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HOT TOPIC [COVID-19] Forgiveable SBA Loans For Small Biz and Freelancers

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Vigilante

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This is going to be an unpopular opinion around here, and not targeted to anyone specifically (since I don't know most of your businesses), but I don't really care.

I would encourage you to think hard about whether you need these programs. Most of you want to be a capitalist, but that means weathering the tough times as well.

I have clients, and I know others, who have literally gone to zero revenue. The money in these Bills sounds like a lot, but a couple hundred billion really isn't going to go far considering how many businesses have been forced by the government to close.

We aren't applying for any of these programs. Could we qualify? Probably. And how are they going to be able to underwrite millions of applications anyway?

But we'll survive without it, and maybe it will go to my client who does escape rooms and has literally ground to a halt, or one of the many restaurants in our town that has been forced to close but still needs to make rent payment (and retain their chef).

I'm not going to be the reason someone else has to shutter their business due to a government-mandated close.
You are assuming there is a finite amount of Fiat currency being printed and that if you take it it means somebody else’s deprived of it. Meanwhile, they are doing a third stimulus as we type. This is unprecedented window. If you pass, it’s not like it is going to your client that operates a escape room only if you abstain. The money is still flooding out, you’re just not going to receive any.

I 100% percent understand and honor your choice. However, you need to understand it is your money that is flowing out.

I’ve paid more taxes in the last few years than most people pay in a lifetime. I have no problem clawing some of it back, Especially during a window where my own cash flow is crippled.
 

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Dufresne

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This is going to be an unpopular opinion around here, and not targeted to anyone specifically (since I don't know most of your businesses), but I don't really care.

I would encourage you to think hard about whether you need these programs. Most of you want to be a capitalist, but that means weathering the tough times as well.

I have clients, and I know others, who have literally gone to zero revenue. The money in these Bills sounds like a lot, but a couple hundred billion really isn't going to go far considering how many businesses have been forced by the government to close.

We aren't applying for any of these programs. Could we qualify? Probably. And how are they going to be able to underwrite millions of applications anyway?

But we'll survive without it, and maybe it will go to my client who does escape rooms and has literally ground to a halt, or one of the many restaurants in our town that has been forced to close but still needs to make rent payment (and retain their chef).

I'm not going to be the reason someone else has to shutter their business due to a government-mandated close.
Couldn't agree more! I've encouraged businesses who are in "OK" shape to first consider reaching out to their vendors to work out a temporary waiver of payments for a month or two before blindly applying for the PPP Loan. I've helped a few companies successfully negotiate a reduction of more than $1,700 in monthly expenses for 3 months, mostly from larger vendors. For some, that's enough to maintain positive cash flow. Others like restaurants, brick & mortar retail and even dentists (At least in my area) have seen revenue drop to $0 and clearly need to consider the SBA.

I read a stat that based on census data from 2018, funds from these SBA loan programs will run out in something like 45 days...I'm guessing based on the loan inquiries I've seen thus far, it's going to run out much sooner.
 

Vigilante

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Couldn't agree more! I've encouraged businesses who are in "OK" shape to first consider reaching out to their vendors to work out a temporary waiver of payments for a month or two before blindly applying for the PPP Loan. I've helped a few companies successfully negotiate a reduction of more than $1,700 in monthly expenses for 3 months, mostly from larger vendors. For some, that's enough to maintain positive cash flow. Others like restaurants, brick & mortar retail and even dentists (At least in my area) have seen revenue drop to $0 and clearly need to consider the SBA.

I read a stat that based on census data from 2018, funds from these SBA loan programs will run out in something like 45 days...I'm guessing based on the loan inquiries I've seen thus far, it's going to run out much sooner.
They'll do more. They're on a new stimulus already and this one hasn't even distributed the cash yet. Not that it is the right thing to do, but since government is forcing the manditory shut downs that are crippling the cash flow, taking the flow that is happening already is not wrong.
 

JScott

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Haven't read the whole thread, but just to clarify from what I know (and I obviously may be wrong about some/all of it)...

