SBA LOANS for Gym Owners - Should You Apply During COVID-19 Crisis?

Well, John, you ready to kick this thing off?

Let's do it.

All right, so, uh, I feel like we got the band back together. Um, I always am excited to connect with you, and thank you for bringing your posse over and, and, uh, hanging out with me. Um, for all the people kind of in the Art of Profitable Gym as well, I want to introduce you up like always and, uh, get them familiar with what you do and who you are. So let's start there, and then I'll do the same for your crew and We'll kind of go from there.

Okay. Um, so John Briggs, our firm is Insight Tax. I wrote a book that was published in January called Profit First for Microgyms. We, we just know that, you know, despite working a heroic amount of hours, the gym owner still lives paycheck to paycheck. And so we've created a system that helps them increase their cash flow so that they can be at home at dinnertime. and their gym can be healthy. And that's our focus. And really grateful to be here with you today, Chris, because this stuff is like brand spanking new. It should pass sometime today, probably. And then I don't know if the president plans on signing it today or not, but I know this is such a big deal, not even just for the gym community. I've already been emailed from the director of the World Trade Center in Utah about how inundated the SBA is right now with these loans, and they're looking for volunteers to donate 15 to— 10 to 15 hours a week to basically process loans for them. So this is definitely— this is a big deal. Excited to be here with you.

Cool. And for those of you guys that don't know me, Let me see if I know how to fix that real quick. I know we're going to have people hopping on and muting. All right, we'll figure it out. John, if you see anyone, mute them.

Okay.

Um, all right, so, uh, Chris Orndike, Factory Forge. I've been a small business consultant for about 7 years now, also an affiliate owner for the past 13. And, uh, believe it or not, I've done over $60 million in loans. So I have a background in lending as well. That's why I wanted to connect with John and, uh, just help you guys understand not only the process but navigating this. Uh, when I first saw all of this stuff come out on, uh, loans, I got instantly overwhelmed. I don't know about you guys, just with the amount we have to deal with in terms of, you know, uh, Connecting with our members, making sure they understand exactly the new offer online, uh, you know, getting your teams back bought in, getting them into coaching online. There's so much going on, not even to mention having to go out and enroll new people to cover any potential loss and replace those people. So there's that. And then on top of this, you've got your loan of potentially, uh, incurring losses like John was saying. So there needs to be a strategy behind having cash and making sure that we make good decisions when we've got options. So looking forward to it as well, John. Just wanted to take a moment to say hello to everyone and know that you're not alone out there. We're all in it together. And I think this is one of the first steps we can do is getting information out and getting knowledge to, you know, the issues that matter.

Yeah.

So you posted, if you guys did not catch John, I troll him often looking for all the goods. And, uh, I put a post up in the affiliate owners group. And John, I wanted to bring that back up because, uh, one of the reasons why I want to have the discussion now when we're talking loans was how to manage cash in emergencies. And you made a great video on it. I summarized it. Hopefully I didn't, uh, you know, destroy your, your message here, but I wanted to bring this up. And kind of talk through first, because I think This is the immediate. You talked about the issue with them not having people to process loans. Just so you guys are aware, it's likely you're not going to see that money for several weeks to a month or more. So I want you guys to be in the understanding of, you know, what to do with the cash you do have and possibly some of the lines. But John, if we could spend some time here and then I'll go through some of the loan. process itself so you guys can see why I'm saying it may take that long, uh, and what's actually worked out and what you think you're applying for may not be fully, uh, developed even. So, uh, let's kind of start here and then—

Yeah, and so I don't want to be a Debbie Downer on this, um, because I know how bad gyms need this cash. Um, I, I actually just applied for a HELOC yesterday Normal type of scenario, but obviously interest rates are phenomenal. And I was— I had a HELOC, and when I paid it off, the credit union didn't tell me they were closing it instead of letting me use it back and forth. So I was like, son of a— but they, the bank, it's not even an SBA loan, is 60 days out of processing just for that. And so with the inundation that the SBA is saying, as they're requesting, you If this is like, this is something as soon as it becomes law, or even right now, click the links. Like Chris is going to give you a bunch of great information. I would start today, tonight, you know, like don't, don't wait to apply, um, for this stuff. So when it comes to—

I'll say, John, uh, just for reference, when I did a HELOC, it took 10 days in a normal market. So just to give you guys some, some timelines, like That means that applications are overwhelming for the bank.

