Making Sense Of The Stimulus For Businesses

Hey, everybody. Welcome back to the show. This episode is about the stimulus package and the different options that are available to business owners because of the recent bill that was passed. And this format for this show is a little bit different. I have brought two people onto the show and we're gonna. This is basically two different opinions back to back. And first, we start out with one of our. One of the members of the 1% who is an advisor to small businesses, who took the time to read the bill herself. So she went through it line by line, went through all the boring rigmarole, and is providing her interpretation and how she is guiding her clients. Now, this is two entrepreneurs going through it and picking out our interpretation from a way that will help you understand it from a layman's perspective. You're also just gonna hear my reaction to it in real time because. Because I'm a little confused by this. I'm a little excited by this. I'm a little perplexed by all this. And so you're gonna hear me make sense of this. And so if you have been a little bit confused about all that's in there, I think you'll start to have a couple light bulbs come on. And then I go to one of my advisors and one of my oldest friends. He's a backroom member. He's also an advisor to my fund with Sam Prentice. So from a financial perspective, this is one of my personal, personal advisors and the person that I go to to vet companies when I'm going to invest in them. His name is Vinnie Fisher. He runs Fully Accountable, which is basically an outsourced cfo. If you have any physical products, brands, or if you have really any online business, this is a really good resource for very, very high quality bookkeeping and some other services, specifically like interpretation of your numbers. It's like an outsourced secret cfo. Fantastic service. He then comes in with his legal background, his accounting team background, and gives his own analysis and really helps me solidify the different pieces and the action steps that you need to take. So in this episode, the first part, you're going to hear me kind of unpack it with Krista Hilton, and we're going to look at the different options and kind of wade through the mud together. And then you're going to hear Vinnie come in and clean up the action steps and the misunderstandings that happened while we were going through cleaning it up. And by the end, you're going to come out with a very clear interpretation of how this affects you and what you need to do moving forward. This is for every business owner, and really, there is something in the stimulus for every business owner. And this is going to help you make sense of this. I would love to hear your feedback on the format of this show. And you can message me on Instagram or I am ryanapitalism.com all right, let's dive in. Enjoy. Hey, Krista Hilton, welcome to the show. Thanks for hanging out with me.

I'm happy to be here.

Well, you are my resident nerd on the topic of this bill, and thank God for people like you. You sent me a picture, I think it was on Instagram, of your whiteboard and just the copious amount of notes that you've done. Did you tell me that you actually read the whole bill?

I did. I read most of it. I skipped over some parts that were totally irrelevant that had to do with, like, the judicial system. But, yes, I read the bulk of it.

Okay, so, Krista, you share my beliefs on the ineptness of government. What compels you to read an actual bill?

Well, because a lot of my personal clients and people that I help are really relying on this money. And so I really wanted to understand how they were going to organize it because I do believe the government's kind of inept. So what is the system going to look like and what exactly are they offering? I also believe that the media has no idea what they're talking about and wants to push agendas on both sides. So that was another motivation. Like, I'm just going go straight to the bill because I don't believe what anybody says. So that was a huge part of it also.

Okay, cool. So just for context, would you share a little bit about who your typical clients that you're giving advice usually is?

Yes. My clients are usually sole proprietors or very, very small business owners. They are usually anywhere from zero to 10 employees.

Okay, and are these mostly local businesses?

I have clients all over the place. Not necessarily local. The main thing is that usually they have some sort of a storefront or they offer some sort of a service, like a physical service. Like they do facials or, you know, massage things. Okay.

So a lot of them are in. Have an in person element to them. My question about that is from what I do know about the bill, which is very little that it seems to favor in person or physical storefront businesses. Is there anything different about local or in person businesses versus online and Internet businesses?

The bill definitely does favor that, but it also, it just, it really favors anyone in business, to be quite honest. Because even if you are, they've made a point to include independent contractors. And like anyone in the gig economy because it's so big right now. So even if you are, you know, you work from home and you are a graphic designer, it includes you too.

Okay, got it. So from a high level.

What would you say? What is in the bill? Krista Hilton, Just tell me what's in the damn bill.

Okay, so the whole concept is the government is putting a very big emphasis on companies not firing people because they don't want people to be reliant on unemployment, and a lot of people have already been laid off. So this bill is designed so that the company or the small business or whatever it is can go get this money and hire their employees back. And then any money that they spend on payroll is then a forgivable part of the loan. So instead of paying out, you know, millions and millions of dollars in unemployment, they'd rather give it to the company so that when the companies can reopen, they're fully staffed and everything can go back to normal.

Okay, got it. So it's. This is basically the bridge to get us from where we are to the other side of this with as little impact of the shutdown as possible. So that makes total sense.

People, too. So, like, restaurants did a whole thing where they. Especially in Portland, I know they laid off, like, everyone. And that, you know, in this bill, they can now go get the money, rehire their employees, and include the tips that they normally make.

