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PPP Loans: Preparing For What Comes Next

May 15, 2020
By Jason Courter, 2020 AIADA Chairman
 
Lately, the automotive industry is breaking records in all the wrong directions. April had the lowest recorded SAAR of any April, ever. The market was down about 50 percent from 2019. The results might have been worse had it not been for a slight upturn at the end of the month, likely spurred by zero percent finance offers. It’s hard to predict what the rest of the year will hold for dealers, but the general consensus seems to be: Buckle-up, it’s going to be a bumpy ride.
 
In times like these, small business owners are looking for relief anywhere they can get it. Many dealers, including myself, received Paycheck Protection Program loans from the government with the understanding that the loan would be forgiven if the funds were spent on mortgage, rent, utilities, and payroll. The loans were designed to be temporary life rafts to keep as many Americans as possible on small business payrolls. Thanks in part to a PPP loan, we will be able to do just that. That might be small potatoes in the scheme of things, but it means the world to us and our community.
 
As expected whenever a giant government relief program appears practically overnight, there has been pushback. Every newspaper and 24-hour news channel has ‘experts’ opining on who truly needs, and deserves, PPP relief. Recent SBA guidance has suggested that the government review all loans in excess of $2 million, in addition to other loans as appropriate, following the lender’s submission of the business’ loan forgiveness application. The SBA added that businesses who feel they do not meet the certification could have returned the funds by May 14 without consequences.
 
Simply put, the Congress doesn’t want any more embarrassing headlines about giant corporations, with healthy reserves, receiving bailouts. That’s understandable, and most dealers shouldn’t have any problem showing that when their stores were ordered all or partly closed, and when their customers were instructed to shelter in place, they truly needed help.
 
Dealers who have received PPP loans don’t need to be worried about defending their choices, but they should be prepared to concisely lay out their reasoning for applying for the loan. Be ready to show why you meet the standard laid out in the application that stated, "Current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant." Get organized and have supporting documents, such as financial statements, payroll records, termination/layoff notices, and return to work notices to assist in answering any inquiry or applying for forgiveness of their PPP loan.
 
In the Small Business Administration’s  PPP FAQs, Question 46 establishes a new safe harbor for borrowers who received PPP loans of less than $2 million (and effectively removes the prior May 14, 2020, repayment deadline).
 
When it comes to both auto sales and government relief, we are in uncharted territory. By being organized and proactive, dealers can set themselves up for success. It’s also a good idea to have a response prepared for anyone asking questions about your PPP loan. Mine is simple: I am confident that better days are ahead for my stores and my employees, and I am grateful for the PPP loans that will help us get there, together.
 
 

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