There’s been a lot of interest, concern and confusion about the Paycheck Protection Program (PPP)—and a recent, controversial opinion from the IRS regarding the deductibility of certain expenses. This week we asked readers what action(s), if any, they had taken in response.
Of course, the PPP was established to help small businesses affected by the COVID-19 crisis by covering their near-term operating expenses and providing incentives to retain employees, loans that will be fully forgiven when used for certain expenses, including payroll costs. The Securities and Exchange Commission has advised that, under certain circumstances, registered investment advisors must disclose forgivable loans they have received under the Paycheck Protection Program (PPP). A key phrase there is “certain circumstances”—and by some interpretations, this statement in a new set of FAQs doesn’t actually constitute a change in the agency’s perspective. FINRA has said that they would not require disclosure of receipt of PPP funds on an individual’s U4.
And then, the IRS weighed in with a controversial determination that quickly drew the ire—and action—of Congress.
Reader Response(s)
So—how have readers reacted? Well, the response rate was somewhat lower than normal—doubtless reflecting the reality that this is an issue/opportunity that doesn’t apply to every situation. That said, among respondents, roughly two-thirds said they had filed for the loans. Roughly half (53%) had received funds (28% hadn’t and the rest hadn’t applied).
We asked if those who had taken a loan were concerned about negative press/perception of them taking the loan—and a majority (two-thirds) of those that had taken a loan were not concerned, though another third were.
Interestingly enough, no respondents were planning to pay the money back before the May 7 deadline, though that has just been extended.
PPP Perspectives
As for comments on the program, we got a number. Here’s a sampling:
“I think it is a great program and something the government had to do. Other countries also provided similar support.”
“I'm really upset about this. It's like they're trying to walk it back and use today's rules to apply to yesterday's decision. We made the decision to apply based on how very uncertain things were at the end of March into early April. Now there's an even more nebulous call for turning the money back in before we're even back to normal business? Our contract said they'd be selling these loans off. That's at odds with turning the money back in! At any rate, we'll be happy to disclose it if our financial state materially changes and we have to use it. In the meantime, 1% interest on a small loan is worth every penny for peace of mind as COVID and our crazy law makers play out.”
“Wish the forgiveness details would be provided with great clarity!”
“My corporate RIA told me I do not have to disclose a PPP loan since the corporate RIA did not take a PPP loan. Is that what other advisors are hearing?”
“This is a good question. I've been curious about what other advisors have been doing. I charge a flat fee for service, so my compensation is not impacted by market performance.”
“Yes, I applied, no I didn't get any money—yet. I received an email that said I had received an SBA loan number—that was about a week ago, last thing I've heard. So, not sure I'll even have anything to repay before the 7th! However, I did receive a deposit from the EIDL program, though no correspondence about it! I'm not seeing anything that would put my firm in disclosure territory, but we are actively monitoring with our compliance firm. I'm more concerned with the tax implications than the regulatory disclosures.”
“We of course have the public perception worries about accepting PPP. At the same time, the amount we received was relatively small. And we are part of a small community. We feel an obligation to try and make the best decisions possible to take care of our team and of our clients.”
“Another good question would have been the debate surrounding whether firms that applied and received PPP money should disclose such on their ADV. My guess is firms that have not applied or taken money want those monies disclosed and those that took/received PPP money don't want it disclosed. Question is should retirement plan sponsors know whether or not their DC advisor took PPP money?”
“I miss group education meetings with employees. I expect that will be the true test of Plan Sponsor sentiment about the coronavirus—when they are willing or able to bring employees together, probably in multiple smaller groups.”
“The word we focused on was UNCERTAINTY. If all our hard dollar clients do not pay and the market goes down another 20-30%, then we're in a pinch. Or if half our clients terminate their plans, then we're stuck too. And if not, we pay the money back and it's no biggie. That's what this was designed for. If we HAD to take it to survive, I can see why the SEC wants us to disclose that, but I can't see how you can penalize a small business for that. The TARP money was seen as a large business bailout for irresponsible financial firms and the government purchased preferred stock in at least 8. The PPP is intended for *small* firms, and limited to 2.5 months of payroll, NOT because they got themselves in trouble for investing in risky assets. Plus, plenty of our clients said the same thing—we're doing a cash grab because we don't know what's next with this pandemic.”
“People have digested everything and things are settling down.”
“Learned way late you can apply at multiple banks but can only accept one loan; also the commission rates of 5% on the first $350,000/loan to the banks; then 3% to $2,000,000; then 1% to $10,000,000; bank app processes differ resulting in great manual labor!”
“We were approved for a small amount but didn't take any funds because of the SEC disclosures and the fact that you can't write off the expenses for income tax purposes.”
We have been approved but have not received the funds as of today 5/4/2020. We may decide not to take it as it may have negative connotations for some of our clients. We are optimistic but wanted to have reserves just in case. The future is uncertain.
How Are Things?
While it is a tad off that particular topic, we also asked readers to share how they were feeling/doing:
32% - There are good days & not-so-good days.
29% - I'm good.
24% - I'm hanging in there.
22% - I'm great.
13% - What day IS it, anyway?
13% - I'm as good as can be expected.
Beyond those labels, readers shared a sense of how things stood—here’s a sample:
Comment “Ed”
Keeping everyone employed, talking with many clients, learning to work in a new way, hoping that the extent of the stock market damage and the liquidity provided won't cause new unknown problems down the road.
Been pretty good, but more stressful times than used to the last 10 years!
Miss getting out and seeing clients and prospects.
It is extremely busy and our clients seem to be opening back up for business.
Concerns about COVID, the elderly and lonely and so many losing jobs and having financial difficulties.
We're fortunate to live in an area that has not been heavily impacted by COVID 19 yet. And, if stock markets stabilize the impact to our firm may not be as drastic as we worried it could be, when they were down 30%.
Other than being stir crazy and tired of Zoom meetings, things are great. But very ready to get back out and see my clients in person.
The weather is getting better and we're another day closer to the end of all of this, whenever that will be. My family is still healthy and my paycheck still shows up twice a month. And we've got plenty of toilet paper. We're good!
I am very fortunate to work for a firm who set us up nicely to work from home. My clients are all accepting of the "new normal" of Zoom meetings. Other than the drop in assets across the firm, we are still maintaining and not cutting any hours.
Sun is out, family is fine.
Thanks to everyone who participated in this week’s NAPA-Net Reader Poll!