Yeah. So in general, obviously, the loans are going to help, but we want to still maintain a level of financial health in our gym. So the first thing is we have to realize what was a productive expense for me 2.5, 3 weeks ago is likely not a productive expense for me right now. And so I encourage you to go line item by line item, over your transactions and cut anything that is not considered essential. And right now, essential is probably paying your coaches and making sure the utility company doesn't shut off the lights, I guess, but you shouldn't be running up a big bill at this point, and negotiating with your landlord. I'm sure Chris will get into it, but there is some discussions of forgiveness on payments from your loans that go to rent. But you might need some time from your landlord and tell them what you're working on to buy yourself the window you need.

Yeah.

When it comes to managing the cash, if you're not familiar with the Profit First system, I certainly encourage you to buy the book. I think it's really good. I put my soul into it. The idea with— just the general idea of Profit First is you're effectively spending money on paper first. And you're going to do that by moving your cash into separate bank accounts so that you know that it's set aside for some specific purposes. Some of those purposes are going to be your tax burden, distributing money for profit. Paying yourself and equipment. So those are the 4 accounts I want to talk about now as they relate to managing things in an emergency. The first thing is you cut back on things like equipment needs and you cut back on profit distributions. Now I want— when I get done with this, I want to come back to that statement though, because there's a catch-22 with it. Anyway, so if I have been using Profit First and I have money set aside, I'm going to use what was going to be profit distributions first. Because half that account actually is supposed to be my rainy day fund. So I want to use that first because this would be considered a rainy day or rainy quarter, depending on how you look at it. When it comes to equipment budgets, you aren't going to have the same wear and tear on your equipment right now. Not to mention, it's kind of a bit of a rainy day fund as well. So if you're looking at operating expenses or the cash you set aside for future equipment needs, use your equipment budget.

I'd be curious, John, if you guys could put in the chat, on average, do you know how much you're spending on equipment? It'd be interesting just to have that exercise to say, hey, you could potentially be looking at— I know For us, it's somewhere around $600, uh, but that's like $1,800 over the course of this period if we're in this for 3 months. So it does accumulate and add up.

Totally. And if that's the difference between supporting a coach, um, you know, who needs it, like, that, that's a big difference. And then of course, you've been setting aside money for taxes if you're using the Profit First system. Well, there's this strong likelihood that we are not going to have taxable income over the next few quarters as we try to manage keeping clients engaged and paying us. So you would be able to dip into that comfortably knowing that you saved for a scenario that isn't going to happen. Does that make sense? Like, your profit is just not going to be there and you pay tax on profit. From your business.

That's probably a scary thing for a lot of people too, where, you know, at the end of the year a lot of business owners will do their filing and their payments. Um, most small business— I don't know if this is fact or not, you correct me— but I don't see a lot of small business making the quarterly payments. They're waiting till the end of the year. So there could be, you know, substantial amount to spend. Just letting go of that money and feeling like, all right, uh, I can spend it for once. On, you know, the operations. Yeah, is already a, you know, kind of—

Look, in my— I understand what the IRS says with their quarterly vouchers. As a self-employed person, which if you're a business owner, that's what the IRS considers you, they basically are making you feel like you have to pay every quarter into the tax system. And that's just not true. The only reason you pay in is to avoid an underpayment penalty, which is a way for the IRS to steal money from you if they don't feel like you paid them enough over the course of a year. And so for sure, we want to avoid that. But if you've paid in by January 15th of the following year, you can avoid the underpayment penalty. So I personally take the money, set it aside in my tax account. I don't touch it. But it's there in case of an emergency, like say, I don't know, when the state shuts down my gym. That would be an emergency. Now I can start utilizing that fund because I have it available to me. Because if I have to choose between putting money on my table or putting food on my table or sending money to the government, I choose my family every time. And you do not have to be worried about what the IRS can or can't do to you because you may have made that decision. As long as you communicate with them, I promise it is not bad. They just hate it when they're ignored. So if you don't end up making your tax payments, you're going to be fine. And if you're worried about it, feel free to reach out to us. We can kind of walk you through the full process on how that works. So on that note, too, with taxes, if you owe for your 2019 tax return, The government has extended the deadline until July 15th. What this means to me as a gym owner is I for sure as crap am not paying that tax bill until July 15th. And even potentially when July 15th comes rolling around, depending on how the world looks like in 3 months, I may not pay it then either. If things have gotten back to somewhat of a norm, yeah, I might be more comfortable knowing that I have more predictable income coming into my gym.

