Brex is letting its customers apply for federal small business loans during the coronavirus crisis, but has these key guidelines for any startup hoping to qualify for relief

Summary

Business Insider article by Megan Hernbroth on how Brex, a $2.6 billion fintech startup, is letting its customers apply for Paycheck Protection Program loans through partner bank Radius. In a webinar for founders, Erica Dorfman, VP of Cash at Brex, said the loans are meant to keep current headcount on payroll, that 75% of the funds must go to payroll costs for loan forgiveness, and that applicants attest to the government that they need the money. Applications are open only to Brex customers with a relationship with Radius, and startups must list Employer Identification Numbers for investors owning at least 20%. The article describes the $250 billion program as confusing for startups.

Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used

Full text

Tech

Brex is letting its customers apply for federal small business loans during the coronavirus crisis, but has these key guidelines for any startup hoping to qualify for relief

By Megan Hernbroth

Brex cofounders and co-CEOs Pedro Franceschi (left) and Henrique Dubugras. Brex

2020-04-10T19:07:48.000Z

Read in app

Copy link Email Facebook WhatsApp X LinkedIn Bluesky Threads

Save Saved

Brex, the $2.6 billion fintech startup that offers banking services for startups , has taken on the challenge of navigating the federal government's new small business loan program, a task so confusing and gargantuan that even traditional banks like Bank of America and Wells Fargo have thrown in the towel.

In its ongoing webinar series for other startup founders , Brex on Thursday laid out guidelines for startups hoping to apply for the Small Business Administration's new Paycheck Protection Program. The goal of the $250 billion loan program is to help small businesses keep payroll unchanged as the business community reels from the fallout of the coronavirus-led economic uncertainty.

As Erica Dorfman, VP of Cash at Brex, explained to the hundreds of founders tuning in to the segment, the loan is intended to cover payroll costs when startups would otherwise have to cut or furlough employees to make ends meet.

"It's a little vague in the rules, and you have to think about answering this question — am I doing this in good faith?" Dorfman said. "If that's the case, you likely do need this to keep payroll up. You have to ask, does this make sense and is it something you need based on your budgeting needs for the next year."

Startups have been particularly on edge about the PPP program, and some experts have maligned the venture-backed founders for taking funds that they believe are intended for other hard-hit industries like bars and restaurants. But Brex, which has partnered with an approved PPP lender in online bank Radius, told founders on Thursday that they are still responsible for employees' livelihoods the same way a restaurant owner is to their waitstaff.

But Dorfman cautioned against founders inflating costs or attempting to get more funding just to keep the lights on. "You cannot hire more people with the money from the loan, this is only for keeping your current headcount," she said. "When you sign up for these funds, you are attesting to the fact that you need this funding and you are attesting that to the government. There are severe consequences if you defraud the government."

Dorfman explained that 75% of the funds, once allocated, must be used for payroll costs if founders want to be eligible for loan forgiveness down the road. The remainder can be used for operational needs, like lease payments or service costs, that keep the business operating as normal.

But not all startups can qualify, and it's still difficult to apply. Brex is only accepting applications for PPP loans from current Brex customers that also have a relationship with its partner bank Radius. Startups also have to list US Employer Identification Numbers for investors that own at least 20% of the company, which could prove an additional challenge for founders that have taken on significant foreign investors.

Given all the moving pieces, Dorfman emphasized that whether or not startups should apply for PPP loans needs to be a case-by-case decision. She said that all teams should meet with board members and any additional stakeholders to evaluate all the options, and get started on gathering the mountains of information needed to complete the PPP application if that's what's decided.

Here are the guidelines Brex shared with other startup founders Thursday in an effort to bring clarity to the opaque and confusing PPP conversation roiling Silicon Valley startups.

Brex

Read next

Business Insider tells the innovative stories you want to know

Megan Hernbroth

Megan Hernbroth is a California-based senior reporter for Business Insider, where she covers healthcare startups and venture capital. She reports on digital health startups of all stages and sizes, such on-demand in-home healthcare solutions, telemedicine startups, and direct-to-consumer solutions. She also covers financial deals in healthcare, from large mergers and acquisitions through IPOs and SPACs. You can reach Megan at mhernbroth@businessinsider.com, via encrypted messaging app Signal (+1 331-625-2555), or Twitter DM ( @Megan_Hernbroth ) Select stories: $1.6 billion Hims is going public after just 3 years. We dug through its financials and spoke with its CEO to find 4 key metrics that could determine the company's success. Investors are betting $1.4 billion that gig workers can transform an essential but invisible part of healthcare. Here's an inside look at one startup leading the charge. A former venture capitalist wants to rethink the 'uniquely bad' healthcare experience for LGBTQIA+ patients by building an entirely new health system RISING STARS: Meet the 16 up-and-coming investors changing the face of healthcare in the US Prior to joining Business Insider's healthcare team, Megan reported on startups and venture capital for the technology team. She covered a wide range of topics from Silicon Valley, including the demise of once-hot companies like Zume and the rise of newly hot companies like Brex . Megan worked in communications prior to joining Business Insider. She holds a Bachelor of Science degree in Journalism from Northwestern's Medill School of Journalism and Integrated Communications. (Disclosure: Megan's partner is an employee at Facebook.)

HOME Subscribe Read in app

File and source

File: see-brex-guidelines-startups-applying-for-federal-assistance-ppp-loans-2020-4.html
Size: 457,761 bytes
SHA-256: affc59e92b49b5c372aa3b4e52ac4a3d96c51e7def544dc449ea2df6aa95a7ca
Our copy: see-brex-guidelines-startups-applying-for-federal-assistance-ppp-loans-2020-4.html
Original: www.businessinsider.com