Momentum Podcast: 688
Small Business Update: The Latest Stimulus Details and Changes to PPP Loans
by Alex Charfen
Small Business Update: The Latest Stimulus Details and Changes to PPP Loans I don’t know about you but accounting has been one of the most frustrating things for me in 20 years of running businesses.
That's why it has been so incredible to work with Pam.
She has given me a sense of calm.
Pam IS an entrepreneur.
She understands me; she anticipates what I'm going to need next, and I don't know that I've ever been as confident in my books as I am right now. The dynamic, informative, and deeply experienced opposite of the stereotypical green-eyeshade accountant.Pam is the author of “Your First CFO: The Accounting Cure for Small Business Owners”; with a reputation as the Entrepreneur's Go-to CFO. Today she is joining us to talk about all of the updates taking place with the current PPE loans.
The Paycheck Protection Program (PPP) will re-open the week of January 11 for new borrowers and certain existing PPP borrowers.
To promote access to capital, initially, only community financial institutions will be able to make First Draw PPP Loans on Monday, January 11, and Second Draw PPP Loans on Wednesday, January 13.
The PPP will open to all participating lenders shortly thereafter.
You will want to tune if you are wanting to learn more about the most recent stimulus package and how it can impact small business owners.
– The new money that is available to small businesses through the government
– What you need to do to qualify for it
– What is happening with regards to the forgiveness on the original loans
Ask your questions live and if you are watching this on a replay DO NOT hesitate in asking your questions below as Pam will be around this week to ensure your questions are answered.
We dive deeper into the conversation as a group here: charfen.com/community
Learn more about Pam here: https://www.facebook.com/PamSPrior
Full Audio Transcript
This is the Momentum podcast. I'm Alex Charfen, and this is the momentum podcast made for empire builders, game changers, trailblazers, shot takers, record breakers, world makers and creators of all kinds, those among us who can't turn it off and don't know why anyone would want to.
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I'm excited for everybody to hear this because there is so much going on right now, I want to acknowledge I'm recording we're recording this on January 14th and things are certainly in a very unique place in the country, in the world from any point of view. But I think there's a lot of distraction around all of that. And I want everyone to get an update on new funds that are available for entrepreneurs and entrepreneurial small businesses. And so with that, I'd like to bring in my good friend, Pam Grier. Pam, thank you so much for coming and doing this.
You bet. It's nothing like trying to keep up with the the news in real time on everything. And the loans are nothing, nothing different than everything else right now.
Yeah, yeah. This has been this has been an unprecedented time. You know, I want to stick to the topic that we're here to talk about, which is the the stimulus money as it directly relates to entrepreneurs. And what I want to make sure that we talk about as first for those people who missed out on and this is what is called the P p p program. What does that stand for? Again, payroll protection program. Payroll protection program. So what this is, is the government wanted to help subsidize payrolls in for any business that's in business right now. As long as you apply and you have the right numbers, you can get your payroll subsidized. And it's in really the right numbers is pretty much almost every business in the country. As long as your business is good standing, then it's there. And so, Pam, what is give us an idea of the new money that's available. So there is a new program, right? This is like stimulus round two. How much money is available for small businesses?
Two hundred and eighty four point five billion. This time it was five, 40 billion or five hundred and twenty billion won out the first time. And the issue was the five hundred and twenty billion won out very heavily to larger businesses. This particular round of two hundred and eighty four point five sounds like it's less money.
But if all of this goes to small businesses, then will be more small businesses covered than there were by the first five hundred and forty billion.
Fingers crossed that that happens and it doesn't get silly like it did last time because it now it's come out. Some of the businesses have gotten money. It's it's confusing and challenging. I don't want to get stuck on that either. So let's talk about this new money.
Yeah. So exactly like you said, it got really bad the last time. So what they've done is they've actually set up a time line here. So Monday and Tuesday of this week was only available to first time borrowers and only through what they call community financial institutions, or CFI, very small local banks that very often focus on underserved and small businesses. As of Wednesday's Wednesday this week, yesterday, those same banks could lend to second time borrowers as well as of this Friday as in tomorrow. The institutions that are a little bit bigger than the ceasefire's, but under a billion in assets are going to be open for lending and taking applications. So that's kind of the big thing is they kind of the last time all the big businesses came in and took all the money and the big banks.
