/These financial advisors applied for the PPP loan. They share some lessons learned

These financial advisors applied for the PPP loan. They share some lessons learned


As small businesses sought emergency federal loans, financial advisors not only assisted clients, but also applied for aid to bolster their practices.

The Paycheck Protection Program, the $ 349 billion small-business loan offering, ran out of money on April 16 after being open for close to two weeks.

More than 1.6 million businesses were approved for funding, according to Treasury. The loans are forgivable, but at least 75% of the forgiven amount must be put toward payroll.

Indeed, keeping employees afloat and keeping the lights on were the primary motivators for financial advisors who applied for the loans. Clients’ portfolios – as well as advisors’ revenues – are already taking a hit as market downturns put a dent into assets.

“If this thing lasts six months to a year, knowing revenue and the market will be down, we’re making sure we can keep full employment,” said certified financial planner Benjamin Brandt, founder of Capital City Wealth Management in Bismarck, North Dakota.

He chose Cornerstone Bank, a local lender, and received a PPP loan of $ 40,000 – eight weeks of payroll for himself and his two employees.

“We are well-capitalized and probably won’t need it, but I’d rather have it and not need it than to need it and have to scramble,” Brandt said.

Here are three lessons from advisors who applied for the funding.

1. Evaluate your options

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While PPP is the loan program that’s in the spotlight, independent advisors and their firms may be eligible for other lifelines.

Employers have access to a number of refundable tax credits, including the employee retention credit and credits for paid sick and family leave – all granted through coronavirus relief legislation.

Be aware that there’s a trade-off with these programs and you should evaluate them before you proceed: For instance, you can’t apply for the PPP and also take the employee retention credit.

Further, until recently, there was also the Economic Injury Disaster Loan, a federal loan program that offered $ 1,000 per employee up to $ 10,000. The program recently closed its doors to new applicants.

Michael Molitoris, founder of Flagship Wealth Management Group in Cary, North Carolina, applied for $ 15,500 through PPP, going with online lender Kabbage.

He turned to the program after realizing that he could only obtain $ 2,000 through the EIDL.

The funding wouldn’t have been enough to support him and his wife – who is also the chief operating officer of the firm – and that was why he applied for PPP.

“I’m not thinking about today; I’m thinking about six months out,” Molitoris said.

2. Borrow locally

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When you’re applying for the PPP loan, it pays to know your local bank representative.

Rockie Zeigler, a CFP and founder of RP Zeigler Investment Services in Peoria, Illinois, obtained funding through the PPP earlier this week. He declined to disclose the amount borrowed.

“For me, it’s a situation where I was very afraid of the short-term future of my revenue,” he said. “None of us knows how far stocks will drop and where we are headed.”

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He shopped locally, going with Morton Community Bank, where he already has a personal mortgage, as well as checking accounts for his business. Zeigler also knows his representative personally.

“I applied the first minute I could and sent it to my buddy,” he said. “I was on it right away, and maybe that was why it went smoothly with me.”

A banker you know well can coordinate with your accountant to help smooth the document-gathering process.

3. Back your funds up

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Just as advisors remind clients to keep cash on hand for emergencies, they themselves also need to secure access to funding in a pinch.

Cash set aside, plus a line of credit that’s set up ahead of time, could be a backup in an emergency. It might be time to review your profitability and stress test your business to see how you would handle a drop off in revenue.

“Businesses should shoot for a 50% profit margin and have a huge amount of cash set aside,” Brandt said.

“Clients count on us to run a profitable business so we are available when this happens,” he said. “If we have to shutter our doors, we haven’t helped anyone.”

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