What if You Don't Have a Business Checking Account When You Apply for the PPP Loan?
Many family child care providers are having trouble applying for the Paycheck Protection Program (PPP) forgivable loan program. Many banks are telling them they must had a business checking account before February 15, 2020. If a provider doesn't, the bank won't process the loan application.
This is an unreasonable requirement! The CARES Act that set up the PPP loan program says you must be in business before February 15, 2020. It doesn't say that providers must have a separate business account before that date.
The vast majority of family child care providers don't have a separate business checking account. But, they can certainly show that they have been in business before February 15, 2020.
Banks and other lenders can set their own rules about accepting applications for the PPP program. However, setting this requirement about a business account doesn't make sense. It may be that the bank is trying to limit the number of loan applications it is accepting. Or, it may be that they think they can't accept an application until the provider has a business account.
Either way, the bank is not following the intent of the PPP program to help small businesses, and in particular, self employed businesses.
What can you do to fight this?
First, you should try to talk face to face with the bank manager or a loan officer, not a bank teller. If the bank lobby is closed, call to make an appointment to speak to someone directly at the bank.
Point out that the federal CARES Act does not require you to have a business account before February 15th and that self employed people are not required to have such an account. The bank can accept your loan application under federal law without a business account.
Next, make the case that you were in business before February 15th! Show them your tax returns for 2019 or 2018, which includes your business tax forms. Tell them that your personal banking account is your business account as well. You run all (or most) of your income and expenses through this account.
Lastly, explain that you are a good customer of the bank. You may have multiple personal checking and savings accounts. Some may have a substantial amount of money in them. You may have a credit card or mortgage loan or car loan through the bank. You may have a high credit score.
All of this information shows that you are a stable business and a good loan risk. If the banker still tells you it's their policy not to accept loan applications if you don't have a business account, ask them if this policy might change in the future. It could be that the bank is waiting to handle larger loan applications or waiting for more federal funding.
Other requirements
Some banks are also requiring family child care providers to have an Employer Identification Number (EIN) and/or a DBA name (Doing Business As) registered with their state Secretary of State's office. This may also be called an assumed name, or fictitious business name.
All family child care providers should get an EIN instead of using their Social Security number with parents. You can get an EIN from the IRS website here. It will take ten minutes online and it's free.
If you incorporated your business, you already have a DBA name. If you are self-employed and have a business name ("Tower of Tots Day Care"), you are probably already required to register your name with the Secretary of State's office. So you should do it.
If you don't have a business name and use your own name, you are not required to register it. The reason to register it is to protect your name from someone else using it. Go to your Secretary of State's website and get your DBA name registered online. There is a small fee (100% tax deductible!).
If your bank is insisting that you have a DBA name, this is not required by the federal law. And it is not required by law if you use your own name. For the bank to require this when you don't have a business name is unreasonable and unnecessary. A DBA name doesn't make you more of a business. If the bank insists, you can always get a DBA name and then resubmit your loan application. If they say you must have a DBA name before February 15, 2020, make the same arguments as cited above.
What else?
If you strike out with the bank, contact your state and federal representatives and ask for help. The federal law was intended to help the self employed. Ask them to contact the bank on your behalf to get them to change their policy. This is a widespread problem for all self employed businesses and it shouldn't be. They should be assisting you and everyone else in your situation. Don't be afraid to take this step and contact your state and federal representatives!
You may also want to consider contacting your local television and newspaper and ask them to publish a story about the plight of the self employed in applying for this loan. You might be able to describe yourself as a minority-owned business, or woman-run business, or a business that serves mainly low income families so they can work. As a public policy matter, you are the backbone of the economy and should be treated as such.
If you have had success with your bank in applying for the PPP loan, let me know. Good luck!
Tom Copeland - www.tomcopelandblog.com
Image credit: https://www.flickr.com/photos/irisphotos/14002487974
