Vol 11. - The Paycheck Protection Program (PPP)
In this episode, we are discussing The Paycheck Protection Program (PPP) which is part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Since recording, the first wave of funds has run out but there has been $175 billion more designated for the second round of funding. We cover:
Who has access to these funds
Forgivability
How to apply
Limited amount of funds available
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TRANSCRIPT:
Naseema McElroy (00:01): All right. So honored to have Leisa Peterson back with us again to talk about financial issues that are coming up right now because everyday things are changing. And so today we are going to talk about the stimulus package and what it has to offer for people who have small businesses and there's a lot out there, but we're going to have speak specifically about one program in general. So Leisa, can you tell us about the PPP program and who it's for and how it benefits them?
Leisa Peterson (00:34): Sure. So this is the paycheck protection program that was part of the care stimulus package and it incentivizes owners of businesses to keep workers on their payroll. There was originally about 349 billion offered up in forgivable loans to small businesses due to COVID. It's available to any business with less than 500 employees and applies to sole proprietorships, independent contractors, self-employed people, private nonprofits for five Oh one C veterans organizations and tribal businesses. So it is what I think has been getting a lot of buzz lately. People trying to figure out like is this something that applies to me? The idea and the reason it's so good and why so many people sort of went Gaga about it is because normally the SBA gives you a loan and you have to pay it back. And in this case it's fully forgiven if the loan proceeds are used for payroll costs, interest on mortgages, rent or utilities over the eight week period after the loan is made. So you need to maintain your employees and compensation levels to receive the full forgiveness so that essentially that money needs to be paid out. It isn't just to go in your savings account.
Naseema McElroy (02:00): Right. And so it's a substantial amount of money. Right. And is it paid monthly?
Leisa Peterson (02:06): I think it's a onetime thing where once you get approved then the money comes into your account. Like I've been working through the process and through kabbage.com and they just wanted the information to go directly deposit that directly into in my bank account when it was done. So, and it's a super streamlined process in comparison to normal SBA loans, which can take long time to do.
Naseema McElroy (02:32): Yeah, I can imagine. And I'm glad things are streamlined. So I know you said that it's business for businesses under 500 employees, but is it just that general like if you have or is it like self proprietors S-Corps? Like what kind of business structure do you have to have in place?
Leisa Peterson (02:50): Yeah, the big thing, it can be any type of business. I think the big thing that I was watching and paying attention and deciding if I could apply to it through is because of having an employee and also paying myself as an employee through my business. So that is kind of when I look at the paperwork that was requested of me, they were asking for filing that the payroll company, I work with supplies to the government on a quarterly basis. So that was one criteria. My sense is is that there are different ways like when in doubt with something like this, I would say if you have a small business and even if you're not sure, you can do it, like go ahead and apply. Like you know what's going to happen. You'll be turned down maybe, but I think it's better even if you don't have an employee.
Leisa Peterson (03:40): But you're paying yourself a regular amount of money through your business, then that would be worthwhile to at least apply to see what you might qualify for. So I think this is where it gets really fuzzy and there's been a lot of confusion. Each person has to assess if they fit or not. But I would say when in doubt, go ahead and apply. The trick also that caused a lot of headache is, we're a few weeks into it now, but originally they said it's going to be available and the community banks, the small banks, like the Kabbage of the world, we're more prepared electronically to set things up than the big banks. And then the big banks, many of them or even medium sized banks came back and said, if you don't have an account with us, so like a business checking account, then don't apply with us.
Leisa Peterson (04:27): We're only going to help our clients. So there was a lot of confusion and mayhem. Also, Wells Fargo has been super lagging behind, whereas they're the biggest SBA loan provider out there. But they didn't get their systems created fast enough. So they still have not taken applications yet and now they're saying the program might run out of money by the time we're actually available to do this. So those are the sorts of things that uh, yeah, you gotta be really careful and that's why I do bank with Wells and um, and I was just lucky that I applied with several different banks that many of them came back to me and said, you don't have an account with us, we can't help you. But Kabbage came back and said, here, you know, submit your application. So yeah. Oh yeah. I was going to ask you how you decided on which bank to go through for this.
Leisa Peterson (05:15): Like did you get a referral for some banks or is there just like a standard website where people apply and they say these are the banks you can apply through? How does that work? I think what's happened is there's a lot of aggregators, our friends in the fin con community who have created posts where they've linked several different of them. And I think I saw someone's post, a friend on Facebook who said Kabbage is taking applications today. And sure enough on the first day they were ready to go cause they're a technology player, right. Versus a traditional banking player. They're like a broker. And that's how I found out about them. And I've never worked with them before, which made it a little scary. I don't like entering those connectors between your bank, some company, but I know that they've been around for a while. I doubt I'll have a problem. But those are the things that you're just like, Oh I wish I could just do this through my bank.