So they're keeping the big banks stiff arm until after what they haven't even determined the date they're going to let the big, big banks back in. So if you and one other thing, you don't have to have a relationship with the bank for them to give you a loan.
So you don't have to have a checking account with a credit card with them, you can go into one of these institutions that's a billion in assets or lower. And I'll tell you how you might be a good way to identify those here in a minute and go apply for your money. And now, as of yesterday, first time and second time, borrowers can both do that. A few things around this second time borrowers. There are a couple of little quirks, some of them good. Some of them actually. I think all of them good.
When can we pause for a second? I just want to give everybody context on why this is so crucially important right now. What happened with the first money that was put out to save small businesses is now that the reporting is coming out, big businesses got them. A lot of very large businesses got a lot of money. And so that money was was taken in huge chunks. And with the intention was that it would be a lot a lot more smaller loans. And instead the government let the money. And again, this was a problem that was put together last minute. Everybody was trying to get money out and save people in the economy, but they've left and they let money go to what a lot of argued is the wrong businesses. So what's so crucial about this new amount of money is that by first going through first time borrowers, it's people who missed out the first time. What's also important is that by going to these smaller community banks, they're not they don't have access to the larger organizations they raise. That's not their business, that's not what they do. And so now there's a lot more money, like Pam said, fingers crossed. You know, whenever it comes to the government, I never want things working like they explained that they should. But fingers crossed, a lot more small businesses are going to get a lot more of this money, which is super important.
Yeah, and that's why I say it may not be perfect this time around, but they certainly learned their lesson the first time. And they're keeping the money right now out of the hands of the chase and the Morgan Stanley's and all of those larger companies who are just giving it away to the big companies. So acting quickly is really key Alex. And that's the thing I want to drive home, because once this does get in the hands of the big banks, all bets are off. It'll probably get consumed pretty quickly. So as of Friday, if you're if you've got a relationship with kind of a mid tier bank or if you need to develop a new relationship, one of the things Alex that I passed on to your team and I think they're going to make the link available, is the SBA actually put a lender match thing out? That's from the SBA, because here's what I'll tell you. A lot of players who may or may not be the most legit people in the world, although if they're doing a PPP program, they're pretty constrained. But you're seeing emails come in left and right from these people who are like, we've got the application, we've got the application. They're third party people that do some of these and they don't actually have access to money yet. They're just getting your application. And a lot of count with two of my clients. Now, what has happened, they went off and did this on their own before I could stop them. The lender came back and said that we can't give you a loan right now, but we'll lend you twenty thousand bucks. And that's not a forgivable loan that's conflated with the stuff. So stay away from ads from people who answer those. But this list that I'm giving you guys is actually from the SBA and it's a lender match. You put in a couple of things like your company name, your zip code, some contact information, and they identify eligible vendors whose application processes are open. So that's a huge I really can't say strongly enough that that's a good thing to do.
Is that just a Earlham? Yeah, it is. And it's I sent that. I don't have it handy right now, but I know Haley's got it. If I could drop it in the chat, that's great. OK, cool. So a couple other things. If you are in what's called a naks code of seventy two, which is just to make that in English, it's restaurants, hotels, caterers, bars, that kind of thing, you can get up to three to five times one month's payroll. Everybody else is a loan amount is constrained to two point five times one month's payroll. The other little exception they're making for those industries is that anybody can apply with five hundred employees or less, whereas all of us, other entrepreneurs who aren't in those industries, it's three hundred employees or less in order to qualify and you only get two point five times one month's payroll. So if you're a second time borrower and there's no problem with being a second time borrower, absolutely. Try it to two or three things. One is you have to be able to show that you're twenty twenty revenue in some period was at least twenty five percent less than twenty nineteen revenue in the same period. How long of a period does that have to be a little hazy. But the general assumptions are the general interpretation is that any quarter over a similar quarter in the next year or the whole year over the year. Now some people are saying, well, why not six months, if that's a better answer? So I just suggest you do it every which way. The application is going to ask for those numbers. And the application is a standard SBA application that every bank's going to use. They'll probably stick their logo on it, but it's going to be the standard application. And if you don't qualify, you don't qualify, but find the best comparison. So pick a Q1 in twenty nineteen. See how much revenue it was. Q1 in twenty twenty. See how much revenue it was. If, if it's twenty five percent less you've got your period, go with it. If that doesn't work, try Q2 versus Q2. If that doesn't work, try the first half versus the first half. If that makes sense, just keep trying.
