Many Atlanta law firms applied for the first round of Paycheck Protection Program loans, but only one of 10 firms contacted by the Daily Report had actually received the cash. Others said they were still waiting on loan funds or didn't get funded.

And while Congress just approved a second round of funding to aid small businesses, lawyers are already tempering their expectations, frustrated by the opaque process and the length of time it is taking to receive the money.

Kristen Nugent, a lawyer at MendenFreiman who has been advising the business law boutique's clients on the PPP loans, predicts the new round of funding will be "somewhat less chaotic" but expects another rush of applicants from those "disillusioned and disappointed" at their inability to gain payroll assistance funds in the first round.

"I expect a lot more calls from people feeling they got short-changed—literally no-changed—and want to give it another shot. Notwithstanding their frustrations, they need the money," Nugent said.

The demand is high.

"Every smaller firm I talked to applied. I suspect 90% or more smaller to midsize law firms have," said Richard Robbins of The Robbins Firm, a 20-lawyer litigation and regulatory boutique that also applied.

But of 10 Atlanta law firm leaders contacted by the Daily Report in the past week, only one, Schreeder Wheeler & Flint managing partner John Christy, said his firm had actually received the PPP loan funds from its bank.

Every other firm leader who responded had also applied but said they either missed the cutoff or were still waiting for funds. Firms ranged from boutiques like Knight Palmer, Sutton Law Group and The Robbins Firm to Hall Booth Smith, which has almost 500 lawyers and staff.

Although Knight Palmer, a five-lawyer litigation boutique, had its PPP application accepted, co-founder Bryan Knight said the Small Business Administration's loan pool ran dry before it was funded. Lawyers at most other small firms Knight spoke with also did not get the funds, he said. "We are hopeful that we are first in line for the second round of PPP funds if Congress decides to provide more funding."

Hall Booth Smith co-founder John Hall said his 250-lawyer firm applied but had not yet received the loan funds. "We have made a commitment to keep our staff and folks employed with 100% of salary for as long as we can," Hall said. "If we actually get the PPP it will help in that effort, certainly for the next 2½ months."

Increasing Need

Congress earmarked $349 billion for the first round of PPP loans on April 3, which was quickly exhausted by April 16 after the SBA approved 1.7 million loans. The majority of those, 1.23 million loans, were for $150,000 or less. The additional $310 billion round that Congress just approved is also expected to quickly run out.

Many law firms, like other businesses, will likely need the funding. Christy of Schreeder Wheeler warned that cash flow will become an issue for many firms in June, when collections on accounts receivable slow or stop. Since there is generally a 60-day lag from when a firm bills clients to getting paid, firms have still been collecting cash in March and April, he explained.

Schreeder Wheeler applied through a local bank as soon as the program opened on April 3 and received funds about 10 days later, Christy said, adding, "Community banks seem to be doing a better job in processing the program."

"We've kept everybody on the payroll and not cut any salaries," he added. The 20-lawyer real estate and business litigation boutique has 31 total employees.

State Bar of Georgia president Darrell Sutton said his four-lawyer insurance defense firm, Sutton Law Group, also applied through a community bank. The loan was approved April 13, he said on Thursday. "We are still waiting for it to actually be funded, although I am told that will happen today."

Robbins said all of his small business clients applied, but he'd heard of only one that had actually received funds. "There are thousands of businesses that needed the money yesterday—or two weeks ago," he said, adding that he's heard from many local companies and law firms that billings were strong for the first quarter, but collections from clients with cash-flow issues is becoming a problem.

'Imprudent Not To'

It's unclear how many Georgia law firms applied for the initial PPP round, since the SBA has not yet released loan data by industry for each state, according to SBA Southeastern communications director Lola Kress. For Georgia, the SBA approved over 48,000 loans totaling $9.5 billion.

"It's a no-brainer. It would be imprudent not to [apply]," Robbins said, since the loans are forgivable. "The funding certainly helps to get through this crisis and avoid the layoffs and salary reductions that the larger firms have been doing."

The PPP program is open to any business with 500 or fewer employees. Billed as first come, first served, businesses apply through their bank, which disburses the funds after SBA approval. The PPP loan, which is for up to 2.5 times a company's average monthly 2019 payroll, will be forgiven as long as the company uses at least 75% for payroll, with the rest going to rent, mortgage interest and utilities, within eight weeks from receiving the funds.

Robbins' firm applied April 4, and his banker told him over a week later that the SBA had approved the loan, but "we have yet to receive any loan documents," he said on April 21. "I've quit waiting by the mailbox for a check."

Even so, Robbins said, his firm has not made any pay cuts, furloughs or layoffs. "Our objective remains to get through this like we did the 2008 recession, as a firm intact with no layoffs or salary cuts."

Confusing and Opaque

MendenFreiman's managing partner, Larry Freiman, declined to say if the business law boutique had applied, but advising the firm's small and medium-sized business clients on PPP loans became a full-time job for Nugent, an associate, until the funding ran out April 16.

At least 50 clients called Nugent with questions, she said, and about half ended up applying. They were either rejected or were still waiting on funds, she said on April 22. "A lot of people I talked to felt really let down."

Nugent said one of many points of confusion was whether a PPP loan approved by the SBA would still be funded if the company's bank hadn't disbursed the money when the pool ran dry. If the SBA approved the loan, she said, "you get the money. Eventually."

"It was supposed to happen in three days—then two weeks," she added. "Some of our clients now are saying they'll believe it when they see it."

For law firms, another confusing issue was whether the SBA considered partner compensation part of the payroll, since they are owners, not employees. The SBA on April 14 published guidance saying it is. However, compensation from the PPP loan is capped at $100,000 per employee on an annualized basis.

"It's very opaque trying to figure any of this out," Nugent said. "It was my full-time job, and it was hard for me—so how is a small mom-and-pop shop supposed to?"

Now clients concerned about maximizing loan forgiveness are asking Nugent what documentation is acceptable to show they spent the money on payroll and other eligible expenses. "The guidelines are not clear on that," she said.

Companies using the PPP funds had to be at full payroll by June 30, and any employee pay cuts or layoffs would affect loan forgiveness, according to the initial SBA guidelines.