Right. Makes sense.

But yeah, but I would not, I would not send a payment in now. That is one of the reasons why they're allowing you to extend. Um, the other thing I would say though is if you think you're going to get a refund, file as soon as possible. Go ahead and get that refund into your bank as quickly as possible. And then the last note you have here is, um, about—

This one, uh, was on my mind because obviously we love our coaches. We love you know, our teams and the moment most gyms switched to an online platform and many did not go with a model of say every single coach was coaching an online class. Some were doing remote programming with no video. Instantly payroll, like, and, uh, that's scary on one end that money is there, but then you have this people component, right? But I want this to be a lesson, so I included it because I think it's really, you know, when I saw it, I was like, yeah, that's, that's going to play a big role.

Yeah. So, I mean, gosh, it is a difficult time for us to be gym owners for sure, because there's— you're trying to balance, I want to have a gym that I can reopen when I'm able to reopen, and you want to balance supporting the coaches who have been good to you. Over however long they've been with you. And so I know some people who lay off employees are getting a lot of grief. I would just say extend them a little bit of grace because they likely are doing it so that they can open their business back up when this is over. And honestly, right now, if you had to lay off W-2 coaches, it's better that you do it right now so they can get unemployment. Versus waiting and unemployment may not be available for them because, I mean, a lot of people are talking, it's kind of first come, first serve. So there are just so many different factors that are in play when it comes to that. But if you are in a position, obviously we want to take care of our coaches as best we can as well. So let me go back to one last point and then, Chris, you can give us all the rundown on the loan stuff.

Cool.

We still recommend using your Profit First system and not changing your allocation percentages yet. The reason being, if you shift all your percentages and just keep all your money in your operating expense account, you run the risk that is always the risk by having all your money in one account, which is you might be taking on expenses or keeping expenses that you don't need. By using these percentages the Profit First system teaches and setting aside money for profit still and tax and those things, it still will force you to look at your operating expenses in the correct lens, which is with this new decrease in income, if I've lost members, I now cannot afford all my operating expense accounts, which means by default, I may need to lessen the experience that I've been providing. And of course, with your gym doors not actually open, there are probably going to be a decent amount of spending you don't need to do. Like, for example, your music streaming, that is something that you need to get rid of right now anyways, unless it's like an annual— you made an annual payment. But because I— we've done some Zoom videos And the first one we did, we were playing music and YouTube wouldn't post it. We didn't even think about it, but it's like, well, I'm paying a music license already, but it doesn't translate to posting the video online for your members to use. So just be as proactive as possible at looking at your expenses and be ruthless when it comes to cutting expenses. In this scenario, I think it's better to cut and see if you can get by without it than it is to maybe convince yourself that there's a reason why you're holding onto it.

Yeah, that's a good one. You don't realize some of those low-ticket monthly subscriptions actually add up to some big outflow. So thank you for sharing that. I think that was essential as far as What's happening in real time, cash in your bank, because there's this hope in the market where, you know, I'm going to get a loan or I'm going to get, you know, cash flow, you know, replenished. And that is the hope, but I want to walk you guys through a little bit of education on how the loans are actually going to work and set up. And then if you have questions afterwards, we can go through there. So, uh, We'll just hit it. So I want to get you guys familiar with a couple different concepts. So the first is a balloon payment and a fixed rate mortgage. So they function very similar. And when it comes to SBA, the SBA loans that I have seen that they're putting out there are fixed rate, meaning you're going to get a set consistent interest rate and that payment's going to be fixed every single month. And it's for the entire term of the loan. And in most cases, we don't know what the loan terms are even right now. I can tell you— someone popped on. Can you mute your mic there?

Yes.

