73: Jessica Mah in Dinero, SBA Loans PPP & EIDL Covid Bailouts

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Jessica it's my pleasure to welcome Jessica Ma. She is founder of Indenero and they help small businesses with a variety of financial issues, from bookkeeping services to tax prep to virtual CFO services. And we are here to talk today about the SBA bailout programs. What's left? What might be coming? She is the founder of this company. They are distributed with about 300 people on their team. She has been featured in Forbes and Inc. Magazine 30 under 30 lists. Jessica, welcome. How are you?

Wonderful. Thanks so much for having me.

And you're coming to us from my hometown, Los Angeles, California, right?

That's right.

Excellent. Well, we are all quarantined up here and the government and the Federal Reserve are printing money like crazy to bail everybody out. And there's a lot of confusion around these programs. There are two basic programs, the PPP and the eidl. We'll jump into this. You've given a lot of webinars and presentations on this. And we just heard that ppp, the paycheck protection program, has run out. But we don't think that's for very long. It's going to come back or some other program will come back. Jessica, why don't you address that maybe first and then let's dive into the details of these programs.

Absolutely. Yeah. Well, first off, thanks for having me. And to everyone out there who has a business and who is going through challenges with COVID you know, sending you all a lot of love here because, yeah, it's a challenging time. And I know many of us have applied for PPP and Eidl and some of the other government bailout programs out there and are wondering, will there be more funding to come in to enable us to get funded? Right. Because I think there are reports that have said that only 6% of all applications have actually been approved by the SBA and funded. And I believe that number is pretty close to accurate. We have over 1000 customers at Indinero have filed PPP EIDL loan applications for the majority of them, and we have seen less than 10% get approved. With that said, I strongly believe that we will get more funding and therefore, I highly encourage all business owners to apply and get back in line to have a shot of actually receiving the funds.

Okay. So maybe the first thing to Say here about this is, is the best source to simply just go to your bank, where you bank now, where your, where your business banking account is, and just apply with them. I mean, there are brokers, there are different sources, but, but it seems like just use your, the bank you bank with already, right? Is that sort of the best way to go?

That's what the SBA is saying. However, that is not necessarily the best advice if you want to increase your probability of getting a loan. The people who I know who have the most success getting a loan have gone with smaller regional banks. And I have friends who have bank accounts that say Chase or Wells Fargo.

Two terrible banks there. Chase and terrible Chase and Wells Fargo. They both suck and so does B of A. So we got them all. And shitty bank Citibank.

It's really unfortunate because of all of our customers at Chase, none of them got funding. However, we have a few who are willing to file applications through smaller regional banks, banks that you probably have never heard of. And they got the loan through the smaller bank even though they applied the same day with Chase and with those other banks. So that is my advice.

Are you saying that even though they didn't have a relationship with, they didn't have an account with that smaller regional bank, they just knocked on their door as a stranger and said, wow, that's just, that's absolutely ridiculous.

I know people who've applied at five banks because they were stuck at Wells Fargo and then they added four small regional banks and then they get approval. So the problem is that in order for the bank to submit your application to the sba, they have to go through their own internal review process and they have to internally approve your loan application before they're allowed to submit it to the sba. But the bigger banks, it's just going to be more bureaucracy.

Wow. Yeah. It just shows you what a fiasco is. These big banks are awful. And of course they just get a bunch of government bailouts and, and we all pay for it. It's absolutely pathetic. But that's good to know about the regional banks. That's great. What about brokers? Have any of your clients used brokers?

I don't really think brokers are going to add a lot of value here. I think that you could knock on the door for the smaller banks, if you have a lot of deposit money, like if you have seven figure deposits, you're willing to move to a smaller.

Regional bank, they'll probably love you.

They will expedite your application. And likewise for folks with seven figure Deposits who need help, feel free to send us an email. And we have relationships with some of these banks, and we can try to make sure that you're buttoned up and your loan actually gets processed.

Okay, so even though PPP is out of money now, can you still apply? Will the bank take your application?

The banks absolutely will, because they think.