- The Disaster SBA Loan is different from the Paycheck Protection Program (PPP)

- PPP is forgivable, and you can get up to 2.5x your average 2019 monthly payroll (or if you're a new business, your average monthly payroll from January/February 2020)

- PPP will start on April 3 through any qualified SBA lender (though not all lenders may be prepared on day one)

- Money must be used on payroll, rent, utilities or other existing debt

- Money is forgivable if used to keep the applied for level of payroll over the 8 weeks following the receiving of the money. If you use part of it for applicable expenses, that part will be forgiven

- The application is very simple -- some business info (name, EIN, address, etc), some owner info (name, EIN/SSN, address), a very simple payroll calculation, and some initialing next to certifications that you are applicable to receive the money. Then a signature.

- Takes about 5 minutes to fill out the application if you have your info on-hand

- If you do PPP, you are not eligible for other programs or for other businesses you may own (there's a bunch of fine print around that you can read yourself)

Here's more info and an application for PPP:

 

CareCPA

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You are assuming there is a finite amount of Fiat currency being printed and that if you take it it means somebody else’s deprived of it. Meanwhile, they are doing a third stimulus as we type. This is unprecedented window. If you pass, it’s not like it is going to your client that operates a escape room only if you abstain. The money is still flooding out, you’re just not going to receive any.

I 100% percent understand and honor your choice. However, you need to understand it is your money that is flowing out.

I’ve paid more taxes in the last few years than most people pay in a lifetime. I have no problem clawing some of it back, Especially during a window where my own cash flow is crippled.
My crystal ball says there's going to be less and less appetite to pass more stimulus. The stuff that was easy to agree to has passed. The Bills coming down the pipeline are likely to be a lot more partisan because there is substantially less urgency.

If your cash flow is crippled, then apply for the loan. I'm not here to say who does and does not deserve it. I'm explaining my thought process since on FB (and even some of this forum) I see a lot of "GIVE ME ALL THE FREE MONEY." I don't think the help will be unlimited, which means there is a finite amount that will be available in the next couple months.

Maybe I'm wrong and the cash will keep flowing, but in the short term the cash is finite, and there will absolutely be people who will be denied these loans due to lack of funds.
 

MoneyDoc

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My crystal ball says there's going to be less and less appetite to pass more stimulus. The stuff that was easy to agree to has passed. The Bills coming down the pipeline are likely to be a lot more partisan because there is substantially less urgency.

If your cash flow is crippled, then apply for the loan. I'm not here to say who does and does not deserve it. I'm explaining my thought process since on FB (and even some of this forum) I see a lot of "GIVE ME ALL THE FREE MONEY." I don't think the help will be unlimited, which means there is a finite amount that will be available in the next couple months.

Maybe I'm wrong and the cash will keep flowing, but in the short term the cash is finite, and there will absolutely be people who will be denied these loans due to lack of funds.
Here in Canada some provinces have issued warnings that if you're found to have abused the options such as mortgage deferrals or rent deferrals, there will be strict penalties. I am actually VERY glad they did introduce this as I personally have seen people that have not had 1 person lose their job call the bank and tell them they have family members laid off and can't pay the mortgage. A straight up lie. Little do they know, it's very easy for the government to find out if you lost your job or if you're not being paid anymore.
 

garyfritz

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I also respect @CareCPA's position. However, in my case, I've already lost $5000 in profit, directly and solely due to COVID. There will probably be more, and I didn't have that much to burn in the first place. So I have no qualms about claiming the $10k if I can.
 

CareCPA

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I also respect @CareCPA's position. However, in my case, I've already lost $5000 in profit, directly and solely due to COVID. There will probably be more, and I didn't have that much to burn in the first place. So I have no qualms about claiming the $10k if I can.
Then it sounds like you're the type of business this program was meant for.
 

Champion

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This is the kind of stuff I talked about in my other thead, we also have this in Germany.
 

Vigilante

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Hearing rumblings of a 10 employee minimum on the $10,000 advance
 

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I look at taking money from the government about how I look at taking money from any other criminal enterprise. Do I deserve it more than them? Sure. But I really don't wanna get shot in the face.

@CareCPA has his moral high ground
@Vigilante has his 10k
@G-Man keeps his balance with the mob as close to zero as possible
 

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biophase

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Then it sounds like you're the type of business this program was meant for.
So here’s my question. Let’s say your business loses $30k in profit due to this, but you have $250k in the bank and can easily make payroll and rent. Do you still apply?
 

MJ DeMarco

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So here’s my question. Let’s say your business loses $30k in profit due to this, but you have $250k in the bank and can easily make payroll and rent. Do you still apply?
My interpretation is NO, not for the PPP program.