Interesting.

Yeah.

Okay, got it. So walk me through. I know there's. There's like, two or three different parts of the bill that each have their own incentives for business owners. Could you walk us through them?

Right, so if you go to the SBA website, there's actually four different options.

Oh, God.

The first. Well, I won't go into all of them. The last two options, I'll just explain really quick, because it's quick. But if you have an existing SBA loan, they are actually helping you make payments on that. So that is something to look into. If you have an existing SBA loan, go and check that out, because you might not have to pay it for a while. And then the other one is debt relief. So if you are an existing SBA customer, there is debt relief available for you. So that's the last two. We don't need to go over those. But if you're an existing sba, if you hold a loan, look into those. The other two are the ones that are the most important for businesses. The first one is the Paycheck protection program. And then the next one is the emergency relief.

And from what I know, the payment protection program is the very short term basically grant that is like a forgivable short term loan, and then the emergency is an actual loan. Do I understand those correctly?

Yeah, but there are elements of the emergency that will be forgivable too. So in both programs, payroll is forgivable, and in both programs, rent is forgivable. That's the way it seems. Rent and utilities, both sides will be forgivable.

Are you telling me that if I take a loan from the government, like the actual loan part of this, and I use it on payroll and rent, the loan is forgivable.

That portion of it.

So with the paycheck protection, you'll have to prove that you only spent that money on your payroll and your utilities and your rent, and that all will be forgivable. With the other portion, you'll be able to get money for other things, but just that portion of it will be forgivable.

Okay, explain to me how you would prove that it was used on that in order to get it forgiven.

You know, that's the thing, is that it doesn't outline that super. Well, I'm sure that that is going to come as, you know, things start rolling out because it seems like every day a little bit of something changes. But I don't think it will be necessarily hard to submit receipts and say, hey, look, this is where all this money went.

Yeah, especially when this is government work here. So the first part, the paycheck protection.

Comes from your bank. So if you're dealing with a banker, then.

That kind of closes that gap too because you'll have to just submit it to the person that you're dealing with through the bank.

Okay. So since I work with, I have a representative at Chase is who I bank with. I know that I'm basically working with them on the payment protection plan that basically the two and a half month bridge. And so my understanding of that is it's, it's basically a grant, but they're calling it a loan. And it is two and a half times monthly payroll and some other fixed expenses that then gets forgiven if I can, if the banker says I used it for certain expenses. Do. Do I understand that correctly?

Yes.

Okay. So is it the banker's discretion?

I'm sure they'll have guidelines that they have to go by, so they'll be documents that you have to submit just like anything else.

Okay, wow. All right. So basically it really is a grant with a different Name on.

Really? Yeah. The paycheck protection program is. It is. That is exactly what it is.

Okay. And what does a small business owner need to be able to do to qualify for it?

So there is a sample application on the SBA website, and you basically just have to put in your name and your ein number or your Social Security number, if that's what you go off of, if you're a sole proprietor. And then you put in the amount that your normal payroll is and what you're going to use the money for. There's check boxes and then there's a bunch of questions that you answer. And it's honestly, like the simplest application I've ever seen.

Do you just make up the numbers that you spent on payroll and other expenses?

That's the interesting thing about this, is that I'm sure each bank will want to know maybe a little bit more. But as far as this whole thing goes, the government is the one backing the bill or backing the money for these programs. So the bank isn't doing any guarantees on it. The government's guaranteeing it. So the bank is like, well, I'm going to get my money anyways. So they're making it very, very, very easy for people to qualify for this. You'll need to know, like, you need to have added up, you know, your expenses and how much money you've made. Like, they'll want to know that. But as far as the approval process, as long as you have an ein number or you have your Social Security number, that's really the important part. The thing is, though, if you get caught lying, then it's a $250,000 fine at minimum. So you don't want to lie about it. But it is a very, we're going to take your word for it kind of program so they can give people money faster.

Got it. So it. Okay, I understand. So there's flexibility between you and your banker, but if you are caught lying or stretching the truth, there's a big hefty fine on it.

Yeah.

Okay. Got it. And it's two and a half times monthly payroll or other expenses as you and your banker determine. Tell me how that is different from the actual loan program that is also forgivable.

So the loan program covers you can get more money for other things. Right. So paycheck protection program is really good for, like, independent people who just have themselves that maybe work from home and then companies that don't have a lot of other overhead and they have, you know, they have some backing to their business where really the main objective is let's keep, you know, the roof over our business's head and keep everybody paid. And those companies usually have like the owners and stuff on payroll too. The other one is better for the people like that have.

Like I'm gonna use a lash artist, for example. She has a studio, she's got a couple people that work for her and she has her studio rent and lease and all the overhead and her employees and herself. So. And not a lot of liquid funds to spend because we don't know when this is going to run out. So even if a company has two or three months in reserve, it's a little bit sketchy to then use those months of reserve because we don't know how long this is going to happen. So that's where the loan would come in and be beneficial.

