How to prepare your financial records for future economic recovery grants
While the application period for the Paycheck Protection Program (PPP) closed on August 8, with no clear end to the COVID-19 pandemic in sight, small businesses should be preparing for the possibility of future COVID relief opportunities now. Congress has been negotiating what a future program may look like. Though nothing has yet been decided, most agree that some additional action should be taken. So what can you do now to be ready for the next program to help your small business manage through this crisis?
By looking at how the prior programs unfolded, we can determine what can be done today to be ready. Preparing for COVID relief opportunities comes down to a few key items: having your financial records in good order and readily accessible, paying attention to the details, and having the right network in place.
A Quick Review of PPP
When the government launched the Paycheck Protection Program in early April, millions of businesses rushed to apply for funds. This program, intended for small businesses, provided loans to be used to keep businesses open as the pandemic was spreading across the country. The loan program, implemented by the 2020 US Federal Government Coronavirus Aid, Relief, and Economic Security Act (CARES Act), is managed by the Small Business Administration and features a 1% interest rate. Even better, if the correct percentage of funds was used to cover the payroll of existing employees and other allowable expenditures, the loans could be converted to grants.
The program had multiple changes made to it while it was in operation and was not without its challenges. But many think it did help to keep small businesses open through the summer. At launch, the program ran out of funds within 13 days of opening, having authorized 1.6 million loans worth approximately $349 billion. A second infusion of funding was authorized and final applications for those funds were due on August 8.
There was a finite amount of money available, so time was of the essence and businesses flooded participating lenders with applications. For some, this rush led to errors in the application process, or submitting incomplete information, which could effectively bounce an application to the back of the processing line.
Getting Ready for Future Funding Opportunities
PPP was not the only funding program put in place to help businesses in Pennsylvania manage though the pandemic. Other federal and state programs, such as the Pennsylvania Statewide Small Business Assistance program and COVID-specific Economic Injury Disaster Loans (EIDL) offered businesses other opportunities to secure capital. Preparing for future COVID relief opportunities by looking back at these programs and others will be very beneficial.
Clear, Accurate, and Available Financial Records
For all these opportunities, the ability to paint a clear picture of the state of the business was critical to receiving approval. For many programs, the application process is very similar to applying for any other loan. This means that you will need to provide documents that show the financial and tax history of your business as well as your current financial position. The ability to document additional details such as number of employees and provide detailed payroll information may also be important for future programs. Start by gathering and verifying the details in:
- 2020 and 2019 tax returns, including Schedule C Business Profit and Loss
- Employee payroll documentation, including Forms 941 and 940
- Balance Sheet, which shows business assets, liabilities, and equity
- Income statement to indicate profitability of the company during a specific period of time
- Cash flow statement showing the money moving in and out of your business
Monitor the Details
To make sure that your information is accurate and current, review your business financial documentation regularly. Consider working with a firm like Gift CPAs, who can offer you support with the management of your bookkeeping tasks as well as providing expert guidance on how to make sense of your financial statements.
Not only does working with a professional help to ensure that your data is correct, but at Gift CPAs we are monitoring developments and making sure our clients are aware of the opportunities available to them. Our experts work to learn all the details of the programs and their application processes so that we can help our clients get all the details right the first time. While an individual business may apply for any given program, we help many clients work through the details, so we know what to expect and therefore, we reduce the possibility that your application will be denied.
Have the Right Network in Place
Working with a firm like Gift CPAs provides you with an expert resource in your corner to help you get through what can seem like a maze of paperwork. While an important part of your network, there is at least one other member you want on your team, a bank representative.
Get to know your bank representative and confirm that the organization you bank with is able to participate in programs administered by the Small Business Administration and other federal and state agencies. Having an established relationship will streamline the application process. If you don’t already have your accounts in place, your application will have to go through standard identity verification processes to get started. And when time is of the essence, even small savings of time can help you get approved.