In most cases, I can tell you on a fixed rate from a government or SBA loan, the intention is to go simple, you know, interest rate times the term and you get a consistent payment. However, some of these loans that you're going to see coming out are usually a 10-year term. So if those loans get up high enough, you're going to have a payment that is consistent every single month. So what happens is in a balloon, a lot of times they'll offer, you know, 5-year or 10-year repayment— or sorry, 5-year or 10-year refinance options. But they'll term the loan out for 25 years or 30 years, and that reduces the payment. But what that means for you guys, if you look for those potential scenarios, is that loan, you'd have to refinance it after 5 years or 10 years. So you would have to be in the position business health-wise to do that. Otherwise, it's 100% due at that time. So that's the difference between a balloon and a fixed. We're gonna try and recommend that you go more towards a fixed It's for stability and for, you know, confidence. And John, you mentioned before, interest rates are ridiculous right now. So the fact that you can lock in a commercial loan at 3.75% is mind-blowing to me.

Yeah, I want to lock in that lower expenses, that lower interest rate for sure.

And keep in mind, guys, you can always pay ahead in loans. And often, even in the SBA, they mentioned no prepayment penalties. So you can pay it like a 10-year loan, you can pay it like a 15-year loan. And not be penalized. So you can make additional payments to speed it up. So there's those options as well. I wanted to talk a little bit about the difference between line of credit installment. You know, John, you mentioned the line of credit. You can take line of credits out on your business. You can take them personally. Many of you guys use line of credits. They're called credit cards. In some cases where they have high interest rates, the line of credit Can be tied to your business, your business assets, even your home. I think, John, you mentioned the HELOC. Um, so that's a home equity line of credit. So essentially you have a limit that you qualify, let's call it, you know, $50,000, and then you only pay on the money that you draw. Okay, so if you draw on that money $10,000 and then you have a big boom the next month in revenue, you could pay that off and your payment's zero. So they're nice in that way. And John, to your point, you know, a lot of people like to keep those open, uh, for, uh, just options, right? Like if you, if you want to spend that money, often it's the cheaper type of interest rates you can get with a lot of flexibility to use it when you need it. Um, any questions on that, guys? Go ahead and put the chat. Uh, we can keep rolling. John, did you see anything come through?

Yeah, April just was asking, is it possible to negotiate lower rate on a current line of credit? And I said, you know, every lender is different, but you certainly should ask.

Yeah, um, well, here's, here's the thing. You can refinance current loans and possibly get a new loan, but in most cases, there's 2 ways to you know, look at the loans. Bank loans are often kept in-house or sold on the market. So, and that's the whole investment side of, you know, Wall Street. But banks that keep those loans in-house are going to say, well, why would I reduce the interest rate on a loan that I already own and I'm getting 2% more? So in some cases, you might have to go to a different bank That would then buy it, pay them off, and then you have a new bank, new loan. So that's possibly one option. Um, all right, keep it rolling, John. If you see any questions pop up, uh, or want to stop me, let's do it. So this is where, uh, the loan process becomes really important for you guys to, to know and understand. And many of you guys have gone through this in one form or another, whether it's buying a house, buying a car, getting a personal loan, you name it. And as you add assets in there, it becomes more complicated and timely. So for some of you guys that have commercial buildings, yeah, your loan's probably going to take longer if you wrap that in as collateral. And in some cases, there's promising expedited loan process, but we don't really know what that means given the volume of people going to apply. So I'll just run you through. If you have any questions, we can talk about it and I'll do the best I can to open it up. So right now, I think for the most part, the disaster relief loan is pretty much in the application phase. They've put it out there. You have a website to apply to. And when it works, apparently it's been crashing a lot. So you can apply online. They've taken your information, things like your pay stubs and your business tax returns, your personal tax returns, your bank statements. Profit and loss, stuff like that. And they basically are submitting an application, your information. It'd be no different than, you know, us taking a contact form, you know, from a prospect, only they ask for a lot more stuff. So that's the application phase. Once you submit it, it goes through often what we call pre-approval, or it's the qualifying stage. They wanna make sure that You check out that the stuff that you've put on the application is accurate, it makes sense for what you're applying for, and it puts it in, you know, someone's bucket to pay attention to, essentially. All right, and then someone's going to pick up that file and they're going to go through it and start verifying the information. And part of that verification is often like calling employers or ordering You know, your home equity, uh, in that case they do an appraisal, or on the commercial side, if you guys are in that boat, they do an appraisal and environmental inspection. Like they just add more in there depending on what they have to verify in terms of your collateral, but that's called processing. So it can hang out there until all those things get done or until they get verified. So you can already start to see the more stuff they got to check and verify, it just keeps adding up. And then lastly, there's actually the loan decision or what we call underwriting. So someone literally goes through your file, they're checking percentages, typically making sure everything was double-checked, and then it gets stamped for approval. A closing date, uh, gets set, and then you sign and get your money.

