Businesses that are planning on applying for additional financing should first apply for PPP Loan Forgiveness. Companies that have an outstanding PPP Loan obligation can potentially have difficulties with additional borrowing.
I have a couple of clients that are currently experiencing this problem. One had a loan package that was outright denied because his debt ratios were just too high. Another had a loan put on “hold” until forgiveness on her PPP was sorted out.
Receiving a conventional loan is all about the five C’s of lending. Those C’s include
1 – Collateral
2 – Capital
3 – Conditions
4 – Character
5 – Capacity
The difficulty normally comes in capacity. PPP Loans carry an interest rate of only 1% but the repayment term is either two or five years, depending on when you received the loan.
Let’s use an example to illustrate the problem. Let’s say that you received a $300,000 PPP with a five year repayment term. That would come to a monthly payment of $5,128.28. If the repayment term is only 2 years, then the monthly payment becomes $12,630.62.
If, for whatever reason your PPP Loan wasn’t forgiven, you might not have the capacity to repay a new obligation. As such, the banks are going to be extremely wary about providing additional lending if your PPP loan is still in place.
Please make sure to obtain forgiveness on an existing PPP before applying for additional lending.
Let me leave you with this.
The first of the Employee Retention Credit checks that we had electronically filed for the 2nd Quarter of 2021 began coming in at the end of last week. The credits where we had to do an amendment filed on paper are probably going to take five or six months.
Again, be patient. The checks will come.
If you haven’t yet signed up for our Employee Retention Credit Consulting and Preparation Program, what’s holding you back? We’re at the end of the gravy train. It doesn’t look like anything else is going to happen in the short run. You would be foolish to not take advantage of this while it exists.
Whether you need help with your PPP Loan forgiveness, Employee Retention Credits, Payroll, or Accounting and Tax, please click the button at the bottom of this email or contact our offices today. You’ll be glad that you did.
Accounting Solutions Ltd. stands ready to complete our mission and purpose of protecting you, your family, and your business. If there is anything you need, whether you are a current client or not, you have but to ask. I’m here and I remain,
Sincerely yours,
Chris Amundson
President
Accounting Solutions Ltd.
773-267-7500
www.AccountingSolutionsLtd.com
Note that the only professional services provided by Accounting Solutions Ltd. are those specified in a written communication from our office detailing the scope of services to be rendered and the terms and conditions applicable to the engagement.