Leisa Peterson (06:08): You know? Right. I mean it just, we hear those fraud stories or people wiping out, you know, bank accounts and it's happened to a lot of people I know. So I'm a little paranoid. I know, I know. It is a little bit scary. I mean, and they make it look so easy. You just enter your information and they'll transfer over. And then like rev, blacks, especially if you grew up like we're not having to do, like everything was like manual and there's all these checks and balances and processes and now it's like, Oh yeah, just put your password in here. Yeah. So I totally understand. Yeah it can be nerve wracking. So outside of the PPP program, what other programs are there? Well, we'll give a few more details too about the PPP, cause I'm just realizing the way that they've set it up is, let's say you get that money but you don't use it in the way.
Leisa Peterson (06:58): Like you can still use it as a loan. So you may get approved, but the criteria is not going to be forgiven. And if that were to happen, the interest rate is set at 1% it accrues over a six month deferral period. But there's a 4% cap and it, you know, so it can increase. But the idea is is that that is a way to get some cash into your business and you might pay it back, but at least you got it now if you needed it. So that's one thing about that. And um, they're due in two years, but you can pay them back early with no prepayment penalties or fees. So again, if it's not forgiven, those rates are super low. Yeah. Even if you don't qualify for the forgiveness, that's awesome. So that's going to be your first line of, you know, approach to go after that one if there's still money available.
Leisa Peterson (07:54): So that's the only other thing is they said that they were going to increase, the government said they were going to increase the caps because they saw so many people applied to them. They didn't realize how much money was going to be requested. So that may go up, which would make it some more people could come and get them. If you missed the first deadline, you know, any deadlines or it's not a deadline, it's like cap, like how much money they have available. So keep trying. If you get any pushback and watch what the government decides to do. The other program that they have as an economic injury, disaster loan emergency advance and the care act extended a loan advance of up to $10,000 to businesses that are currently experiencing hardship due to Covance. So this is of the same size and type as the PPP, but these are bigger loans.
Leisa Peterson (08:50): They can be up to $2 million and the funds are intended to help businesses cover payroll, other operating expenses. So I think that's like probably bigger businesses go after those and they also have a express bridge loan pilot program, bridge loans for up to $25,000 and I think these were always available, but there's something that people might find, you know as you go through it. I think that there's a bigger theme going on that we should probably talk about, which is during something like this, I was writing this checklist out earlier in these sorts of times. If you have a small business or a side hustle, it's like you also want to step back and ask yourself like, is this something that I am really committed to continuing because my guess is is there going to be a lot of businesses that look at all of this and say this isn't for me. I don't want to be running a business right now. It's too stressful. I'm going to focus on my job or I'm going to go get a job or what have you. Like the money we're talking about here is might not be as big of an amount in comparison to if you went out and found a job for example. Right,
Naseema McElroy (10:04): right. I like that that you put that into perspective because I think this is a time for people to reflect just on all kinds of values and this is something that I like to call it the last couple of years like the side hustle boom because everybody was just talking about side hustles and you know, making money on the side and doing all these things without like a real evaluation of the longevity of these businesses. And so yeah, like that that you mentioned that.
Leisa Peterson (10:33): Yeah, just making sure that you know that your heart is in it and that it's worth the struggle. And I mean I've gone through that this past month, like really taking stock and my husband and I talked about it and it's like he was really funny. He's like you, I don't think you'd be really happy. Like there get another job. Like I don't think it's time yet, but I think it's always good to be asking yourself those questions to make sure that you're spending your time on the things that are going to bring you the greatest joy.
Naseema McElroy (11:04): Right. This is a time of reflection. Totally. So thank God that there's all these opportunities for a little bit of an economic boost, but these things are pretty temporary and so know that they're available to you, but then know that long term there has to be a lot of analysis on what you really want to do. But yeah, thank you for sharing these options, I should say. And hopefully somebody finds these valuable, especially the fact that even if you don't think that you're going to qualify, go ahead and apply anyway because you never know. Just like I didn't know I was going to get a stimulus check and I got a stimulus check, deposit it into my bank account. Surprise. So yeah, you'd be surprised. Yes. So we're just highlighting these things so you know what's available for you because these are super challenging times and things are changing rapidly and to just keep you up to date. And so if you have any questions that you want to ask during these segments, you can ask at nursesonfirepodcast.com/ask and we'll be happy to address them here. Thank you, Leisa. Thank you.
Hey there I’m Naseema
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