One thing I want to add there, um, just a little suggestion when you're filling out the application and Going back and forth with underwriting. I always just save a folder, whether that's in a Dropbox or in a spot, you know, it is anything that you send to them, save it in a folder. Just because as a business owner, you may be applying for loans throughout, whether it's to invest or whatever. I like what I literally was on the phone yesterday with for the HELOC. They sent me the email with the information and I was able to get it to them in like 3 minutes because I just have this folder of the typical crap that they always ask of you and it's just saved. Um, I know we're getting a lot of requests from clients right now, like, uh, can we have a copy of our last 2-year tax returns?

Yeah.

Even though we sent it to them over the years, they just didn't save it in the same spot or whatever. So save yourself some efficiency and just anything that you're attaching to send to your lender, keep it in a file.

Yeah, I can't stress that enough. Out of, you know, I mentioned I came from a lending background, and as much as people are great at organizing things, but, you know, with email coming in, and in some cases, uh, I told you about the— we'll talk about this in a little bit, but sometimes when you think you sent something in, it doesn't get there. So just prepare yourself. It is very Frustrating. So I know it's stressful already, but you're signing up for a lengthy process and one that there's not a lot of organization because it's had to be created on the fly. So, John, I wanted to show a couple examples here just of how loans are expected to come out in terms of payments. And then you guys can get an idea of playing around with a simple loan calculator. I recommend doing that. There are some qualifications to how much you can apply for. They're rough guidelines of what I've seen out there. So you may want to start thinking about this ahead of time, because when you do get to the application, they're going to ask, you know, how much are you applying for? So you've got to start thinking about that. I'm just going to plug in $50,000, guys. Like I said, in most cases, they're going to put a term I'd say somewhere around 10 years. I'd be very surprised if they put a 30-year term, John, on, you know, something like $50,000 unsecured. That'd be great to, you know, have such a loan, a short, small loan payment, but we'll play around with it and we'll see. So I'm just going to use this. This is the disaster relief rate. And then let's just take a look. So if you borrowed $50,000, you're looking at roughly a $500 payment at 10 years term at that interest rate. Okay, so if they termed it out, and that basically just means extending the term drops the payment for cash flow reasons, you see how it knocks off $200. And I'm shocked if they do 30 years. But you can see how it continues to drop the payment down, and that is really great when you can rely on that payment as the kind of the floor of what you have to pay. And then you know that you can always pay if you're having great months and speed up the loan repayment and cut down the amount of interest you're paying.

Yeah, and I was going to say too, on these loans, it does look like all of them are going to be offering some sort of period of time Before you actually have to make your first payment. Until it becomes real law though, we don't know what that number is. But just so you know, like when he was talking about the $500 payment, you likely are not going to pay that for a few months, if not 6 months, or I've even seen a year.

That's what I saw. Yeah. We're in impressive times. I will say I've never seen anything really quite like this. I don't think anyone has, but just in terms of The banking, uh, it all kind of functions as normal as far as what I've seen, but where we're starting to see a lot of easing is on the approval side. So, uh, when we get into this next step, you'll see it's getting easier. So they're easing the ability to get the loan because they want to help us keep people working, including ourselves. But also, uh, the big unknown is, uh, how much verifying they will do. That adds up to the time part. And then ultimately, you know, if you need a loan and you don't have a lot of assets or great credit, will that be a determinant of whether you get this or not? And right now it's saying no. So that's never really been— you know, that's never really happened before. All right, so here's the 3 loans that I've seen out there. And the first one is meant to be what we call a bridge loan. So you'll have to check in your local area. I know in the state of Florida, John, I don't know if this is up by you or not, but most states also have access to funding. And in the state of Florida, they responded with what's called a bridge loan. And a bridge loan is meant to be funded in 30 days or less, get you that access to the $50 grand while your application is being processed for the disaster relief or the 7. So it helps you with cash flow where that money's in your account. And then it's meant to, at the time of the disaster relief loan, it pays off the $50 grand and rolls it into the new loan. So you really only have one loan payment, but that's what we call a bridge loan.

