How the Paycheck Protection Program can save your agency, and your clients

This might be the greatest upheaval that the digital marketing industry has ever seen. There’s no doubt that online methods are more important than ever, but consumer demand is drying up.  Many clients have requested contract pauses, and signing new contracts will be difficult. It’s hard to find an agency or business that hasn’t seen a reduction in its revenue.

The first step many of us would take is to cut staff and hours commensurate with this loss of revenue. It’s a cruel but often needed step to keep our business afloat in times of crisis.  However, starting August 3 there is an alternative that could help us keep our team and not kill our business. It’s the type of bridge that many of us are likely to need to keep our agencies functioning. It is known as the Paycheck Protection Program.

The Paycheck Protection Program

In the CARES act, a considerable amount of money (roughly $350 Billion) was put aside for loans to small businesses. On the surface, taking on debt with an uncertain future wouldn’t be advised. The difference here is that these loans are forgivable if they’re used for payroll over the next 8 weeks. The loans are capped at 2.5x average monthly payroll expenses. While there are limitations, there’s virtually zero reasons for most agencies not to apply for this program. 

The program works fairly simply. Rather than use the typical SBA system, which can take months, community banks will be administering this program. This means that the bank you use every day can be your lifeline for this application, and it’s likely to be much faster than the normal system. Some banks may restrict applicants to those that already have a banking relationship. Here’s an example of a page from Chase about the Paycheck Protection Program, which requires that you’ve had a business checking account since February.

There are limitations. Your company can’t be larger than 500 people. It won’t forgive amounts of over $100K of annualized salary for a person. At least 75% of the loan has to be used on salary.  You’ll need to prove that the money was spent there, or you could actually be prosecuted for fraud. It’s a great lifeline for employees, but it isn’t just free money.

What about freelancers and single-person agencies?

This is one piece of great news. How the government defines a business is pretty generous here. It includes sole proprietorship and independent contractors. It also includes the money you pay to freelancers as part of your average monthly payroll expenses as well, and the amounts that will be forgiven. It does not exclude partners or other owners from the compensation consideration either, but they are subject to the $100,000 annual salary limitation. The challenge for independent contractors and sole proprietors is that they will need to wait another week to apply.

What do I need to apply?

The sample application issued by the SBA is fairly simple. It’s one page of information, one page of certifications, and two pages of instructions. You’ll need basic business information, like your tax ID and date of establishment. You’ll also need information that backs up your average monthly payroll costs. In many cases that will be a combination of your accounting and business tax returns. Some payroll providers have already rolled out easy reporting for the program, right down to calculating the amount for which you can apply.

When the program is done, you will need documentation that you actually used the proceeds for payroll and other approved expenses. How exactly this will occur isn’t clear at this time. If amounts aren’t forgiven, they will be due within 2 years at a 0.5% interest rate.

What if I already let people go?

There’s a provision in the program that allows you to rapidly rehire them. Even two weeks ago no one knew that this would be coming. This is your chance to make amends and bring them back. Perhaps send a fresh-baked cookie along with the request?

What could go wrong?

This program has rolled out with a very rapid timeline. Banks don’t fully understand what they will need to do to make these loans. The sample form has been revised three times this week alone. There is a solid chance that all of the information needed hasn’t yet made it to the local level.  

Also, despite the fact that $350 Billion is a lot of money, it may not be enough for everyone. It is strongly advised to get in an application as soon as possible. There is a lot of need for this program, which means that every branch could have a surge of customers they haven’t seen for a while. Long wait times are quite possible.

What else should we do?

Do not assume that your clients know about this program. Send them a link to this article if they are likely to qualify. You might not only save your agency, you just might save your client’s business as well.