Okay. So that two and a half times paycheck protection program is really made for people like you and me who have businesses where we are the front man or woman and there's a few other people involved and it's made to kind of get through this. And then there's this loan program that is made for businesses with more infrastructure to where a longer term shutdown or a longer term recession would really hurt them because they have overhead and all that jazz. Is that right?

Right. Yeah. Like inventory, things like that. Like if you have a bunch of inventory that you need to keep restocking or whatever, the loan would be a better way to go.

Okay, so only do one or the other.

I believe. So you have to pick which one you want to do both. And you can't take unemployment with that also because they opened unemployment up for self employed individuals too.

Okay, that's really helpful to know. Thank you. Now help me understand what is forgivable under the actual loan option.

The same things. So payroll is forgivable, rent is forgivable and so is utilities. That's the way it seems to be written. I know for 100% certain that payroll is forgivable. And it says there's some language in there that suggests that it is for sure that rent and utilities will be. But I, you know, I'm only about 85% sure on that.

Okay, and is the time frame the same meaning? Is the two and a half times payroll the same or is it a different duration?

If you take the loan, it's a different calculation. If you take the loan, it kind of, you can add in all of your other things that you need to pay for too. Like if you have some sort of supply chain that you have to.

Maintain or if you have, you know, like for example, you're selling products online now and now you have to make this big product order because now people can't come in to get it because you had to shut your doors. You can include stuff like that.

So do you know the time frame difference in the loan versus the protection plan?

Yeah, the loan.

Go ahead.

You can start applying for, you've already been able to start applying for. And today is when they're supposed to be looking at applications and starting to process them. So today's the third. And then paycheck protection, I don't think rolls out to be available until the 10th.

Okay, so where I'm going with this is if the duration is longer on the loan, but it's still forgivable, meaning the payroll and rent and all that is still forgivable. Why does it not make sense to just get the loan if it's gonna forgive a decent percentage of, of what you borrow?

Well, I mean, that's the ultimate question, right? In my opinion, it makes more sense to do the loan and that's what I'm gonna do. I could do either one, but personally I'm going, I filled out the application just to do the loan part because I have a lot of extra expenses that I would like to have covered. And it's the cheapest money we'll ever borrow. The interest rate can't. It tops out at 4%.

So it's out at 4%?

Yeah.

Yes.

And that's on what is not forgiven, Right? What is the maximum on this?

The maximum amount you can borrow?

Yes.

Well, it depends on how much money your company brings in. But the maximum I think is 10 million.

Okay, so the maximum for any business is 10 million. And do they have a way that they calculate how much you can borrow?

Yeah. When you fill out the application, it asks you how much money you made for the last 12 months, basically from January 31st to January 31st of 2019. And then it asks what your expenses are. So you do have to reveal your revenue if you want to take out a bunch of money. They're not just handing out money willy nilly, but it is a pretty easy process.

Okay, so.

So much of my confusion, Krista, is like this hesitation you hear in my voice is like, this sounds too good to be true.

I know, and that's another good thing to say because that is what everybody has been saying to me. But honestly, reading the bill, like there isn't a lot of loopholes where this can really go Wrong, because it's a government backed.

It'S government backed money. And I also read in the bill that credit reporting agencies, they're not reporting to credit for the next three months. I mean, there's, and with this, this loan situation, there's a clause that I'm going to mess up what it's called. Let me look. It's.

Basically in other loans that you take out, there's a clause in it that says you can't take out any more loans because this one takes priority and that clause doesn't exist in this one.

Okay. Yeah, so this seems too good to be true. It sounds like free money from the government. It sounds like. Here's what I'm processing. I'm just, I'm filtering a little bit because we're talking about finances and things that seem legally dicey to me for the comment. But I'm just going to unfilter for a second. What I'm interpreting from all of this is that I could borrow or my temptation is to borrow as much as I can on this, knowing that the government is going to forgive a portion of it. As long as I use it to make the appropriate allocations. Like I use the money for payroll, I use it for rent, I use it for the things that I would normally use to keep the lights on. I can have what seems to be a larger percentage forgiven and the parts that aren't forgiven, I'm getting really, really cheap money from the government that is not non recourse but basically doesn't count against other types of credit. So it just seems like easy, cheap money from the government. That's my interpretation and that feels weird to me because it's government and it shouldn't be this easy. So am I missing anything here, Krista?

Well, you know, it seems like that, except for it makes sense for them to do this because it's a really large incentive for. Think about it this way. I think I was watching the press conference yesterday and the lady from sba, or I don't know exactly where she's from, a little short, older lady, she said, you know, if we have to spend one or two trillion dollars to save eight or nine trillion dollars, that's what we're going to do. And her point was the small business is like half the gdp, right? So if they have to dump a bunch of money into this to make sure that people have jobs and that businesses don't go under, that is a huge priority. So they're making it as like, attractive as possible for people to keep their Doors open and keep people employed.