Yeah. So just obviously not to, you know, be condescending here. It's not, it's literally bridging your current state of emergency to when you will actually get the loan, which we know will take Probably 2 to 3 months optimistically, I think. So it, it just builds that bridge. That's why they call it bridge loans.

Yeah, I think you hit it on the head as far as the timing goes, is why that most states are saying, hey, we're going to tap into our emergency and make these small business loans to get us as small businesses through this period. Because if cash dries up, you need access to credit. And if, you know, credit has high interest rates, you're going to want Something like a bridge loan. A bridge loan right now in the state of Florida is 0% interest for a year. And even though, say, I don't have the ability to make that payment, you can use the funds to make the payment as well. So keep that in mind when you get that money. It's all at once and you can pay it with the loan proceeds. Um, all right, so here's the big 2 that are really out there. You've got the disaster relief SBA loan Um, they've changed the name like twice, so I don't, I don't really know what they're calling it now. And then we've got the SBA 7, the CARES loan. Uh, this— both these loan forms are— have always been there. Um, so just know it— the disaster relief, being in Florida, uh, is heavily relied on because we have hurricanes. And, you know, if you're— if you get completely wiped out by a hurricane, it's a disaster. So there's actual funds within federal government that you can apply for. And in some cases it can be grants. So some of that is still built into this current bill. So just know there's 2 forms and they just changed this, John. I was reading through this. You can apply now for both of these, which is—

Like at the same time?

Yes. So here's where, whether you should apply for it, I think you should. And here's why. And you can see I'm saying apply now. So here's why. Um, you're going to notice that the disaster relief is going to be the harder one to apply for. This is the one where the site keeps crashing. And it's getting to the point where I think the servers are overloaded. It gains access to a little bit cheaper money, longer terms. However, people have resorted to printing out the application and then mailing everything in. There is this like mass like thought that I need to get in line and you need to go ahead and apply for that online. We'll post it in the comments below, but that is worth gaining access to. And like I said, if you don't need it, there's no cost to it in most cases where you can pay it back. But if you do need it, or you could, you know, see fit that you have other reasons to use it, you can use it for payroll, you can use it for marketing, you can use it for A lot of different things, and that is about as cheap of a loan you're ever going to see on the commercial side. So I think that is worth noting, John, of just saying, hey, like, it's good to have capital. And if you don't have an immediate need for it, but you are finding yourself in a position, you know, you're running low on payroll expenses, or in 2 weeks We may not see the same number of members. So it's, it's kind of hard to predict that. So go ahead and apply now because 2 weeks from now might be a whole different scenario inside the gym realm. Yeah.

And with that, a lot of times traditionally loans have prepayment penalties, but everything that we've seen, even in the drafts, has never— hasn't changed yet. So I assume this is going to stick with law. There are not going to be prepayment penalties here. So Like where he's saying apply now just in case, and if you end up getting it but you don't really think you need it, that's fine. Let it sit in a bank account until the storm passes, pay it all back, it's fine.

Yeah, I would agree to that. And then the, the CARES loan, this one functions a little differently. Um, I actually have a 7 loan right now on my commercial building, and they— it's a traditional, it's probably the most popular form of SBA loans. Um, but they attach some things that are fairly compelling to go that route too, is this is the one that people are talking about getting forgiveness on payroll. So they just released or modified it in the new writing of what I've seen. You'll get up to 2.5 months of payroll relief. So say for instance, your payroll is at $10,000 a month and You know, it'd be— what is that, $25,000? That can be forgiven. In many cases, it's, it's free money, essentially. However, like we keep talking about, if you're going to keep your staff on board and continue to do that, you have to have cash to pay them.

Right?

Like, literally, you, you have to cut checks until this money kicks in. So the gap is really the challenge, I think, for most small businesses. if the cash flow has, you know, dried up from loss of membership revenue.

Yeah. Hey, will you, Chris, will you mute Josh real fast? He's not seeing my messages.

Yep, got him.

Oh, perfect. Thanks.

