SBA’s PPP failure and its lessons for great leaders

My COVID-19-related recommendations last month for CEOs and fund managers — which a few then referred to as “heavy-handed” — now appear lightweight.

Beyond the virus’s medical realities, with profits tumbling from banks like JPMorgan Chase and famed Bridgewater Founder Ray Dalio warning of a Great Depression, many now feel its economic effects with layoffs, furloughs, and reduction in hours as the unemployment rate soars.

In order to combat these economic trials, Congress signed the largest stimulus relief package in history of $2 trillion. Appropriately named the CARES Act, the efforts include a $349 billion package called the Paycheck Protection Program (PPP) providing small businesses, self-employed workers, and individual contractors forgivable loans to maintain their payroll/earnings for an eight-week period.

Yet, the SBA program fails to get the little details right — like an idiot-proof application form and universal accessibility — to ensure those struggling get relief quickly. It gives vague guidance for borrowers and lenders, and uses oft-crashed tech to close on loans.

During times of crisis, great leaders create structure and simplicity in spite of chaos.

Here are five things that founders and executives can learn from the PPP’s failure:

  1. Create order. Taming chaos requires two key plans: one for action and one for communication. Focus on clarity and break down large problems into manageable items. Remain calm, transparent, and resolute as team members takes their cues from leaders.
  2. Design for simplicity. Whether designing an app, campaign, or meeting, now is the time to keep it simple and reduce noise. Guide the audience and clearly outline achievable next steps. Humanize messaging and remain consistent.
  3. Focus on results rather than rhetoric. Create an objective with quantifiable results. It’s impossible to track progress without a baseline, and this holds everyone accountable.
  4. Have a plan. Identify the stakeholders involved, the actions and results required, and potential blockers when moving from Point A to Point B. Communicate this plan, document it with simplicity in mind, and remind the team often.
  5. Trust your experts. Never be the smartest person in the room. Listen to advisors with expertise and experience. Invite them to challenge perspectives and influence the plan.

For the sake of all leaders and their small businesses fighting for financial life, I hope Congress, the White House administration, and the SBA acknowledge the program’s shortcomings by increasing its allocated funds, approving additional lenders for easy accessibility, and extending its time coverage.

In the meantime, stay healthy, cover your face, and wash your hands.

P.S. Below is my own tumultuous experience with PPP including new updates.


The economic effect of the virus has reduced my income, which includes cash compensation from advisory relationships.

Much of my earnings flows through a single-member LLC for legal protections. My entity enjoys a “disregarded entity” tax status from the IRS, and thus profits (or losses, in theory) are claimed on a Schedule C of my Form 1040 personal tax return.

While the IRS makes this rather straightforward for tax purposes, the PPP application form unnecessarily complicates this otherwise simple checkbox selection.

My accountant counseled me to select LLC, mirroring the advice of a CPA friend with a law degree from Georgetown University and MPA from McCombs School of Business at The University of Texas (#1 accounting school in the nation for 14 years in a row).

While I recommend following the advice of direct counsel, many accountants on forums and blogs recommend selecting “sole proprietor” for those with a disregarded-entity single-member LLC as the application requires an LLC to have a payroll and includes a confusing employee definition that actually implies the “self-employed” selection.

Adding to the confusion, after a few days of reflection, my CPA friend changed his suggestion to “sole proprietor” as the SBA processes for LLCs were focused only towards traditional employee payroll. Fun, right?

Given these issues, it became unclear which checkbox to select, and thus date to apply:

  • April 3rd: small businesses and sole proprietorships
  • April 10th: independent contractors and self-employed individuals

In order to disperse the $349 billion funds more quickly, the U.S. Treasury and SBA rightfully engaged major national banks in addition to already approved SBA lenders.

My LLC banks with Capital One, the 11th largest bank in the country with nearly $500 billion assets under management. While Chase, Bank of America, and other major players started their PPP loan processing within a few days, Capital One has yet to open its application process after more than 11 days.

Due to Capital One’s delay and the limited PPP funds available, I’ve been hurrying to find an alternative lender that would accept a new business customer.

I located a bank in Minnesota named Stearns Bank accepting PPP loans from new business customers, so I sent them my application and materials on Monday, April 6th. Although the bank confirmed receipt, their email five days later stated that all applications would no longer be considered.

After sensing a foreboding with Stearns, I tried Sunrise Banks on Wednesday, April 8th. Despite their confirmation of receipt, I had yet to hear from them for more than a week. Thanks to Senator Rubio and Mark Cuban, a few days later I tried to apply via PayPal after several fintechs became approved SBA lenders.

Unfortunately, my efforts were not in time as the allocated $349 billion funds were depleted within a week. At the insistence of business and economic policy leaders, Congress replenished the SBA program funds after two weeks of prolonged negotiations and policy administration.

With a renewed fight for funds by small businesses, I readied by using four competitive lenders to each attempt submitting my loan application to the SBA. Over the next two weeks, I found lender communications unacceptably infrequent and uninformative (except for PayPal, which was fantastic).

But my competitive strategy worked: Capital One, which finally got it together, emailed that my PPP had been processed by the SBA nearly a month since first trying.

Overall, despite the tumultuous and disheartening experience, I truly consider myself very fortunate: I just tried to offset lost compensation for one person, not for a payroll of hundreds of employees.

Hopefully everyone else had an easier time than me.