Like we do, that there's just more money coming.

Right, Exactly. And they also don't want the bad press of saying, oh, yeah, we are just putting it on hold. And then if it comes back alive, all the other banks have been working on internally processing applications, and then they're going to get ahead of line. Right. So every bank is accepting PPP and Eidl applications, even though both programs are currently on hold due to running out of money.

Yeah. Wow. So Eidl is also out of money?

Eidl is also out of money as of today.

Wow, what a government fiasco this is, isn't it?

I know.

So we need a few more trillion dollars, and that might not even be enough either. Okay, well, look, we're all pretty much, pardon the pun, banking on the idea that these programs are going to be refunded. I have no doubt that they will. The government action and Federal Reserve action has been swift and bold. I mean, there is no reluctance whatsoever at the powers that be on bailouts. It's not even like they're thinking about it, giving it a second thought. Hey, there may be consequences. They may create tons of inflation later. They're just printing money like crazy and dumping money into the system. They're flooding the system with money. So a lot more is coming. I don't think there's really any doubt about that. So we might as well dive into this topic, and let's talk about what's available and how to be successful in getting your slice of the bailout pie. Jess, it's all yours.

Awesome. Well, again, really hopeful that all this comes back into action. And I think some of the most important advice here is to fill out the application and work with your accountant or whoever your financial advisor is for your business to make sure that everything's accurate. But I would just get that into the bank today. It doesn't need to be perfect. I think ultimately you're going to be able to adjust the amounts. And what I've seen is that the sba, they're not really checking the amounts. They're just trusting the banks. And if you have a good relationship with your banker, whoever that person is at your bank, they're going to get this loan application processed. The other advice is to show your work. Think of the PPP and Eidl applications. Kind of like you're doing your math homework when you're in school. The teacher says, show exactly how you came up with the answer. And so what we've been doing for our customers, and I really hope other accountants are doing this for their customers, have an Excel workbook that shows the total numbers for how you think about everything. So right now I'm just going to scroll through my presentation here.

And by the way, if you're only listening to the audio, this will also be on our YouTube channel so you can see the images that we're referring to. And there are some slides here as well. But you don't necessarily need to rush to YouTube to see it. I think we'll explain it pretty well, but sometimes seeing it visually is very helpful.

Yeah, I'm just gonna. I'll stay with the most important points here and then we'll share all the information later. So you could download it on your own. I wouldn't be worried about getting the visual right now.

Okay.

And I also know that by this point, most of us know the high level details. I think what I'm going to try to communicate here is really just how to make sure you're dotting your I's and crossing your T's and increasing your probability of getting accepted. And as you know, the PPP program will give you 2.5 times your average monthly payroll, up to $10 million. And for U.S. employees, it's going to be capped at $100,000. When I say show your work, have a workbook. What we've been doing is not just showing the total payroll, but really showing all of the payroll and then all the payroll minus the money spent over 100k in salary. You have to take out contractors. In the early days, people thought you could include contractors as part of payroll. You cannot include contractors.

And that really bummed me out because I was going to apply for my share of the bailout pie because we have mostly contractors in my companies and I was sad to learn that I won't qualify. Oh, well.

But the contractors will be able to apply. And last Friday they opened it up. Of course, I don't think any contractors got any PPP money because they ran out of money so quickly. But my suggestion is, if you run a company that has mostly contractors, give them this education, encourage all of them to get their own PPP applications in, because then that's going to enable you to negotiate better rates to pay them if you're going through a crunch on your own.

Right, right. How much time does it take to get through the weeds here and apply? I mean, it depends how many banks you go to. It depends on a lot of stuff. But how difficult is the application process?

The application is so easy. The initial application, it's one page, and it basically just asks for your name, your address, and who owns the company. And. And it's so easy, it'll take you no more than 20 minutes to fill out.

Excellent.

The problem is, once you submit it, your bank's going to ask for supporting information. Potentially, since we have so many customers from so many different banks, there's no set process. Every bank has a different set of materials they're looking for. Many banks are looking for this workbook. And when you submit the initial application, they don't necessarily tell you what they're going to need from you. So my other advice is email your bank and say, what other supporting information will I need in order for this to get internal approval and to be formally submitted to the sba? That's the magic question that I really want everyone here to ask.