Okay, so here's a couple questions for you. Is there any restriction over the types of businesses that can qualify? And specifically, if you're profitable, doing fine, and have no plans to lay anybody off, can you still get money from the government?

That's a really good question. It doesn't really say, but at some point you have to anticipate that you might have an issue. Right. We don't really know what's gonna happen. I'm sure that, like if you are. If Kroger wanted to take out a loan right now, I'm sure they couldn't, you know, because they're an essential business.

You should have. Could or could not?

Could not. No. I think you do have to prove that you are struggling in some sort of a sense because one of the stipulations is if you have like a loss of revenue over this particular problem.

That's one of the stipulations, is that we said, yeah, how would people even know at this point if they run an online business?

Well, the money is available for a while because we don't know what kind of fallout this is going to be. So even if you're not struggling right this moment, you might in a couple of months. Yeah. And that the loan, it looks like the loan will be available for a while.

So there seems to be this question of uncertainty of do I qualify or not? And is the government going to come back and.

Change anything and make what I thought was forgivable, not forgivable? But is that possibly why it's going through a third party, why the bank is then responsible for some of this?

It could be.

It very well could be because, you know, and the smaller part that is more easier to.

The PPP program, it's a little bit easier to say, okay, well this whole portion is forgivable. You just have to submit these documents. Is a lot easier to. Can control. I guess so, yeah.

So. So in other words, the, the short term bridge grant that's not a grant is, is, is easier to predict than the longer term debt piece, which might be more favorable, but it's also a little bit more uncertain because some things are still coming out about that. Is that correct?

Yeah, I mean, there, there is. It does say for sure that the payroll will be covered in both. So you, you know that.

And again, I didn't quite catch. Do we know the duration under the loan, how long payroll and other expenses will be forgiven?

You know, it will be forgiven for sure.

Through.

June 30, but they're expecting to probably have to extend that.

So that's the same amount, the same two and a half months, but probably longer, is what you're saying?

Yeah, I think so. I think if people are out of work, then they're obviously going to extend it.

Okay, so with all of this, what are you suggesting your clients do and what should people do in order to move this forward?

Well, my suggestion is, because I'm not a cpa, is to talk to your person that does your taxes and things to get their opinion. But what you want to really look at is how much money you're normally bringing in, how much your expenses are, and how much realistically you're going to need and if anything got brought to a halt because of this. So one of the things they're looking at is the priority goes to businesses that have been in business for two years or under, which is kind of cool because those businesses are probably going to suffer the most since they are not as established.

So kind of try to anticipate like, okay, well, if this does go on a little bit longer, how much am I going to need? And then kind of go from there. And do you need it immediately? Because it sounds like the. The emergency relief, that's a $10,000 advance. So on the loan, the. Not the paycheck protection, but the other one, you can get 10,000, like right now, and then the rest of it will come, like, you know, a week later.

Huh, that's weird. That's really interesting.

Off of the total loan. So if you get an advance of 10 grand, but you qualify for 60, then you'll get the remaining 50.

Got it. Okay, so this needs to be done through. Did you say a CPA or through a banker or either one.

It doesn't need to be done through a cpa. I just might get some, like, actual tax person advice on it if I were, since I can't tell you what to do.

But yeah, but when it comes to applying for it, who do you need.

To go through the paycheck protection is your bank. And I would check with your bank because not all banks are participating. So you'll have to find a bank. That is if your bank isn't. Some of the smaller credit unions aren't.

Okay. Since this is changing so quickly, where would you recommend people stay up to date on all this?

The SBA website is really good.

I'm doing almost daily updates in my Facebook group, so you can join that. It's called called Hacks by Krista.

Krista, I would appreciate if you do A post in the 1% and tell people all of this stuff like as it's happening, because I'm sure this is going to get nuts over the next few days and weeks.

I can definitely do that.

All right, so now we're going to pivot over to my conversation with my advisor, Vinnie Fisher. I bring to him what Krista and I spoke about and he helps clarify a few things and also provide some action steps. They make this really much simpler. And you'll hear me kind of fumble my way through it as I'm catching up to speed. But by the end, we get a crystal clear understanding of what this means for us. So hang with me and enjoy this next piece. All right, Vinnie Fisher, I need to get some expert opinion on here. First of all, thank you for hanging out with us. This is such a crazy time. I'm really thankful that you could offer some expert advice here.

Thanks, buddy. Thanks for having me on.

Yeah, of course. So here's my understanding. Here's word on the street is that there's two parts to this bill. There's the paycheck protection program, which sounds to me like a loan that is a really a grant. It's a grant disguised as a loan as long as it's used for a appropriate things. And then there's this other piece of the bill, this other option that is a loan maximum $10 million, somewhat calculated by revenue or profit and also partially forgivable. But no one really knows how much or how much they can take. It's like a more uncertain path. So it seems to me like you've got this grants that you can take as a bridge or you can take this loan and it's really good terms and partially forgivable. And the question is how are they different and what should business owners do? So could you help clarify some of this?

