Payroll-protection loans are popular, tricky to navigate

Banks in Las cruces are busy processing loans for businesses that are taking advantage of the Payroll Protection Program (PPP) authorized by the COVID-19 relief package from the federal government.
Jed Fanning, president of Citizen’s Bank of Las Cruces, told Bulletin Publisher Richard Coltharp that his bank alone has staff working in shifts that begin at 4 a.m. to process all the applications they’re receiving each week. He estimated Citizen’s Bank has processed more than 750 loan applications through the program.
The Bulletin reached out to a local expert about the program, Christine Wright at Beasley Mitchell and Company, whose clients have been asking for information about the program and whether participating would work for them.
Bulletin: Are a lot of Las Cruces businesses taking advantage of the payroll-protection program?
Wright: I recently saw statistics from the Small Business Administration indicating more than 5,300 loans were approved as of mid-April, so it’s clear that New Mexico businesses are benefitting from this program. My firm has helped hundreds of clients understand and apply for PPP loans, and from my conversations with local bankers I know they’re busy processing a large number of loans. Based on this, I know that many Las Crucens have already utilized this program, and I’m still helping clients with their applications.
Bulletin: Is the program a loan or a grant?
Wright: The PPP is a loan available to business owners and non-profit organizations, and this loan is forgivable if borrowers use the money to keep paying their employees and comply with other program requirements. Any amount not forgiven will be a short-term, low-interest loan.
Bulletin: How many payroll cycles is it designed to cover?
Wright: The loan amount is based on 2.5 months of an employer’s average [payroll], but after a business receives the loan, they have only eight weeks (or roughly two months) to spend the money. Fortunately, business owners are able to use up to 25 percent of their loan proceeds on certain non-payroll costs, such as rent or mortgage interest and utilities.
Bulletin: What are the main hesitancies of business owners in terms of enrolling?
Wright: In my experience, virtually all business owners want to know whether they should apply for the program. Most business owners know the basics, but they want more information to help them be confident in their decision-making. This is a new program, and business owners want to understand how it benefits them, what the rules are to receive loan forgiveness and get answers to their specific questions. That’s where my firm has been able to help. By March 30, we had created a video that explained how the program works, and we reached out to all of our clients to let them know how we could help them navigate through the PPP process.
Bulletin: What advice do you give clients who want to enroll but are unsure?
Wright: I help them understand the program, address their specific concerns and challenges and help them consider what other options are available. For example, a business who is shut down will struggle to meet the requirement to use 75 percent of their loan proceeds on payroll costs, in this case, it would be appropriate to consider various other SBA programs. For clients who are able to maintain their payroll without PPP, the employer retention tax credit is a great option but isn’t available to PPP recipients.
Bulletin: What am I not asking that’s important?
Wright: We should stress the importance of planning how business owners will use their PPP money. In order to obtain loan forgiveness, they should make sure the money will be spent in the required time period on allowable expenses and have the necessary documentation they’ll need in order to obtain loan forgiveness. My firm has developed a “PPP Loan Tracker,” which we use to help our clients plan their PPP expenditures, and we start this process as soon as the client’s loan has been approved.
It’s also important to focus on the intent of the Payroll Protection Program, which is to help businesses continue to pay employees and other expenses. I’ve experienced first-hand how the PPP program has enabled our local businesses to stay afloat. In many cases the businesses could not have survived without this help.