Say that magic question again. Let's make sure people caught that.

So the magic question, what is all the information you need from me in order for the bank to formally process my loan application and submit it to the sba? They're going to come back and say things like, all right, we're going to want to see your 2018 tax return. We're going to want to see your Excel spreadsheet that shows how. How you calculated 2.5 times average monthly payroll. Did you include contractors or did you not include contractors in that number? They want to know if you're fudging your numbers, if you're exaggerating your numbers, if you're including things that PPP says you're not allowed to include. And this is something that's really. You're really best off having your payroll, company, or accountant help put together. But you want to also anticipate what are all the other things they might ask for as early as possible. So you could send that to your advisors to get. Get started working on.

Okay, and when you, when you say advisors, do you mean the loan officer at the bank?

No, I really mean your accountants and your tax advisors and your payroll.

Putting the package together.

Yeah, exactly. All the materials. Because a lot of people, they lose precious time. They submit the application. The banks are super overwhelmed by the time they get to your email. It's like four days later and Then they send your request of all the things they need. But that's four days. You could have been working on preparing the information already.

Right, okay.

That's the number one reason why I'm seeing that companies who are less prepared, who aren't proactive, those are the ones who are not getting the PPP loans. So, yeah, I hope this is really helpful, kind of inside what I've seen.

Okay, go ahead and cover more information on your slides now.

Yeah, sure. So a little bit on the details here. So the SBA has changed a lot of these numbers through the past two weeks. You know, at first the interest amount was a few percentage. Then it dropped a half percentage. Now they've settled on it being a 1% interest loan. And at first they would give you 10 years to repay. Now that number is only two years. So it's a 1% interest loan, two years. And all of it will be forgiven as long as you spend 75% of it on payroll or the vast majority of it on payroll, and then no more than 25% on rent and on other things. There's a list on the Internet that lists out all the things you could spend that on. But think about it from the government's perspective. They want most of this to be spent on employees and keeping. Keeping them working.

Right?

Exactly, exactly. And so to that extent, what you're going to do once you get approved, and I want to say once you get approved, because I really believe that they're going to try to get most of you guys approved here. You're going to set up your own separate bank account, call it the PPP bank account. And you want to make sure there's a paper trail to show that you're following these rules where most of the money is going to payroll. And so I'd go to my payroll company and change it so that all the payroll is spent from that new PPP bank account. Because if you don't have this buttoned up, you might have problems having the loan forgiven at the end.

Okay. Now I can't. Nobody knows yet, but I just envision really a total mess in the loan forgiveness aspect at the end. Right?

Oh, my God. Yeah.

Are they really just basically grants? I mean, they're loans that. It's not really a loan if you don't have to repay it. It's a grant. Okay. They're just giving you the money, but you might have to repay it. The government is saying if you don't spend it properly. Is that how it works?

Yeah. If you don't spend it properly. And then also there are rules around what the total headcount of your company is. So if you laid off employees because of COVID and if your payroll spends spend this year is lower than your payroll spend pre Covid, then there will be less money forgiven. The idea is that with this money you're going to rehire any of the people that you've laid off or furloughed. And to the extent that you don't do that, less of this money will be forgiven.

I just imagine them not checking that or accounting for that very well. I will make a prediction here. Maybe I'll be wrong, but I bet a whole bunch of companies won't spend the money properly. They will lay people off and they'll still get their loan forgiven somehow or another. But maybe not. You know, don't bank on that, by the way, folks. Don't bank on that. Don't bank on that. Yeah, it's just a prediction because government programs are a mess always. Right.

So they will probably go after bigger companies though and make an example of the big players.

Yes, the little ones, they won't have time for the small fish. But, but anyway, again, and I'm not recommending that, I'm just saying my prediction is a lot of bad apples will end up with grants and we're all going to pay for it through either taxes or inflation, one or the other. That's the only way the government can pay for things. Those two ways. Right. Okay, go ahead.

