Helping Companies Weave Through the U.S. Small Business Administration’s Paycheck Protection Program During Covid-19

When Bob Rojas interviewed with a leading audit and tax firm fresh out of Pricewaterhousecoopers, he told the firm’s hierarchy that he wanted to be a partner within six months or he would launch his own firm.

Within six months Rojas became the 90% owner of the company.

That was 30 years ago, and 2020 is throwing knuckleballs like never before seen in the history of the world. Like everyone else, Rojas is contending with the dual-crises of the global COVID-19 pandemic and the cresting wave of economic collapse.

The global crisis represents an opportunity for his firm to link in with businesses that need management advisory services in two different ways. The most obvious is to work through applying for SBA PPP (Paycheck Protection Program) loans from the U.S. Small Business Administration and to ensure everything possible is being done to maximize the amount of those loans to be forgiven. But possibly more important is to be taking steps now to not only weather the current and likely ongoing economic downturn but to actually grow the business.

From his experience working with SBA PPP loans, Rojas has gleaned four key insights that he would like to share.

The first is that all of his clients who have applied for SBA PPP loans received the loans. His second is that the rules related to loan forgiveness are in flux, and not all of them were in place when companies first began to take advantage of the loans.

“You’ve got a loan, and inside of the loan you don’t have all of the bank covenants yet, you don’t have all of the restrictions yet,” he says. “They’re still clarifying these rules.”

The result is that several companies received some of the PPP funds – Ruth’s Chris, Los Angeles Lakers — then faced backlash when the rules were clarified retroactively.

Rojas cites the SBA, which announced at the end of April that it would review all loan packages of $2 million or more. After the businesses had applied for the money and received the loans, U.S. Treasury Secretary Steve Mnuchin said companies with relief loans of $2 million or more would be “audited.”

“The problem is that it wasn’t in the original documentation when some of these companies applied for the loan,” Rojas says. “If you had known that the IRS would be involved with this loan, you might have had a different perspective on this loan.”

Rojas, who has extensive experience with IRS audits, feels that his skill set “will be very valuable to business owners over the coming year.”

The rules governing the loans are not very complex, “just cumbersome,” he says. “We are a ‘go-to’ resource for businesses as they navigate the changing rules and meet on a daily basis to ensure they are staying current on the changes being made and everyone understands them.”

The individuals putting together the loan packages and applications for forgiveness are usually not the owners of the company, but attorneys and CPAs. This leads to Rojas’ final insights: that the businesses his company has reviewed have all used their professional advisors, such as their attorney or CPA to work through the loan process, and that “there are tremendous planning opportunities at this time that businesses should be taking advantage of,” he says.

While it is difficult to focus on anything other than the here and now as we fight through the COVID-19 pandemic, Rojas says, “Right now is a perfect opportunity to plan for growth. You would think that it would be exactly the opposite, but it’s not.”

Economic downturns give all business owners, quite literally, pause: pause to reconsider exactly where their companies are heading, or need to head, if they are to meet their owner-based goals.

“Surprisingly, most business leaders don’t know the full value of their business,” Rojas says, so he and colleagues make a proper valuation. They then use the time afforded by an economic downturn to create and enhance the value drivers in their company.

“Our strategies are developed and implemented to help owners protect the company’s assets — and their personal assets.”

From a company standpoint, this is “the perfect time” to restructure organizations to minimize tax and liability exposure, review and modify contractual obligations, and review insurance coverages, Rojas says.

Companies need to identify their key employee group, and then set up a compensation plan to keep those key employees together. On a personal level, use this time to work on estate and family planning.

“Most small to mid-size businesses will realize their plans are incomplete,” Rojas says. “This is where we — and other qualified advisors — can provide real value.”

Meanwhile, Rojas is taking lessons he learned from the Great Recession in 2009. Like today, everything was crashing, yet he acknowledges that everything was less expensive. During that time, Rojas and Associates invested heavily in Cisco’s firewall and a paperless system and infrastructure.

“That recession proved to be a great opportunity to invest,” he says. “There were a lot of people out of work. That’s when we hired some really talented people. We doubled in size within two years and decreased overhead substantially. That’s what’s out on the market right now.”