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Paycheck Protection Program: ‘If You Have Not Applied, It’s Too Late’

‘If you’re not in line at a bank that is processing your application over the next few days you are likely out of luck,’ says Barry Shevlin, senior managing director of the midmarket technology practice for Skyway Capital Markets LLC. ‘The banks have so much of a backlog of existing applications that there is no way they are going to get through them to get to the new ones.’

Given the backlog of applications at banks to obtain Paycheck Protection Program (PPP) loans, it’s probably too late for those who haven’t yet applied to receive assistance, said a top midmarket technology investment banking specialist.

[Related: Paycheck Protection Program: 5 Things You Need To Know]

“If you’re not in line at a bank that is processing your application over the next few days you are likely out of luck,” said Barry Shevlin, senior managing director of the midmarket technology practice for Skyway Capital Markets LLC, which has helped dozens of customers get assistance through the complex Small Business Administration (SBA) PPP loan process. “The banks have so much of a backlog of existing applications that there is no way they are going to get through them to get to the new ones. If you have not applied, it’s too late.”

One sign of the mad scramble for the $321 billion in new PPP funds that became available starting this week: the first day of the reopened program, the SBA E-Tran system was unavailable for some banks to enter applications into the system. The second round of funding – which includes $60 billion set aside for community banks - comes after the first round of $349 billion in funding ran out in just 13 days.

“The banks had a week after the first round ran out to organize their current backlog which is why I think the additional $321 billion in funding is going to be exhausted in just a few days,” said Shevlin.“There are more than 30 million small businesses in this country and 1.6 million got approved for funding in the first round. There’s going to be even fewer this time around because of the smaller amount of funding.”

The PPP, part of the federal government’s $2.3 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act, provides loans for up to two and a half months of payroll costs. Much of the one percent interest rate loans could be forgiven if businesses do not lay off workers and utilize the funds for payroll and other designated purposes. The forgiveness could occur as soon as three months after the loan is funded.

Even with the new funding, the SBA is only reaching about 10 percent of the small businesses that need assistance, said Shevlin. He is advising those solution providers that have not yet applied to come up with another option to weather the economic maelstrom from the pandemic. That means considering alternative financing such as a minority investment or a merger and acquisition.

“It’s a binary choice for those that miss out on funding: you have to either raise capital or do a deal,” said Shevlin. “The PPP loans only buy you several months. A lot of companies are not getting those. So what do you do? We are going to have to help businesses figure that out. I would welcome calls from solution providers that have missed out on the PPP and are evaluating their options.”

Shevlin said there is going to be consolidation across the technology sector as a result of the economic downturn caused by the pandemic. Some industry executives have estimated that as many as 30 percent of MSPs will either be acquired or go out of business.

“Everyone is going to have a percentage of their customers that are not going to reopen and they are going to have to deal with that,” he said. “That’s on top of customers that are having trouble paying their bills, which is causing a cash crunch. That is happening across the entire technology ecosystem. For companies that aren’t really well capitalized they are going to have to do something whether it is raising some additional capital or accelerating a sale of the business. That is the reality of what is going to happen.”

Michael Goldstein, CEO of LAN Infotech, a Fort Lauderdale, Fla., solution provider, which got approved for a PPP loan on April 17, said he also suspects that the it is already too late for those that have not applied for funding because of the big backlog on loan applications.

“Think about all the businesses that didn’t get in on the first round of funding,” Goldstein said. “Their paperwork was already in the queue waiting for the second round to be approved. If you were late to the game and decided to apply this week it’s probably too late. It’s like what my grandfather used to say: by the time you read about the stock tip in the newspaper it’s already too late. If you didn’t apply early in the first round, it’s probably too late. The banks have all been overwhelmed.”

One of the problems with the SBA loan process is that banks have to transpose the loan application into the SBA E-Tran system, said Goldstein. “They have to put that into the SBA site in order to get approval,” he said. “The reason the site was down on Monday was everyone was reapplying.”

Another problem with the loan qualifications was that it was difficult to interpret the SBA guidelines, Goldstein said. “The upfront ask wasn’t as clear as it should be,” he said. “As for the larger publicly held companies obtaining funding I thought the PPP was very clear that this was for small businesses with less than 500 employees. It sounds like good banking relationships paid off for some of those companies.”

Goldstein stressed that the PPP is designed to keep businesses up and running for the next several months. His message to his staff: take it one day at time. “This is a short-term measure,” he said of PPP. “I tell our employees that we need to take this one day at a time. We can’t think about what next week is going to be like. We have to do what we have to do to get through this. We feel like the business will come back, but we have to survive this. We are doing internal training to make ourselves better and our sales team is 100 percent giving back to help the community.”

LAN Infotech technicians have been providing Microsoft Teams training and assistance for school systems, cities and non profits. “We are just going out and helping wherever we can,” said Goldstein. “We’re doing this to help the community. We can’t go out and make PPE (Personal Protective Equipment). What we can do is provide our services capabilities to help some of these entities survive this crisis.”

Allen Falcon, founder and CEO of Cumulus Global, a 14-year-old Westborough, Mass.-based cloud solution provider that has been approved for PPP funding, said his advice to colleagues is to establish a strong relationship with a community bank.

“Solution providers looking for help need to check with their local community banks and credit unions,” he said. “Small businesses need to go local. It’s about the relationship. If you don’t know a banker talk to your accountant or attorney and get an introduction.”

Falcon said he expects the financial downturn from the pandemic could force anywhere from 10 percent to 30 percent of MSPs to go out of business. “Most MSPs are going to lose customers who either go out of business or are unable to pay,” he said. “A lot of MSPs are going to face cash flow crises or serious challenges. Some just won’t be able to maintain a critical mass of customers. If you’re an MSP and you are not responding well to your customers it is going to have a long term impact on customer retention.”

Falcon wants to see another $200 billion round of funding approved for the PPP program. He said one of the challenges with the current funding program is it is not reaching minority business owners in hard-hit communities.

Even with the problems of the PPP, Falcon praised the SBA for providing so much assistance in a short period of time. “The SBA facilitated loaning out more money in 14 days than it had in the previous 14 years,” he said. “Kudos to the SBA for standing this up in a matter of days and processing so many loans.”

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