Yeah. So we'll use little parts of terminology to help people as they need to so they can kind of get their arms around this. So like you said, there's two pieces and they actually came in two pieces of stimulus and then they tried to correct part of it in the second stimulus. So, you know, surprisingly the government moved fast. But as part of moving fast, where the banking and private sector has to fill in those gaps, there's a lot of, you know, interpretation and holes. And the two pieces are this, right? One of them is this thing called the paycheck protection program. And the other one is the Eidl loan, which is an economic disaster relief loan. Now what's interesting about Eidl is it's actually not new. The funding of it under these stimulus packages has just been funded into an older program that really has been around since hurricane relief and other things. It's bad time. There's an established process to it where it got a little fun and interesting. I suspect that is this idea that the advance on that loan can be treated like a grant in certain circumstances. Then right on the back of that legislation being passed, the Big Cares act came out inside that $2 trillion legislation, which has never happened before and certainly has raised the ire of a lot of people based on whether or not a government and how they're bailing out and all those types of people who want those opinions. Well, buried in that legislation is a economic recovery act called the Paycheck Protection Program, which is designed to be a loan turned into grant that has everywhere up to $10 million. That whole program is designed to have our businesses, certain categories to keep people working U.S. jobs. And throughout the last 10 days.

Actually, even though it's only been a week today that the President signed it, almost a week right now to the moment that there has been a lot of comments. And even as soon as yesterday, our friends at the SBA put a very strong directive as to how that thing is going to work. And just today we, right now, banks are open, some of them, for the starting process of applying for that. So there's two parts. And what we've been being asked by lots of people is which one do we apply for? How does it work? What do we work for? Here is the thing I would say if you're a business that has people working for you, first and foremost, let's start there. Forgetting the other classifications. You fall into the category of this Paycheck Protection Program because you are exactly who the Congress wanted to keep the economy stimulated as well as keep jobs protected. Every business, 500 employees less who fall into that category already meet the standard of being injured. The world is closed. The world is closed for business. We are all being injured at the level of what the Paycheck Protection Program is talking about now idle under the economic disaster relief program. Entirely different discussion. And so those need to be separate for one case and then kind of commingled for another. So I'm, I would love to go back and forth on banter with this and so we can help people. But this first time really ever in everyone's current economic situation, where we have a loan turned stimulus turned grant that's available, that looks like ultimately grant money in the hands of a business this is the first time most people who are alive today have seen something like this. Yeah, all over the place.

So. So here's what, based on what I know and what you just said, it sounds like the paycheck protection plan, which is that two and a half times monthly.

Loan turned grant is available to all businesses because all businesses are injured because the economy is basically on pause right now. That's what I'm hearing you say so far is is up to that point, correct?

Yeah, it is correct. And so that $349 billion number is the 500 employees less companies, all of them in America. Their six weeks average of payroll. When you multiply those two numbers, you come up with $349 billion. So this was intended for all of those businesses in those categories to fall into this. Now, as it rolls out, there'll be some complication, but the answer is yes.

Okay. Now this other part of the bill, which I understand it to be a loan with forgivable elements, you're saying is a completely different conversation and I'm under the impression that it's one or the other. You can't double up here. You have to pick one or the other. Could you help me understand how and why some people would go for the loan rather than the paycheck protection plan?

I just want to add. The answer is. I'll be happy to walk you through that. I just want to make sure clear for a very high level discussion, there are real circumstances where you can have both. Okay, it is not one or the other, but let's start. The paycheck protection program is designed to keep employers keeping people employed. Okay. What was added to that bill, corrected, may I add in that bill late last night by the sba, is to carve out from operating businesses, independent contractors. What that doesn't mean is full time equivalents. People who are full time employees who are really non W2s are actually employees under the Department of Labor definition. Independent contractor are people who basically are outsourced or kind of work for multiple people and kind of work from home as a freelancer or like, you know, your Uber driver. That gig economy worker is that independent contractor. Okay. There is the separation of that, which is an amazing fact that you and I can talk about the idea that that legislation carved in some of that stuff. But there you go. You have that the Eidl loan is meant to be for economic disaster. This has been around a while, Ryan, where there's an overlap. When you apply for that loan, you have to actually show real economic revenue Loss. This is not this idea that we, we've all been damaged. You have to actually qualify for loss. Most people who think they're going for that 10k advance on that, this is how it works. You apply for it simply right on the website directly at the sba. It was broken for the first few days, but starting this past Monday, they fixed all that you can apply. They will correctly. If you do the part correctly, you qualify to get in advance of the first 10,000 of that loan. Even if you don't qualify under the rules of the economic disaster and you're turned down for that loan, you can keep the advance they give you, which could be up to $10,000. Not everyone's getting 10,000. Some people are getting less and some, and many people are getting even turned down for the advance because they don't meet the economic disaster part of it. Some are keep it even if you get approved or not. If you spend that $10,000 on qualified activities that fall under the list of the economic loss, you will be able to be forgiven of those dollars. Now here's what's interesting. One of the categories on the qualified list is payroll. So if you pay payroll with that 10k out of the Eidl loan and then go apply for the paycheck protection program, you can't double dip. In that case, the CARES act is saying you need we will deduct at the bank level, at the SBA level, that 10k you took under Eidl will come off of your CARES act paycheck protection calculation.