All the comments have to be parallel period though. Yes. Bingo. Got it. So low periods from one year to the next and ninety days to six months. Bingo. OK, nine months to a year. Ninety days to a year. So you can try it all the we can show that twenty five percent total nineteen versus total twenty.
Yeah. It's different than you can count that.
So the other thing is you have to have fully used your first PPP loan. I don't think that's going to be an issue for anybody, but you have to have. He used it. What does that mean?
Ma'am, I saw, you know, when I hear something like that, so I look at it is like, what exactly does that mean? I mean, you had to have put it into your account and then it had to have come out of the account. How do they how do you use that money?
So here's the easiest interpretation of that. If you've completed a forgiveness application and it's 100 percent forgiven, are you you've applied for hundred percent forgiveness. You've used the money. And in short, if between the time you got the money and twenty four weeks later.
You used at least that much money in payroll, rent, utilities.
Then use the money to argue that in almost every case, unless you've shut down, that's going to be you're going to be able to prove that out. So that's the other key there. Let me think the oh, if you're self-employed, you're still qualify for PPY relief. And what they use is that net income on your schedule, see? Plus, any employee wages that you might you may be getting, so and farmers and ranchers, I don't know if you have any of those, but they're also qualified and it's via schedule F, so anybody who is in that shape knows exactly what we're talking about. So the key here is fast. The other really good thing Alex remember how we had to worry about is it rent, is utilities, is this year. It's this time you could use it for anything operational. So go buy yourself a Ferrari. But if you need to pay your suppliers, if you need to pay rent, if you have property damages, if you're one of these storefronts that's been damaged, supplies, that kind of stuff makes so much more sense that way.
It's so much easier. It was so convoluted before. Yeah.
And this makes it a little bit easier to figure out. And then the other thing that's a little quirky is if you're going to get a second loan, you have to know what the Sabah's number was on your first loan.
So you're going to have to haul out that paperwork that's tripped up a couple of people.
The other big thing, and then I'll just recap the highlights is that it does appear that loans both from the first round in this round, if they're under one hundred and fifty thousand dollars, will be automatically forgiven as long as the owner sends in a signed affidavit that says, I use this in accordance with a hundred percent forgiveness. So that looks like it's sticking through this legislation.
Let me just make sure there are no major new thing that is literally really like that's that's how this has been throughout this entire thing. It's like daily updates. If there isn't anything brand new, let's let's go to the forgiveness process of the first ones. So if somebody got and without getting into too much of the detail, because we can get buried in the detail, but the process is actually about how to do it. Not all the details. It's like this is where you need to go to apply. Right. So if somebody got the money before, what is their step now to make sure that they get as much of that or all of it forgiven?
Yeah. OK, so go back to the institution that lent you the money. So if you remember, with PTP loans, it's not directly from the SBA, it's with a bank. You go back to that bank. Every bank almost has the forgiveness form now out on their website somewhere. So just go to your bank's website and look up loan forgiveness form if you log into your account at your bank. Most banks have a thing at the top that says here's your forgiveness application. So you click on that and fill it out. Now, like you said, the details are ridiculous.
It's crazy to have to do like my bobcat's Haley and I have had two calls. Arcady and I have had two calls on yours.
