On Wednesday (April 29), we encouraged dealers to create a budget to ensure proper use of PPP loans. Today, we reiterate the importance of doing so, recommend dealers consider external and internal communications relative to PPP funding, and remind you of the PPP-related resources available.
Create a budget.
Many franchised auto dealers applied for and obtained funding through the PPP. Now, it is critical you work with your dealer group’s controller and outside accountant to create a budget to ensure your organization properly uses those funds. When doing so, you may consider the following:
- Is your dealer group seeking complete loan forgiveness? If so, both NADA and the accountants at Dixon Hughes Goodman have created materials to help you with the process.
- Does your dealer group wish to treat any of the funding as a regular loan with interest and less than 100% forgiveness? PPP loans feature a one percent interest rate and two-year maturity period. Borrowers would not have to make any payments for six months following the date the loan was dispersed. That said, interest would accrue during those six months.
- Understanding what uses are permitted for your PPP loan, is there any part of that loan your organization wishes to return to the SBA?
Manage communications.
Last week, the Federal Reserve Board announced it would disclose borrower information for loans made available by the Coronavirus Aid, Relief, and Economic Security (CARES) Act, including those obtained through the PPP.
Since, Treasury Secretary Steven Mnuchin indicated the federal government will audit PPP borrowers who received more than $2 million through the program.
The SBA and U.S. Treasury also issued updated FAQs about whether businesses with adequate sources of liquidity qualify for PPP loans.
In light of all this, it is important you (1) reference NADA analysis released late Wednesday (April 29) about those SBA and Treasury FAQs and (2) designate someone in your organization to speak on the dealer group’s behalf should PPP-related questions arise from those outside your business. Internally, make sure dealership personnel understand your message.
Remember the PPP resources available.
- SBA PPP Webpage
- SBA COVID-19 Small Business Guidance and Resources
- Treasury CARES Act Webpage
- Treasury PPP Overview
- Treasury PPP FAQs (updated April 29, 2020) and related NADA analysis (updated April 29, 2020)
- NADA PPP FAQs (updated April 30, 2020)
- NADA Preliminary Guidance on PPP Loan Use and Forgiveness (updated April 23, 2020)
The above and more is also available online at the VADA Coronavirus (COVID-19) Resource Center.
Lastly, as with all our messaging, understand the content in this message is not intended as legal advice. If you require legal advice, please contact your attorney. The content in this message reflects information at the time the content was created and, given the changing circumstances surrounding COVID-19, is subject to change at any time.