April 13 PPP and EIDL Update – CARES Act stimulus package for small business

Hello and welcome to the Steven Carlson Show, I’m Steven Carlson.

Wow . . . just wow. . . I do not even know where to start.

Of course, I know you are all smart people and already know this, but just in case a very quick background.  Even if the first few seconds is a review for you, stick with me through the end of the video as I will give updates, tips I’ve learned, a few tricks I think might help, and my analysis of what I think is going to happen next.

Don’t forget to like & subscribe to this video, it really helps with the YouTube algorithm and I really appreciate that, Thanks!

The US Congress has tasked the Small Business Administration (the SBA) with administering a large percentage of the $2 trillion-dollar economic stimulus package referred to as the CARES Act.  Specifically, the Paycheck Protection Program (PPP) and Economic Injury Disaster Loan program (EIDL).

The PPP gives small businesses with less than 500-employees, a forgivable loan (basically free money) to help pay 2.5 months of payroll.

And the EIDL gives you the option of taking out a low-interest loan to help cover other business-related expenses.  Originally, it was reported that small-businesses would get a $10k advance of their loan money within 3-days, but since it has been two weeks and people only started getting some of it last Friday, well . . . we know how this goes with government bureaucracy.

While on the subject of government bureaucracy, I do prefer to keep my channel free from the ‘right vs. left’ narrative as this is a business channel not a political science channel.  For anyone that is interested in learning how both parties have profited from and seriously endanger the American Dream, check out my book ‘America Hijacked’ – link in the description.

Ok, now back to the current topic at hand.

The whole situation is one major cluster-[you-know-what] with the Treasury, SBA, Senators, Congress, business reporters, YouTubers, etc., all giving conflicting information.  It is not that any of these people or groups are trying to give out misinformation, the problem is there is no single concise set of guidelines for these programs and they are being interpreted by each person slightly differently.

As I covered in the previous video ‘SBA $10,000 Small Business Grant EIDL – COVID 19 CARES Act Stimulus #Fail’ (link in description) people were originally expecting a flat $10k free grant to all small businesses that applied.  Whereas, after more careful reading of the law, and some slight updated guidance from the SBA, it was discovered businesses would get UP TO $10,000 based upon a formula of $1,000 per employee.

On Friday, April 10th, around 7pm I received an email from Experian notifying me that a credit inquiry had been placed on my credit report from the SBA.  This was a good sign as it was the first indication from the SBA that anything was taking place on my loan application and grant.

As reported by Meet Kevin earlier on Friday afternoon he suggested that some people may be skipped by the loan/grant process if they have a Credit Freeze on their credit report.  While this is only speculation, it does make sense, because the SBA is probably triaging the applications and they are processing the ‘easy ones’ first.  

In my case, by pure luck, I had already removed my freeze as I was working with Wells Fargo on some real estate deals right as this whole pandemic kicked off.

Now this morning, Monday, April 13, I received another Experian notification of a second credit inquiry on my report.  While this sucks having two inquires on my report, as it knocked my score down 5 points, it makes sense as I have two businesses that applied for the EIDL.

As of the time of me recording this video I have yet to actually receiving the EIDL grant money, nor have I received any additional communications from the SBA, based upon what others have said that within about a business day of the inquiry showing up others have received their grant money.  So, I presume it will come in today. 

Now, let’s switch over to the PPP loan debacle.

As I covered in more detail my video ‘SBA COVID 19 Stimulus Package – Payroll Protection (PPP) Loan Update: Loan Funded’ (link in description) the national banks completely failed small businesses here and a vast majority of loans at the big banks are being delayed, stonewalled, denied, or just ignored, whereas the small, local, community banks are processing these loans assembly-line style.

A few asked in my previous video what bank we used to get our PPP loan processed and approved.  We went through Blue Ridge Bank, they have about a dozen or so locations throughout Maryland, DC, Virginia, and North Carolina, with their biggest concentration in the ‘Blue Ridge’ mountains area of Virginia and North Carolina.

For any viewers in those areas I would highly recommend Blue Ridge Bank.  If you are outside of their banking area you can check out the Independent Community Bankers of America at www.icba.org and click on “Find A Community Bank”

At least 75% of the funds from the PPP must be used to pay payroll, check out my previous video for a full breakdown of the numbers.

Once you apply for the PPP, and I hope you get it, you then have some things to think about.  If you also applied for the EIDL, you are free to keep the advance of $1,000 – $10,000 even if you choose not to take the EIDL.  This might be the best option for you, of course, remember I am just a dude on the internet, so check with your CPA.

The reason why I feel this might be the best case is if you get both the PPP and the EIDL, you must use the PPP funds to pay off the EIDL loan.  So basically, it was a waste of time getting the EIDL. 

One thing that I do not know the answer to, so if you know, please comment below.  I wonder for a moment, in a hypothetical situation.  Let’s say you get an EIDL for $30,000 and a PPP for $75,000.  The PPP rules say you must use 75% of it to pay payroll, but if you also have an EIDL you must first pay off the EIDL with your PPP loan. 

So, my thought is, and of course you most definitely should check with your CPA first as I am not sure if this is even legal or not: if you use the $30,000 EIDL to pay other business expenses, that would reduce your PPP funds down to $45,000.  In theory, now are now only obligated to spend 75% of $45,000 on payroll.  Thus, giving you extra funds to pay emergency business expenses that you would not technically fall under the PPP.

Remember the EIDL is a loan with low interest, whereas the PPP (if used per the rules) can be converted into a forgivable loan of free money.

So, you are probably wondering why I am encouraging small business owners to put less of their money towards payroll.  Actually, I am not, allow me to explain.  My bigger concern is how the 75% is mandated and if a business falls short of this, even if out of no fault of their own, they may lose the convertibility to a grant and risk having to pay back the full amount.

Why would this be a concern of mine?  The reason is simple.  Also, part of the CARES Act was an increase in unemployment benefits.  Depending on a number of factors that are too complex for me to give justice in this short YouTube video, depending on where a person lives in the country, they may be able to file for unemployment and actually get paid MORE than their previous pay at their former job.  In many cases employees can get between $15-25 per hour with these benefits, and with many employees that is way more money than when they worked, all for just staying at home.

The issue here lies in how some less than honorable individuals will choose to stay on unemployment rather than return to their jobs at small businesses. 

What happens to small businesses if they are unable to rehire their previous employees and maintain the 75% funds to payroll ratio?  Yes, you guessed it, they get screwed and this is what scares me the most for these small businesses, because I feel, many of them will get trapped by the PPP and be forced to file for bankruptcy and close their doors.

Do not let this happen to you.

Luckily, AutoCorner runs a very small ship of 3 employees that are all very dedicated to keeping the business running and especially our head of Tech Support Bryan, I know his morals and personal character would never allow him to take unemployment for a few months rather than continue to work for us.  Other small businesses many not have the luxury of dedicated employees with strong personal character.

Stay tuned for my other videos.  I have one coming out tomorrow that explains the pluses and minuses of Life Insurance Annuities and if they are a smart investment or not, perfect discussion during a financial crisis.  I am also working on a video that will be out shortly on where you should invest $100 or $1,000 in today’s market that will almost guarantee you amazing returns.

Until those videos launch make sure you check out the Webull link in the description, as they are giving away 2 FREE stocks when you open and fund your trading account. 

Thanks for watching, I really hope you enjoyed the video.  Please make sure you like & subscribe. 

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