more and tips in upcoming videos. My request is to pay this forward by sharing the Qnity YouTube channel to other small businesses that you care about. And if you haven’t done so yet, please be sure to subscribe for updates as this lets us know that this information is helpful.

Tune in to Qnity's YouTube channel to watch Tom Kuhn's video series, aimed at helping you through the COVID-19 Crisis.