That makes sense. So in other words, if you take the $10,000 advance and use it for one of the forgivable expenses, it's not forgivable again in the paycheck protection, so you can't double dip in that.

So.

In our world, a good example would be in the E commerce space if you had a problem in the supply chain with your inventory and you can show economic disaster and you qualify for this Eidl loan and you use that 10k advance to deal with your invent supply chain problem and then turn around and file for a PPP loan, hoping to get a grant out of that and go through that process, you won't have to pay that 10k back off your inventory because that's not a qualified expense under the PPP program.

Got it. Okay, so now I'm, it's finally starting to sink in for me where you can take the loan and use it as a way to keep normal business operating overhead going and then still use the payment Protection plan to specifically keep people paid. And that part is forgivable. And you can still take cheap money from the government in order to keep operations going like things are normal. Is that a correct understanding?

That's a very correct understanding. And the reality is, under that paycheck program, the process you have to go through to prove payroll is exactly the process that provides you the established approval from the bank that ultimately will be used as the same stuff you give them eight weeks later to show that you complied.

Okay, so my understanding is also that if you only take the loan and forgive me, I don't know the right verbiage to use, but if you just take the loan part and you.

Economic disaster loan.

Yes, yes. What was the phrase you kept using for that?

So it's really Eidl. E I D, L. Right. Economic injury disaster loan.

Okay, so if you take the Eidl, if you take the loan and you use that for, use some of that for paychecks, for rent, for utilities, I've heard that that is also forgivable within that loan. Is that true?

That's correct. Because it's a qualified expense.

Okay.

Only time that becomes an issue is if you then turn around and go apply for the PPP program. You're going to have to have an offset because you can't do that twice.

Okay, I understand. That makes sense. Now, you said that there are people who are not getting qualified for Eidl. Now, from just a normal business mind, I'm looking at this saying this is 4% money from the government. So I would want to take 4% money that was from the government all day long and twice if I could. So what. What has to happen in order for me to qualify for that? Is it a multiple on revenue? Is. Are there. Do I have to show that I was hurt in because of COVID What are the. What are the requirements here?

Yeah, so because of some outside factor in this case, we have Covid right now is our outside factor. We have to show as a business that we are. Accept we are suffering economic disaster under the standard of idle. By the way, this has happened when hurricanes happen, when we just. Our current disaster that this country is facing hope to never happen again, hope this never happens in our lifetime again. But this is real. If you can show economic loss under the calculation that exists already at the SBA level, then you'll qualify for this loan. Now, I want to say it's a specific person because most people for you and I in our community are going to have a hard time meeting that Standard. Not everybody, but a lot of people are not going to meet that standard under the Eidl loan.

And why do you say that? Why would an E commerce company not qualify if there's an interruption in their supply chain or they can't get a shipment from a certain manufacturer? Why would that make them not able to qualify?

They may in some cases, and I think that's true. But most people in our space, they're not actually. They may have had a slight delay. They may have had those same slight delays even before this. There's a normal pattern of their activity. Just being out of stock in Amazon may not live rise to the level of a disaster. Now, if you can apply and the bank agrees with you, then okay, great, I agree. Apply for the loan. Go through the process. Just recognize that when Eidl was funded, it wasn't passed, it already existed. But when the treasury funded it with this actual money that's in there now so that people can use, that money will run out. And that is not designed for every business to file for it. That's really for truly economic damage. That's not this stimulus where everyone should take advantage of, you know, adding some dollars to their business. That truly is going to be a pot that runs out where the guys that kind of don't need it took it from the ones who may really need it.

Okay, now, now I understand. So what is the process for showing that you were injured in order to qualify for Eidl? Do we even know?

Yeah, so it's actually well established in the SBA because this is a new, this is not new legislation. This loan, this type of loan has existed. I think it started back with that major event happened in the 80s or 90s, I can't remember which one, in some of the Florida hurricanes. This has existed a while.

Right.

It's well established, the process. And so when you apply through an SBA certified process, it starts on their website. But once you do that submission, what happens is you'll get an email back and that email will start a process where you're working with a representative through an SBA certified program to get you into underwriting through the Eidl as part of kind of putting some front end relief to the sba. They've said if you've done those first couple steps will kind of advance you out money to 10,000, up to $10,000 so that we can take some relief of burden off of us as an administration and then we'll take you through the underwriting process which will not be as Fast, but it's going to be faster than had you been doing that under any other circumstances.

