Building a PPP practice
After the Coronavirus Aid, Relief, and Economic Security Act was signed into law in response to the COVID-19 pandemic, accounting firms were suddenly fielding questions from clients seeking to take advantage of the CARES Act’s Paycheck Protection Program, the federal loan program providing small businesses with cash-flow assistance.
Based on the large number of small businesses needing relief from the economic downturn, some firms even added dedicated PPP service lines to aid these clients in applying for loan forgiveness and complying with the program’s rapidly changing requirements and deadlines.
As soon as the CARES Act was passed through Congress on March 27, firms like New York City-based Top 100 Firm Prager Metis sprang into action.
“When COVID hit, when the first PPP act was signed into law, the firm proactively set up a crisis management group,” explained Robert Mayer, practice leader of the CFO advisory services group. “It fell under my responsibility, within client advisory services, and [legislators] added to it as we read through the first law. Changes to the tax program needed to be done and considered. We began the process of beginning to figure out how to address it.”
The first step was education, both for firm members and clients. Mayer and Edward Rigby, a tax partner in the New Jersey office who helps lead the PPP loan forgiveness services team, hold daily calls after reading the latest (sometimes daily) updates from the government and Small Business Administration. Sometimes they will loop in some of the five members of the firm’s crisis management team.
When the SBA and Treasury simplified the application into an EZ form in July, for example, their team had to quickly review the new requirements, which, despite the name, still ask for copious information and documentation from companies.
“We have a phone call over breakfast, across the country, fielding questions from colleagues and clients,” explained Rigby. “My day starts, I look at the Treasury, SBA, what new guidance is out there. Same thing as a tax partner, the legislative activities — with COVID-19 there are a number of complex tax issues in the CARES Act. Regarding SBA lending, we diligently focus our attention on new developments and guidance — ‘SBA and the Treasury hasn’t addressed this yet.’ We submit a question and ask for a response.”
Before creating its PPP services line, Maryland firm KatzAbosch was also monitoring the federal response from the beginning of the pandemic outbreak, explained director Terry Grant. “When COVID first started, we knew there was the potential to have a significant impact on our clients, so we started following what was happening on Capitol Hill,” she said. “When the CARES Act came out, we knew there was going to be a lot of questions sent our way. We were bombarded by calls from clients wondering if they should apply for the PPP loan.”
Kentucky’s Dean Dorton is another firm that established a dedicated team, arising from its larger COVID-19 solutions group, to advise clients on the PPP. Like Prager Metis and KatzAbosch, Dean Dorton has been working overtime to both learn applicable information about the program and to push this knowledge out to clients.
“There’s a team of five of us, and as soon as something comes out, we collectively read, review, and try to digest and summarize whatever the guidance was, and discuss amongst ourselves what it means and doesn’t mean,” shared Erican Horn, tax associate director at Dean Dorton. “And we communicated that out to our clients as much as we possibly could.”
All three firms immediately set up email blasts and webinars to inform clients and prospective clients about the CARES Act and the PPP. And all have been in constant contact with the SBA for all questions and clarifications needed for their clients.
“We spent quite a bit of time tracking Treasury and SBA bills going to the House and Senate,” Grant said. “We would then put out email blasts to our email lists. This turned out to be a plus as far as business development goes. Our current clients appreciated that we were keeping them up to date, and prospects and industry partners were amazed at how quickly we were getting information out to them. I believe this helped our business development efforts quite a bit.”
Dean Dorton took a similar approach. “When the statute was signed into law, we did a series of email blasts to clients, friends of the firms and others,” said Horn. “We outlined the federal income tax changes … as well as the PPP loans, so it was instantly received. Also, as a firm we decided to put as much information in the public domain as we could.”
Prager Metis also utilized the public domain, reported Mayer, exchanging knowledge with other top firms. “We’ve always had an excellent working relationship with the large firms,” he explained. “We may be competitors, but they’re a great source.”
Range of services
Prager Metis also found the demand for PPP assistance to go beyond the firm’s existing client base, prompting the firm to begin actively marketing the services externally in September. As part of its service offering, Prager Metis provides a tailored software solution that automates calculations to monitor the level of forgiveness in real time, providing detailed reports for multiple scenarios that also calculate the most beneficial time for filing an application.
“We came out with software specifically designed to calculate all the possible scenarios in order to maximize forgiveness,” Mayer explained. “It takes from [clients’] QuickBooks, Xero, payroll and all different payroll companies, and puts it all in place, is sent to the client, the client signs off, and it’s uploaded to the bank’s portal.”
“The software brings in data from any payroll company for 2019 and 2020, to calculate the full-time equivalents and all the requirements,” he continued. “We have that in place and trained the staff on how to use it to advise clients.”
