Last year, as the pandemic shut down the economy, many people needed money to live and became desperate. With funds being short and people living on unemployment benefits, the possibility of getting additional money can be welcome news. Some professionals have been helping clients get pandemic relief funding. But if the money they are relying on does not come, clients can become unpredictable. A recent event reminded me of this.
I spent the past 12 months helping struggling small businesses obtain government grants to stay afloat. By far, the most popular and most accessible program was the Paycheck Protection Program (PPP). The PPP is a low-interest loan which could be forgiven if at least 60% of the funds were used to cover employee payroll expenses. The Small Business Administration would accept funding until May 31, 2021, or when the earmarked funds were exhausted.
I only took a few applications in the month of May due to the upcoming deadline and general lack of interest in my small sphere of influence. I planned to spend most of my time on other work and making sure that the applications I already submitted had closed and my clients were funded.
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And about a week ago, I learned from multiple clients that the PPP funds have been exhausted. They all asked about the status of their applications and whether the SBA approved their applications. Some of them were frantic as they were calling, emailing, or texting me frequently.
I spent the next few days dropping everything else to deal with this problem. Thankfully, I worked with a smaller bank that had actual human beings processing the applications and was usually very responsive. The larger banks and some third-party platforms automate as much of the process as possible. Heaven forbid you have an issue with your application because the customer service is horrible and usually nonresponsive.
Talking to the bank didn’t take up a lot of time. Most of my time was spent trying to placate the frantic people that called. They all told me why they desperately needed the money. Some were borrowing money from relatives to pay for food. One needed to pay an employee who was caring for a parent suffering from COVID-19. Some needed to send money to family members in other countries where the coronavirus was continuing to spread. They were hoping that I could share their story with the bank or the SBA, hoping that it would help them get funded.
I recall one applicant demanding a full accounting of what I did with her application, who I sent it to and whether I took any actions to ensure expedited processing.
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To make a long story short, almost all of my clients managed to get approved before the funds ran out. Some had to take a lower amount than what they requested. The few who didn’t make it had issues with their application and couldn’t get them fixed before the deadline. Some applicants are minorities so they may qualify for PPP funds through community financial institutions, but I warned them not to get their hopes up or make financial decisions based on false assumptions.
Unfortunately, the sudden news of the funds depleting was a shock to everyone. Presently, with things starting to get back to normal, a third round of PPP funding seems highly unlikely. There may be other sources of grant funding, but they are likely to be funded through local government and likely target certain industries and demographics.
Even if there is no third round of PPP, I am hoping that the federal government will allocate additional PPP funds for those who applied before the PPP funds were depleted. The cost to the government will be negligible, and it will ensure that no applicant is left behind. Sure, a lot of these people probably procrastinated, but some did not, and all of the applications were submitted when funding was available.
The lesson to be learned here is to manage client expectations from the beginning to minimize the chances of frantic (and possibly angry) calls later. Let clients know all of the possible outcomes, including some unfavorable ones. I generally warn people that funding is not guaranteed and that they should not make major financial decisions assuming that the money will come. And unexpected events (such as funding being depleted without warning) could affect their chances at funding even if they did everything right. While it is good to help the client feel optimistic, you do not want them relying on your words to make major financial decisions until you know the money is coming.
Unfortunately, the PPP funds have been exhausted, and I am hoping something will be done to help the last applicants get the funding they need. But until then, some will have missed out and will be upset or frantic. To a degree this is unavoidable but can be minimized by managing expectations from the get-go.
Steven Chung is a tax attorney in Los Angeles, California. He helps people with basic tax planning and resolve tax disputes. He is also sympathetic to people with large student loans. He can be reached via email at [email protected]. Or you can connect with him on Twitter (@stevenchung) and connect with him on LinkedIn.