Yeah. Okay, this is making a lot more sense now. Then he. Thank you so much for this. So is there any downside or is there anyone that should not take the payment protection plan options?

So there's, I would say there's a situation. First off, generally I want to let everyone hear that that's an amazing program. And if you're a small business or a not for profit, a church, if you're a self employed, a sole proprietor or an independent contractor, hear me, this stimulus program has a chunk of free money for you and it's going to be easy to get to. I again recognize easy with some quotes because we're still dealing with our friends at the government and now private banking. Not necessarily they're getting dragged into it, not wanting to do it. So there's going to be a little bit of friction, but at the end of the day, everyone should apply. Now here, Ryan, is where I would put a footnote on this. If you're a business that had revenue and you had and you meet this payroll cost because you had people working and you could qualify, right. They're going to go back a year if you're old enough. So let's just say for sake of Math, all of 2019, if we took every month of your payroll costs, which includes full time equivalents, which could be non w people working for you, not independent contractors, but W2 equivalents, which has got a rule definition under the Department of Labor. Let's assume we agree on payroll costs which basically pull your payroll census and all those costs that go along with it. Right. The way to think simply about that is if it's actually a real cost that you have to pay to have an employee or an employee equivalent, not a pass through cost like withholding, but a real cost, then that's an actual expense that gets added into the payroll expense. So let's assume that's $100,000. That math can then times it by 2.5. You would qualify for a $250,000 loan. The reason why a business may or may not want that is if since the moment of this kind of required shutdown process, if you've been bleeding and you needed to kind of stop people working, right. 10 million people have been put into this category where businesses have stopped them from working and they've gone and filed for unemployment. If those people are in that category and then they go and want to go apply for this loan, they're going to qualify based on their old payroll, but it's going to stay alone and possibly not convert to a grant. If they don't hire either new or those people back.

I see.

They're not going to have an or corresponding offset to it. And if you're a business that's truly not going to pick up income, then recognize you're most likely going to have a loan, not a converted grant.

Okay, so I heard you say that if you're not going to hire or hire back or something like that, then you'll be stuck with a loan. But I thought that if you just paid existing people that, that, that it was forgivable. Would you help me understand where I might be misunderstanding?

Okay, so let's just, let's just say for sake of an example that my 2019 financials, my payroll census showed that I qualified for $50,000 of my monthly average payroll costs. Accept that example. Is that good? Yeah. And going forward, from the moment I apply for the loan, I actually only now have $25,000 of qualified payroll costs. Well, then I'm never going to make up that gap from what I did qualify before for, from what I have now.

Okay, I gotcha. And so you'll, you'll end up owing, you'll end up with at least some part of a loan. Some of it would still be forgivable, but you're going to end up with partly alone.

Right. And I won't be able to pack it filled with those other expenses because the SBA said that my grant calculator has to be 75% payroll, 25% those other qualified costs. Okay, so if I don't have enough, this is all designed to protect jobs or to kind of incentivize you to rehire back or to hire new. And if those things don't happen. Now, don't get me wrong, alone at 1% over two years doesn't sound awful.

Right.

I couldn't get cheaper. The cost of funds are going to be 3 or 4% next year just from kind of an inflation concept. So it would almost be crazy to not go get the 1% money.

Okay, so here's, here's what I'm understanding now. I understand a little bit differently. You have the paycheck protection plan, which as long as you are all are going to use that money to, to, for payroll and for other fixed expenses, there's no reason not to take that. And if you're off by a little bit and you don't end up getting it 100% forgiven, the costs on it are going to be low enough to where it is. It's worth taking the money and having a piece of it forgiven and having some piece of it that you pay back. That's how I'm interpreting it. And then.

And Ryan, just one more little factor on that and obvious thing to say out loud. If you're somebody who's listening, who's so fiscally conservative that you're afraid of just having debt when you're done, there's no prepayment penalty. You can give it back the extra at the end of the eight weeks and you have no outstanding liability.

Okay.

Beauty. All right. Now, on the other side of it, you have Eidl, the loan program, which you have to be able to show that you were economically injured as a result of the current crisis. And so there's an application to it that not everyone is being approved for. It's not as simple as the payment protection plan, but if you qualify, you have. There's a. There's a bigger pool of money that is alone with some of it forgivable. We don't quite know how much at this point, but it sounds like that is a little bit more restricted than I believed until this conversation. In my understanding it clear now.

Yep. The only thing I would change is that it isn't. Overall, it is not a bigger pool of money, but it wasn't designed to cover a bigger group of people. The paycheck program is for you and I to keep people employed. The idle program is to save you and I in case this forced closure really damaged my business.

