The federal government’s COVID-19 relief funding for small businesses is coming to an end, as the deadline for the Small Business Administration (SBA’s) Paycheck Protection Program (PPP) is June 30. Still, businesses have time to pull together information and apply for a loan from the billions of dollars that are still available in the program.
While it was unclear whether cannabidiol (CBD) companies would be eligible for funding due to their status in legal limbo, David Metzler, the CEO of venture capital firm CBDCapitalGroup, says he’s worked with industry businesses that have been successful. Metzler says CBDCapitalGroup has secured funds through the program as well. Here, Metzler offers quick tips for CBD companies navigating the last-minute application process.
Hemp Grower: How long does the PPP loan application take to complete? What information should CBD companies have before they begin the application?
David Metzler: Completing the PPP loan application is actually a fairly short process and easy to do if you are organized with your chief financial officer or controller helping you. It will likely take no more than 45 minutes to file if you come prepared with your tax filings and documents. You can either use your 2019 annual tax returns or a form 941 for 2020 quarterly filings, plus your incorporation documents and payroll and expense pro forma breakout (Excel model).
HG: To qualify for PPP funding, companies have to confirm they’re “not engaged in any activity that is illegal under federal, state, or local law.” Has this been an issue for CBD businesses because of CBD’s technical illegality?
DM: Hemp is a federally legal product and therefore is protected and qualifies for PPP funding. Hundreds of hemp and CBD companies have gotten returns because the intent is to keep people employed, and the hemp industry employs thousands of workers. After the first stimulus package, Congress then made it so hemp farmers are also eligible.
HG: Are there certain sectors of the CBD industry that have tended to be more successful than others in securing funding because of their position in legal limbo?
DM: We have knowledge of hundreds of hemp/CBD companies that have been approved and have been saved by the PPP program. These companies are throughout the hemp industry's ecosystem and all sectors have had success.
HG: What are the biggest mistakes you see CBD companies making when applying for a PPP loan?
DM: The biggest mistake we see CBD companies making when applying for a PPP loan is simply not applying. As of early June, there was still over $100 billion worth of PPP funds left, yet we still come across companies that haven’t applied, and that is a mistake. This PPP program was created to help companies through hard times and keep their employees, so not using that resource just makes it harder to survive in the long run.
HG: What tips do you have for CBD businesses to secure a PPP loan?
DM: Go to a small bank, use PayPal or Kabage, or do all of the above. There is no rule saying you can’t apply via multiple entities, and when you get approved, just withdraw your application from the institutions that didn’t work out. Big banks tend to not prioritize small accounts, and so a lot of times, community banks and other providers tend to be more effective and work harder for the small guys.
HG: Do you have any tips for seeking loan forgiveness?
DM: Unfortunately, loan forgiveness is still a confusing moving target as new rules and guidelines are constantly amending. The good news is that recent adjustments now give companies more time to spend the PPP money (now 24 weeks after granting), mandates only 60% be used for payroll to still get forgiveness, extends the repayment period to five years instead of only two, and removes the penalty for businesses that don't maintain their pre-crisis staff count. We strongly recommend getting expert advice on this and working with your banks or institution that granted the loan, as they are in charge of working with the SBA on the forgiveness paperwork.
HG: Does the PPP give priority to minority-owned businesses?
DM: They are working on this now to earmark more of the money for minority-owned businesses, but unfortunately, that wasn’t in the original law. [Those businesses should] work with smaller banks and keep at it until you get it approved. Your businesses are essential to the diversity that makes America great, so keep trying, because we need you.