On October 8, Morgan Nighan provided an update on recent developments involving PPP loan forgiveness. We then heard an insightful conversation with Paul Breitenbach, CEO and founder of r4 Technologies and Marco Carvalho, the leader of the enterprise blockchain technology consulting practice at RSM.
Enjoy the recording and these key take-away points regarding:
PPP Loan Forgiveness
- Banks are now accepting PPP forgiveness applications. Some banks have applications and calculators for borrowers to model different scenarios. Note that borrowers can apply for forgiveness as soon as the funds are spent. Borrowers would be well served to apply thereafter as the total time to get final approval from the SBA can take up to 120 days from the original submission.
- There has been a lot of confusion around how to close deals where the target has a PPP loan. Last week the SBA provided new guidance. You do not need to get SBA approval for change in control, that is, to purchase or sell a company. First you have to apply for forgiveness and agree to escrow the amount of the loan with your lender. You do not have to wait for SBA approval to close your purchase or sale. Setting aside the amount of the loan allows buyers to take comfort knowing they will not be held responsible for a rejection by the SBA. The seller will receive the escrow after the forgiveness application is accepted by the SBA.
- The only situation where you still need to wait for SBA approval is in a merger or asset sale over 50% and the seller is still deploying the PPP money. Then you’d need SBA approval.
Artificial Intelligence
- Artificial intelligence (AI) is a mystery to many business managers. In short, it leverages data to solve processes but it is different from enterprise software applications in that it helps you look at tomorrow and see what is going to happen next. It doesn’t produce reports. It creates business advantages at scale tomorrow.
- As horrible as it has been, disruptions from the pandemic will cause winners to emerge. Their ability to scale is key. Winners will leapfrog processes or systems using innovative technology, deploy it, and become more agile.
- The next big trends on the technology horizon involve data. The key is not data lakes, or repositories of data, but how managers will drive enterprise outcomes. Agile companies in the CPG and retail spaces are using AI to address personalization of the buyer—identifying micro-cluster and patterns—to make buyers’ experiences unique, relevant, and actionable. Matching the right product to the right person at the right price and time.
- In making the decision for one AI platform versus another, each company should evaluate its core competencies, goals, and budget. Do you have the capabilities internally to develop your own solutions? If not, then can you buy it. Also, evaluate where your IP is most secure and assess operational risk and data privacy issues associated with your AI partners. Look beyond their software.
Blockchain
- Another emerging technology that can help many companies address operational, logistic, cash flow, and regulatory issues is blockchain, or distributed ledger technology. Blockchain has become popular in finance but silently it is entering the food industry. While quality is a differentiator and sustainability is an enduring trend, food safety remains a constant for food companies, farmers, consumers, and regulators. Note the recent FDA guidance on traceability requirements. Blockchain easily satisfies the same, providing everyone from the farm to table the proof of provenance and immutability that legacy supply chains and manual processes cannot. Complying with food tracing today takes days or weeks but on blockchain it can take seconds.
- While blockchain is still in its infancy stage, benefits in traceability and invoice settlement are eliminating overhead and time already. To proceed, companies need to digitize their processes. For broader benefit, both allies and competitors need a common language to exchange data. The market needs to define the benefit to assure adoption and cooperation among competitors. That is to say: Why share data? Participants—farmers, processors, logistics companies, wholesalers, and retailers—need to be incentivized by saving money, increasing profits, and evidencing authenticity.
- Companies that digitize their assets allow manufacturers to show consumers where and how products were produced and to identify false products in the market. For instance, a large French grocer traces the provenance of its hens on a blockchain to show consumers where their birds were raised and fed and to apply quality labels. Doing this grew their sales by 20% versus other labels.