And it's just it's just insane what you have to do. But ultimately, you just fill out every number. They ask you to fill out and attach and they're going to it's a three or four page thing. Follow the instructions, that's all. Just follow the instructions and it's going to ask for some attachments, most of them from your payroll system. And if you've said basically what you're saying is, here's what I spent the money on. If you spend it entirely on payroll, you just have to attach your payroll reports. If you've spent it on payroll, rent, utilities, they're going to have you attach something that proves you paid those bills and then they're going to calculate it, that the application you'll actually know when you finish filling it out, it'll tell you your loan is X percent forgiven and then you submit that to the bank. Now, here's the real honest truth. Every bank I've talked to, without exception has put out these forgiveness applications and is telling you to fill them out and get them in. And I recommend that you do, because you don't want to trip over any live wires here, but you're not going to hear back any time soon because they're submitting these to the SBA and the SBA is drowning. They're not getting any of them back and said, you're forgiven, you're forgiven, you're forgiven. So don't hold your breath for that. And the other thing, Pam, prior prediction is that one hundred and fifty limit's going to go up. So I am pretty sure that by the time we're done, we'll be at two to fifty, maybe even higher, where they're just going to say, forget that application you filled out. Send me this affidavit instead. Yeah, because they can't hant they can't they can't handle the truth.
Well, this is so much like the mortgage crisis. All of a sudden, millions of mortgages in the United States had to do a short sale. Well, there was no one at the banks who knew how to do a short sale. There wasn't a short sale. Well, same thing at the SBA. There has never been a payroll protection program. They are made or or leader until now. The entire infrastructure of the business side of this had to be built since they started giving away money. And so that's why.
And they did it through tens of thousands of banks. It's not even like they were administering it. All they did was. Make the regulations and guidelines and then all these banks administered and layered on all their shit, and it was just crazy after that. Oh, one other huge thing, Alex, because you and I had a conversation about this.
They have slapped the IRS on the hand and everything about the forgiveness now is fully tax deductible. So that's so important to be taxed on the forgiveness.
OK, so so this is important to share. And this is probably the last detail we're going to have time for on this podcast. But this was something that I was really confused by and pretty offended by based on what the loan was supposed to do. What had happened is if you had applied for a loan in the first round and you'd gotten money, the IRS was treating that as a taxable income of it, as though you had gross revenue come into your business, which really doesn't make sense. If the intent of the loan was to help you offset expenses and you were allowed to apply for the amount of the expenses. Now you're getting the amount less taxes. And so they are now making it one hundred percent forgiveable. You don't have to pay taxes on it, which is huge. So anybody at a BP loan, it's all yours. Yeah, it's important.
One little twist on that, just so people know, is it actually what they did was they found a backdoor Alex that the SBA clearly said or the legislation clearly said, don't tax the forgiveness. So what they did was took away tax deductibility for the expenses. And it's the same end. And that's what the legislation came back and said, no.
Awesome man setting it up. Yeah, this was awesome. 20 minutes, which is exactly what we wanted to do. And if you're if you're watching this, go ahead and leave. Any questions that you have about the PP loads here. Pams going to come back and check this for us a couple times and my team will be taking a look as well. And then if you're listening to us on our podcast, go to the Charfen community on Facebook and join. And then once you get in, you will be able to come in and ask questions of him as well. Plus, you should be in the community as where I record all my podcasts live or most of the podcast live. And look forward to seeing you in there. And thanks for being here. I appreciate you like crazy. And Pam, if anybody wants to learn more about your fractional CFO service, where can they go?
Pam Pryor, dot com Vampira Dotcom.
Awesome. And so for anybody who's listening. Like I said at the beginning of this, Pam is our outsourced or fractional CFO. She's we actually had a pretty good accounting and finance. When you found Pam, it was something I worked on for over a decade in my business. But she came in and even though we were in a good place, made it easier, made it more plain language, made it even simpler, more fun. I mean, I know that's all it is actually more fun. And I just feel so much more clarity now. So if you are running a business and you want financial advice, not not bookkeeping or accounting, that's different. That's people who put the numbers the right place. Pam comes in and looks at all the work they did and makes it easier for you to understand what's going on. And there's very few people out there like her. So go to go to her website, check her out. She's amazing. And thanks for being here, everybody. We will see you the next time. I appreciate you.