As for the "disaster loan" -- I'm guessing that's more of a gray area.

PPP App below...
Screen Shot 2020-04-01 at 3.04.34 PM.png
 

GIlman

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This is what I was thinking too, but thoughts on future planning? Meaning do you get it in case something happens and you can use that loan to bridge the gap? Torn on this myself.... I applied, but don't know If i would take the money if i got approved. The wife mentioned the exact thing you did and mentioned how it made her feel 'greedy'.

My concern is we're fine right now, but in case anything happened, am I going to kick myself for not applying for it?
That’s an understandable sentiment, just remember that whether you receive any benefit or not from this law, you will be expected to pay your “fair share” in taxes to repay the debt that was created to create this program. If there was a way to not pay taxes if your didn’t receive any benefit I would be all for it.

Otherwise, I view this just like taxes, you have a legal obligation to pay what you are required, it’s not smart to pay more than you are legally required. Whether it’s a “benefit” or a direct tax fundamentally it’s all the same. It’s all money in and out do the same pot.
 

CareCPA

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So here’s my question. Let’s say your business loses $30k in profit due to this, but you have $250k in the bank and can easily make payroll and rent. Do you still apply?
I don't think the answer is black and white. The application makes you certify that you need the money due to uncertainty (as @MJ DeMarco noted).
That's a personal choice.

I've seen the same question go through the FIRE community. If you have plenty in the bank, and you don't need your business to survive, do you apply?

I don't know, that's up to you. I'm not here to draw lines in the sand, I'm just encouraging people to think instead of just walking around with their hand out.
 

biophase

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My interpretation is NO, not for the PPP program.

As for the "disaster loan" -- I'm guessing that's more of a gray area.

PPP App below...
View attachment 31764
Sorry I should have been more clear.

Let's say that you personally have $250k in the bank. But your business LLC has only $5k in the bank and you have $25k in bills, rent, etc.. coming due. And it is a single member LLC.
 

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Sorry I should have been more clear.

Let's say that you personally have $250k in the bank. But your business LLC has only $5k in the bank and you have $25k in bills, rent, etc.. coming due. And it is a single member LLC.
your personal money is not the business money. The business is an entity.
 

biophase

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your personal money is not the business money. The business is an entity.
But does that really matter for a pass-through entity? You could move the $250k from your business account into your personal account today if you wanted to.
 

Vigilante

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But does that really matter for a pass-through entity? You could move the $250k from your business account into your personal account today if you wanted to.
Which is likely why they put in financial scrutiny for loans over $200,000.
 

SD Entrepreneur

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Hearing rumblings of a 10 employee minimum on the $10,000 advance
Heard a few people saying that too but I don't think that is the case. If so, I'd imagine they would have said that upfront to eliminate tons of unnecessary applications and processing. Time will tell, I think the actual funding of the 10k will be coming real soon so we'll be hearing who has received it, who has not, etc.
 

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Nobody has heard anything yet so it appears that the 72 hour window to fund the $10,000 advance appears to be incorrect.
 

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ecommercewolf

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Nobody has heard anything yet so it appears that the 72 hour window to fund the $10,000 advance appears to be incorrect.
Thanks for the update. I'm applying today (may or may not be too late) but I'm curious to see how this all plays out.
 

MJ DeMarco

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I'm gonna go on the record to say this: In several months, to several years, we will hear stories about how these programs were bilked for millions by unscrupulous third-parties ... kinda like Medicare fraud.

This is a fraud shit-show waiting to happen... just saying.
 

Vigilante

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I'm gonna go on the record to say this: In several months, to several years, we will hear stories about how these programs were bilked for millions by unscrupulous third-parties ... kinda like Medicare fraud.

This is a fraud shit-show waiting to happen... just saying.
100%

The basic requirement is that you had a business As of three months ago. That’s about it. The business doesn’t even have to prove that it was ever doing anything.
 

biophase

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100%

The basic requirement is that you had a business As of three months ago. That’s about it. The business doesn’t even have to prove that it was ever doing anything.
For some reason, I don't think any of these things will come true. I just can't see a $10,000 advance from the government that is forgiven so easily.

I think they hammered a simple bill through Congress and now they are figuring out how to walk it back.
 

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