KatzAbosch also standardized its approach, according to Grant: “As the weeks went on, we started developing templates to help with the calculations and if clients needed help we provided assistance at our standard rates. It was easier this way because each client was different and needed different levels of assistance.”
Along the same lines, the three firms reported that the needs of clients have ranged from a quick phone call to overseeing the entire process.
“It can be a question and answer — clients call and say, ‘I looked at the application form, I have these concerns, what can you tell me about X, Y, Z’ or ‘I looked at the application form, I think I’m going to lose my mind, can you do this for me?’ Or they have all the information done, the application done, and send it to you to take a look at it,” Horn shared.
PPP experts generally agreed that patience is a virtue in the loan process, with changes and clarifications still to come, and many advising clients to wait for the most advantageous timing to apply for forgiveness. This was especially important when the covered period for applicants to use funds and receive forgiveness was extended from eight weeks to 24 weeks back in June (along with a reduction of the payroll cost rule from 75 percent to 60 percent).
“We are trying to tell clients, don’t be in a rush,” said Mayer. “Use it to your advantage, add another week, two weeks of payroll, you’ve got to the point of 24 weeks, max, of forgiveness prior to that.”
Mayer also urged professional oversight where necessary: “Some clients did file their own application for PPP. Many filed for the wrong amount when they originally borrowed, and didn’t consider the limitation of [payroll cost per employee to the annual equivalent of] $100,000 for employee, and limitations on owners for substantially less. There was a date to be forgiven, and clients returned money to lenders so they wouldn’t be penalized.”
“All cases or examples of the borrowers, taxpayers, that didn’t consult with us,” Rigby added. “All nuances, complexities with the application itself — issues with affiliate rules, partnerships, how they apply, foreign investment in U.S. companies — people did it on their own. Overborrowings, underborrowings, where they could have gotten more. Our firm quickly jumped on this, and were heavily involved in learning all the rules, the complex rules and requirements.”
These firms’ PPP service lines are aimed at a range of industries, mostly aligned with their existing client categories, though some sectors have been more greatly impacted.
“[The pandemic] has affected business across the board, it has affected our business, it has affected everybody,” Mayer said. “From the very beginning, clients were concerned about taking the money. We told them to take the money, we’ll figure it out, but get the money. The first tranche of money went quick, the second, still has $100 million not used, but it’s not available anymore with the last deadline for filing [having been] in early August. More money is available, distributed on a different basis, earmarked for smaller businesses. We have a lot of restaurants and bar [clients] tremendously impacted by COVID-19, and then what happened, they wanted to reopen, and approached [employees], but they’re not coming back, not now. We advised clients to get it in writing that you made the offer and they rejected the offer, so it did not affect PPP forgiveness.”
Dean Dorton also reports a broad range of industries requesting PPP services “from construction to manufacturing, to personal services, restaurants — I think we’ve seen most industries, I’d say,” according to Horn.
As for KatzAbosch, “Most of our clients were within the medical, government contracting and construction industries, but we also had our share of restaurants and various other industries,” said Grant. “Working with government contractors puts another twist on forgiveness because they may also be reimbursed under [Section] 3610 of the CARES Act, and as we all know you cannot double dip.”
As far as payment for PPP services, firms tend to use hourly billing, with some flexibility.
“At first, our consulting was pro bono as we were all trying to figure out what would qualify for the loan,” Grant explained. “As we provide assistance, we plan to charge based on hourly rates. The AICPA has provided a nice template that goes through all of the calculations.”
Dean Dorton had a similar billing trajectory.
“We intend to use standard hourly rates,” Horn said. “Very early on, the first dozen, we offered clients a cap on fees because we had no idea what it was going to look like, [no] estimate what this was going to cost, but now we have a much better idea of what it takes … . Now we know problem areas, where to concentrate the majority of our attention [and have] standard hourly rates.”
Prager Metis also uses time billing, calculated through its specialized software. “We put in fee ranges based on the amount of time we believe it will take us to get the application prepared, and it stores for a period of six years on our own cloud, all backed up, with payments for rent and other utilities,” explained Mayer.
The software has taken on an influx of applications recently. “We are starting to see activity really pick up,” reported Rigby. “Borrowers know they can submit applications, so interest in having the firm prepare the applications, review their applications, has really picked up in the last couple weeks.”
As interest in PPP only grows and small businesses seek counsel, Horn advised applicants to stay actively involved in the process.
“I’d suggest to folks, ‘Proceed with caution,’” she said. “Everybody is trying to get into the market, payroll providers have come up with special reports for clients to use in connection with applying. Many lenders have a portal, have contracted with software vendors to help facilitate the forgiveness process — all really good. If you go through that process and get the result you’re not expecting, you should ask someone about it; don’t stop there. You know your business better than anyone else, you know what’s happening or happened to you over the last six months. Make sure you are fully satisfied before you submit the application."