All right, so those are the 3 different forms, um, and I'm saying, you know, based on what I've recently read, it's worth applying, uh, to both. And then the piece that you will likely have, um, a better experience is with the 7, because what they just changed on that is now— and I knew this was going to happen— where if they tried to funnel everything in through a website, the problem that they're facing is what John originally mentioned, is actually going through all these steps with not enough people. So the only way to relieve that is now ask for help from the banks. And the credit unions. So what they've now done is gain access to any of your local banks, any of your local credit unions that are approved to be SBA lenders can now handle those types of specific care. So you're, you're actually going to get a direct contact. You're going to, you know, be able to— well, you can't drive in this state, but you'll be able to, you know, email or message or call your local credit union or bank and actually have direct contact. So I think it'll give at least the sense of confidence that someone's managing your account, someone's pushing it through and working on it. So it may likely expedite things and be a better loan experience than what John and I were talking about before, where if you have no contact, you don't even know who has your loan or who's servicing it, who's working on it. It can be very frustrating in that regard.

Yeah, and to that point, uh, like you're saying, it probably will get processed faster. This is from the actual bill. It says lenders will have greater Greater authority to approve loans without receipt of SBA approval. So typically they have to wait on the SBA to get back to them. They're saying with this law, the lenders will be able to make their own in-house decisions. So you'll likely get it faster because it'll be on their system that you're applying instead of the SBA, which already this law hasn't even passed and the SBA is already inundated and their site is crashing. I've heard if you want, your best chance. You have to wake up at like 2 AM or 4 AM in the morning to use the website at that point, because that's when it's the lowest peak. And with that in mind too, I, I just want to highlight something he said, what Chris said, man. If you use the loan proceeds for payroll or rent, the portion that you use will be forgiven. I mean, that is literally free money. Okay. You can take care of your coaches, keep the doors open, or I mean, keep the facility there so that when doors can open, you can do that and likely not have to pay back the money you used. That's huge, which is, I think, one of the reasons why they have such a huge influx of people applying for it, because like, wow. I want to apply for this before they change their mind.

Here's the catch though, John, and what I read was you have to continue to make those payroll payments, and that will be the challenge for many people that don't have incoming revenue and where to get that money from. So just know that they're working out the piece, and this is the one that felt most great to me, was for business owners. So some of you guys don't pay yourself through Like a W-2, you know, sometimes it's guaranteed income or distributions, and they're not going to count some of that money towards payroll. Um, so that— It's on one end, it's like in normal times, right, John? It's like having a certain structure benefits you from avoiding payroll taxes. And then this time, like, they are literally trying to look at what you've submitted to them. And I'm glad they included some of it in there, but it's a little unclear to me. Um, you know, and I guess the difference between distribution would be if you have a partner and you're taking a percentage of that, uh, you know, profit every month versus guaranteed is you're just taking an additional draw with no percentage where you're just taking it above and beyond, right?

Usually the distinction, and this has been the case in the tax law forever, Is between, am I paying self-employment tax on the income or am I avoiding self-employment tax? This is no different in this scenario. Look, and I don't, I don't want to get anyone's hopes up. I imagine whatever they come up with, it will not be favorable for the owner.

Hmm.

Because the purpose of the law is to keep people employed. And for whatever reason, they just don't look at us, even though we're the ones who are employing people. It's just, it's asinine. Like, I even, I've had owners apply for unemployment and get denied because they were the owner. Like, well, we don't give unemployment to owners of the business. Like, it's like, what? So, and just to clarify that too, because there has a law that's been passed relating to tax credit. And if you've had to lay off, or if you've had an employee have to be at home because they had the coronavirus, Or their family has coronavirus, or they have to be at home to watch their kids who can't be in school anymore, the government is reimbursing a certain portion of those people's salaries just so you are incentivized to keep them employed. They have a section for self-employed people in that law, and it is not nearly as great as the section for the employees. So I expect the same type of treatment in this as well.

Yep. So one, I just want to thank you, John, for coming on and offering up all the info and hanging with us. And then 2, here's all our contact information. If you want all of this information on our slides, I'll go ahead and put them into the comments section as well as I'll post that calculator for you guys to play around with some of the payments. I want to take the next, you know, 2, 3 minutes if, John, you got the time to just hang and see if they have any questions and we'll go from there.