Skip to main content

Reflections on Small Business PPP Loans and Bank Relationships

Most of our small business clients are now focused on Step 2 of the Paycheck Protection Program (PPP) loan process - FORGIVENESS. While we're waiting yet again for clarifications from Congress and the Small Business Administration (SBA) on the rules for forgiveness, this may be a good time to reflect on small business banking relationships.

While national banks have received the most PPP loan attention from the popular press, we've been pleasantly surprised with the superior quality of our clients' experiences with smaller regional or state banks. There have even been a couple of credit unions that have participated in the SBA programs and aided our clients. Our clients have found these financial institutions almost without exception to be more responsive to small business needs than some of the national banks.

Don't get us wrong. We've also worked with individual bank professionals at these larger institutions who are serving well, so we don't want to name names. But others have seemed to be more focused on protecting themselves through self-selection of their customers who can qualify for PPP loans. Of course, supporting small business efforts to protect the paychecks of small business employees is the program's primary objective.

Our thought for the future - don't forget about regional and state banks as you consider your small business banking relationships. If you do not currently work with a local bank that is not simply a branch of a national bank, then consider broadening your network. 


Comments

Popular posts from this blog

Debits and Credits for Designated Gifts

Question:A church is setting up QuickBooks for its accounting, but its personnel have little experience with fund accounting. What are the entries for the receipt and disbursement of designated gifts and the opening balances?Answer:We recommend that most churches that do not need to present financial statements in accordance with Generally Accepted Accounting Principles (GAAP) observe the following steps. Even those churches that do report using GAAP can employ these methods but must make some adjustments when preparing their financial statements.What we will demonstrate relates to what most churches call "designated gifts" (CPAs call these Temporarily Restricted gifts). These are gifts that donors contribute with the intention that the church will spend the funds as they direct. Most churches do not receive "endowment gifts" in which donors prohibit the expenditure of the core gift (CPAs call these Permanently Restricted gifts). Only earnings on the subsequent inv…

Housing Allowance and Form 1099-MISC Reporting

Question:A church provides its minister a housing allowance but believes it must report the full amount of compensation (including the non-taxable housing allowance portion) on Form 1099-MISC in order to demonstrate the full earnings of the minister. (Starting in 2020, Form 1099-MISC is replaced with Form 1099-NEC for non-employee compensation.)If the church reports his compensation, including the housing allowance, on the Form 1099-NEC as taxable income, will he be able to deduct his housing expenses somewhere else on the Form 1040?Answer:This question brings up a couple of issues. First, most ministers are properly classified as employees who receive Form W-2, not as independent contractors who receive Form 1099-NEC. Box 1 on Form W-2 reports taxable compensation. It is reduced to reflect the church's designation of a portion of his pay as non-taxable housing. Then, in Box 14 (Other), Form W-2 typically reports as a memorandum item his additional non-taxable, housing allowance c…

Rental of a Church Parsonage to a Non-Minister

Question:A church owns a parsonage, but the pastor does not use it as he owns his own home. The church rents the parsonage to a tenant other than a minister or employee of the church. Will the church be responsible for paying income tax on these monies as Unrelated Business Income (filing a Form 990-T) even if the money is used to carry on the business of the church? Answer:Whether the money is used for church purposes is irrelevant. IRS Publication 598 states:"If an exempt organization regularly carries on a trade or business not substantially related to its exempt purpose, except that it provides funds to carry out that purpose, the organization is subject to tax on its income from that unrelated trade or business."Fortunately, in the case of rental income from real property, such income is "excluded in computing unrelated business taxable income" (Publication 598). Caution: see content below regarding debt-financed property. However, a second concern not addresse…