Thread by @guyhturner

#startups #stimulus #paycheckprotectionprogram Thread on what we are advising startups on applying to Paycheck Protection Program:👇💰 cc @hydeparkvp

Things are moving fast. Some of you may have already seen that the SBA and treasury posted more info about the Paycheck Protection Program (PPP). sba.gov/funding-progra…

The SBA says that existing SBA 7(a) lenders may start taking applications on April 3 (this friday), which is good news.

They also posted a sample application form, along with FAQs for borrowers and lenders. In addition, they have defined the loan term of two years with a 0.5% interest rate, no payments for the first six months. Forgiveness potential for most or all of it.

The sample application form and and lender FAQs - taken together - paint a picture of a fairly simple underwriting process focused on validating existence/operations as of Feb 15, 2020 and verifying employees for whom the borrower paid salaries and payroll taxes.

While we are hopeful this means affiliation complexities related to VC ownership will not be examined, we won't know that until lenders implement the guidance they are getting from the SBA and create their internal processes and application forms that would be supplemental

So, don't count your chickens yet. Also, noteworthy, all >20% owners will need to sign the application. (more about affiliation rules: nvca.org/wp-content/upl…)

Based on this, an immediate course of action THIS WEEK is as follows:

1. Find lenders: Talk to SBA lenders ASAP about when they expect to implement. Most still catching up on things, but if they don't have a view in the next few days, move on. Initially we recommend those who understand venture, like SVB, WellsFargo, BridgeBank, Comerica and CBIC.

...however, if the underwriting process ends up being as simplified as (a) prove operations on a certain date and (b) prove payroll, you would be wise to also speak with other/local banks who may not see the same rush of now well-informed startups the venture banks will see.

2. Audit your legal documents: Check for potential tripping of affiliation rules in your protective provisions based on guidance from the NVCA (also attached here).

3. Develop a legal doc plan: If you believe you may run afoul of the affiliation rules, develop a plan with your counsel to amend your docs, but do not yet execute pending determination of whether affiliation will indeed be examined by lenders

4. Communicate to your investors: Talk to them about (1) the potential need to adjust protective provisions and (2) the potential need for them to sign the application. Share the sample application so they can have their own counsel review. You don't want VCs slowing your app

5. Gather info, do calculations, fill out draft application: Centralize 2019/20 monthly payroll, 3 yrs financials, audits, filed taxes, current cap table, corporate formation docs, general liability insurance and physical leases. Do the calcs. Fill out a draft application form.

6. Once lenders have found their stirrups, pick one and pull the legal document amendment lever if needed. Then apply. Look for separate forgiveness app in 60 to 90 says