What it’s really like to apply for a Paycheck Protection Program loan

As part of the CARES Act, a larger relief package for individuals and businesses affected by COVID-19, the government has made loans available to small businesses through the Paycheck Protection Program. Available to businesses with fewer than 500 employees, these loans are designed to keep workers on the payroll and may be forgiven if recipients retain or rehire employees. 

The demand for these loans has been intense, and there have been widespread reports of companies having trouble applying. To find out more about the process, we spoke to Keith Moore,  CEO of CoverHound, a Hiscox partner that employs 120 people. CoverHound provides insurance for small, micro, and nano businesses, so many of their customers also qualify for loans under the program. He shared his story of applying for a loan under the Paycheck Protection Program and passed on what he learned to help other small business owners navigate the process. 

One company’s Paycheck Protection Program story

Moore says he applied for a PPP loan to protect his employees’ jobs. “It was easy to see the economic impact the pandemic was going to have on our business. We project we would have had to lay off 40 to 50% of our staff if we had not been approved for this loan,” said Moore. 

Moore described a multi-step process CoverHound had to go through to apply for a Paycheck Protection Program loan. 

To get started, CoverHound contacted their bank, who was an authorized SBA 7(a) lender. “We use a good-sized regional bank,” said Moore. “What we found was that they were a little bit limited by their technology, because they’ve been in business for a while and they had older technology and processes. For businesses that don’t already have a banking relationship with a 7(a) lender, I’d recommend looking into a smaller, newer bank that would not be hampered by legacy technology. Speed is of the essence, since the program is first come, first served.” 

Intense demand

In fact, 4,000 banks successfully submitted 100,000 applications for small business owners in the first six hours, according to Moore. Just one out of three applicants successfully got through the system and was able to submit an application. Banks with older, legacy systems were not staffed to deal with the demand for these loans. 

A team effort

“We had a whole team who worked on this. We had people from marketing, finance, and operations, all working together,” said Moore. “We had to make amendments to our charter to clarify who has a financial interest in the company and to make it clear that we are not able to access capital any other way. We had to specify that we could not get a line of credit, since lending has completely dried up except for these SBA loans. “

Having to amend the company charter was the first pain point they encountered, according to Moore. “That was the first mad rush – to get the charter amended,” he said.

Once the application was completed, Moore’s team waited for a response. Within a few days they received a guarantee number, indicating they will receive a loan as long as the information provided checks out. While CoverHound applied for a loan as soon as the first round of funding was announced, their loan will be funded by the second wave. 

A challenging process

Looking back on the process, Katherine Moura, the CoverHound CMO, said, “It was very confusing and hard to digest. If it’s hard for us, it’s hard for any business, especially those that are very small or may not have the specialization in financial services that we do. “

“Considering what the government and the SBA as an organization had to deal with, this was a pretty quick turnaround,” said Moore. “So it’s very impressive, but you feel bad for all the businesses that weren’t able to get through the journey successfully. We’re still not successfully 100% through to the point where we have the funds in the bank. So there’s still a level of stress there, which we can relate to.” 

Advice for PPP loan applicants

Persistence and resilience are key

Keith Moore had this to say to companies that have applied or plan to do so: “Don’t give up. Just because somebody says no, ask why. Be persistent and resilient, and realize you don’t have to do it alone. Depend on your team and your network. Find out what’s working and what’s not so you don’t have to repeat the mistakes others have made.”

What’s most important is relying on your community, relying on your team and sharing that feedback – not necessarily in an open forum, but directly so you don’t worry about sensitive data leaking out,” said Moore. “I know a couple of small businesses that are partners of ours that have successfully gone through the process, and they shared what worked and what didn’t. We’re trying to do the same thing: trying to pay it forward and give back.” 

A step-by-step guide to help other businesses

Taking his own advice, Moore and his team decided to share what they learned so others can get loans more easily. “Once we had completed the process, we realized that a lot of the companies we serve did not have the personnel or the knowledge to do what we did,” said Moore. “So we decided to share our experience with our customers so they could apply for their own loans without having to re-invent the wheel.” The process was detailed, along with helpful tips for those looking to apply for their own Paycheck Protection Program loan, in a blog post on the CoverHound website. 

“We also wanted our customers to know we are in the same boat as they are,” said Moore. “We’re learning as fast as we can, but this process is new to everybody. We’ve had six to 12 people working on this, to make sure that if a customer of ours is qualified, they have the information they need to be first in line. For this program, it’s important to be detailed and accurate, and to act fast.” 

The ability to help their customers and other businesses was an unexpected silver lining to the Paycheck Protection Program application process for CoverHound.  “Even if we’ve only helped one business, we’re happy with that,” said Moore. “But I’m pretty sure we’ve helped more than one business.”