Yeah, so I'd say you just want to start thinking about. I would at this point still assume though that that the PPP approval process, it's going to be at least another week or two before Congress gets their act in order, if not longer. From the time you submit this to the time that it gets processed and submitted to the SBA by a small regional bank, the average receipting is about four or five business days. And then from that point it's usually pretty quick. Once you've been formally approved by the sba, it's about another three or four business days before you get final paperwork. And in most cases the paperwork is non negotiable. It's kind of take it or leave it. You sign that and then the bank will fund you the next business day. To that extent you really want to be careful. This next month you could furlough and lay people off. A big popular question I get is, well, what if I need to lay people off because PPP money is not available yet? Will this decrease the forgivable Portion. And the answer to that is actually you're allowed to lay them off now and then once you get the loan, you can rehire them back and un furlough them and still be able to take advantage of the forgivable aspect of the loan. But I would not wait. If your business cannot stay sustainable, you need to make those changes and cuts today. And that will be okay, according to ppp.

Yeah, you know, this is just such a whole sad mess we're in. These activities of dealing with the sba, dealing with the bank horsing around, furloughing or laying people off and rehiring them. None of this is productive activity. None of it. This is not what an economist wants people doing. We want people growing their business. And here we're all just now messing around with paperwork. You know, it's just really a bummer, but it is what it is. So let's get through it together, folks.

Exactly. And I would also encourage you guys to think about applying for both PPP and Eidl, because companies are allowed to participate in multiple programs. With that said, PPP is really your best bet here. I mean, I think the Eidl program is just not going to do as much here. And I've heard of people getting $10,000 forgivable advances, but as far as that really helping out, I mean, PPP is really what you're going to be focused on if you have a lot of payroll that you're going to need cover.

So of the two programs, the PPP is the one that people should most likely pay attention to, right?

Exactly. Because if you're going to get ppp, I mean, there's some. You can't really overlap here. Like, you don't want to pay for the same expenses twice through one program and the other program, you really have to treat it as the Eidl program. If you get Eidl, that's covering stuff that PPP won't cover. So to that extent, you want to just get ppp. And also when they expand PPP and Eidl, it's going to happen at the same time. If PPP is out, Eidl is probably out as well. So just keep that in mind.

Okay.

I think we've covered the most important elements here. What I also want to mention is that a lot of these smaller regional banks, they say every bank says we have to focus on our existing customers. And that is correct. With that said, as we discussed earlier, the smaller banks, they want new customers, they want new deposits, they want to help people who are getting screwed by the big mega banks. So I wouldn't be shy about moving around and putting in two or three applications. I don't think anyone knows.

You know, I've heard mixed answers on that multiple applications thing. I have heard from some, and this is probably pretty important, that if you put in more than one application, it could be triggered as though it might be fraudulent in the system and you might get both denied or delayed. You're really saying put in more than one application though, huh? Is that the experience you're finding works the best?

I'm saying the folks who put in multiple applications are more likely to get approved. If you look at the actual metrics and data I'm looking at. Keep in mind, what is it that you're really focused on? You're focused on the bank getting through their internal application process the fastest and then having that submitted to the SBA as quickly as possible. That gets you towards the front of the line. Whereas with the bigger banks, you're just going to be way further back in line, you know, for that, that bank. So that's, that's why I really stand by this advice. And this is all super controversial. Debatable, this new territory here.

Totally new. Yeah, everybody's. It's so confusing what's going on right now. It's a big fiasco. Okay, Jessica. Well, good. This is great information. We did talk about the loan application process sort of at the beginning, so that's great. Please give out your website and tell people where they can find your company and find out more about these programs.

Yeah, absolutely. So we're publishing information on this all the time@blog.indenero.com and feel free to email us. We're happy to answer questions. We're not charging for answering questions. We just want to help other businesses out. Coviddinero.com Feel free to just let us know what you're struggling with or what you're curious about and we'll get someone on our team to help you out.

Jessica, thanks for joining us.

Thank you for having me.

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