And you said it's not a bigger pile of money, but I know that it's up to $10 million. Is that going to be calculated as still being like two and a half times your monthly payrolls?

No, those are not the same calculations. Okay, so actually you have it a little bit messed up. $10 million is the paycheck protection program. That's all. By the way, there's nothing you can do other than fill the calculation incorrectly to get your qualified payroll cost that would have already happened during the last year of your business or if you're younger, during the last couple months, that's already set. Right. That is the program that a small business can get up to a payroll cost that times by 2.5 to get to $10 million. Okay. There's three categories, 350,000 and under. The banks are calling those the 5 percenters because a bank gets 5% to underwrite that loan from 350 to 2 million. They're calling them the 3 percenters because banks obviously get 3% for that loan. And everything above 2 million is a 1 percenter loan. And the big banks are taking the 350,000 and below and kind of putting them through a fast track. Your retail people at the bank are getting repurposed to handle them. Your 350 to 2 million, you're kind of like in a kind of quasi private banker Mode. And then 2 million and above to that 10 million, you're kind of being handled by the middle market bankers, which are, who are helping these bigger clients each go through their, their category.

Okay, now what, is there a, is there a limit to how much can be borrowed under idle?

Yes. $2 million.

Oh, it's $2 million. Okay, got it. And is, and that is not calculated by the same way that the protection program is. Do we know at this point how much credit is going to be available for small businesses or under idle at this point?

Well, it's been funded. Right. So it got funded with, you know, I'm sorry, I don't have it sitting here right in front of me, but I feel like Congress put $10 billion into the, the treasury put 10 billion into the Idle program.

Right.

All it was, was more funded. It existed. And so that underwriting, when you go through the bank, that's where you're going to have to submit financials, show the economic loss. Like there's a real underwriting process to that.

Okay, okay. This is making more sense now. So the confusion has been the difference between these. It just seems like people are talking about them like they're the same thing. And you're helping me see that they're very different. And the loan is a proper loan where you go through a regular underwriting process and if you qualify, it's cheap money that you might want to consider, but that the qualifications are a little bit more stringent than I had believed up to this point. Whereas the paycheck protection plan is a lot looser. But both are going through some sort of an underwriting process. But the paycheck, the payment protection plan, you're going through your own bank and it's expedited, is all that correct?

Yep. I hope the expedited part's true. It started today. You know, there's little noise we're hearing from clients about a particular bank or two and kind of what they're doing. And so I think for the next few days, today, Monday, Tuesday, until we kind of settle into a process, I think the banks are overwhelmed, quite honestly. Right. And I think that, you know, there's going to have to come some guidance out of the Treasury Department and some things like, I don't, I don't know that it's going to play out as smoothly as everyone hoped. I also don't know that, you know, it's real. They're not bait and switching it. It's coming out and there are rules attached to it. It's meant to help, but I think because bureaucracy runs up against the free market, it's going to have some headaches.

Yeah, makes sense. Vinny, I'm sure you're overwhelmed helping clients through right now, but when people come to me and say, who do you use for or who do you recommend I use for navigating all of this? I send them over to Fully Accountable. So could you do a quick plug for yourself?

Yeah. So, Ryan, here's what we did. I want to do a quick shout out to our coo, who's Rachel, did an awesome job. When we got on the front of this fully accountable@ fullyacountable.com we decided to offer all of our clients complimentary to walk them through this. So for our clients, if you're here, one of them on the phone listening, you've either been contacted or you know that we're walking you through this. For someone who isn't, who's either a prospect or needs help, just at this temporary moment, we created a dedicated stimulus team where you can reach out to us, sign up for a call, and we will help walk you through this process, even if that turns out to be a one time event or relationship because we want people to take advantage of these programs.

Beautiful. Love it. Well, Vinny, I didn't know you did that, but I imagine your phone's going to be ringing because that's awesome, Vinny, thank you. Thank you so much, my friend. This was really, really helpful. I really appreciate it. All right, team, I hope this left you with a clear understanding of what all is in this. If you're a business owner, it would make sense to talk to your banker or to talk to your CPA or to talk to somebody who can help you take advantage of these programs. If nothing else, reach out to Krista or Vinnie because both of them can help you navigate this. I know there's a little bit of different content of what we talk about on the show. I thought it was really important that we have this conversation because there's obviously a lot happening and it's pretty rare that I make suggestions about government programs. But when the government gives you free money. I shouldn't call it free money. I'm not an accountant. I know nothing of what I'm talking about. Don't listen to me. I'm a dude on the Internet. Don't take my advice. Talk to somebody who knows what they're doing. Seriously, you should. But I'm choosing to take advantage of some of these programs. Hope you enjoyed today's episode. Would love to hear your thoughts. Feel free to hit me up on Instagram. I'm at Ryandan Moran. Or you can email me@ryanapitalism.com as always, I so appreciate you listening to me on the Internet. It means the world to me and I'll see you next time.

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