The Three U’s Of The Apocalypse

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This is the seventh edition of my New Regular series, which is devoted to how small businesses have been impacted by the coronavirus shutdown.

In barely more than the lifespan of a housefly, we’ve been extruded through a pandemic wormhole, from a place called normal into a new reality devoid of that concept. Along the way, the orbit of our lives has been altered by the rude gravity of what I call the “Three U’s of the Apocalypse”:

  • an Unprecedented coronavirus pandemic,
  • precipitating an Unprecedented economic shutdown,
  • necessitating Unprecedented direct government assistance.

Regarding that last U, it’s time for a 90-day update, including new rules and offerings.

On March 27, as the CARES Act was being signed, you saw my first report before there was a Paycheck Protection Program (PPP). Since then, you’ve had chances to apply for at least two financial assistance options. Note: qualifying rules are different for entities like S Corps and LLCs than for sole proprietors and freelancers (millions in each category).

Since the end of March, Congress took two passes to appropriate over $600 billion for the heroes just mentioned. In between, the Treasury Department and the SBA created the PPP structure, which was then executed by thousands of banks across America. The result was 4.5 million small business loans totaling over $500 billion (yes, there is some left, see below). The average loan was $113,000, but almost 80% were for less than $100,000, and eight-of-ten of those were under $50,000. That was the equivalent of 29 years of SBA loans. Unprecedented.

Explicit in the name, PPP funds helped small employers make payroll during the shutdown/stay home firewall imposed between businesses and customers. And the sprinkles on this cupcake is that if certain conditions are met by the borrower, the loan will be converted into a grant – fully forgiven. Happy birthday.

Now, let’s bring things current.

1. More money: If you haven’t availed yourself of a PPP loan, there currently is money sitting in the pot waiting for you, at least until August 8. Contact a community bank near you – they’ll help you and treat you like family. 

2. More flexibility: As policy made the acquaintance of reality, by June 1, the government learned that the PPP time strictures were not reasonable in the real world of operating a small business during a pandemic. Consequently, the PPP’s “75% for payroll and 25% for other expenses spent over eight weeks” requirement was adjusted to 60% and 40% respectively, with the application of funds window expanded to 24 weeks. The interest rate is still 1%, but the term went from 24 months to 60. More sprinkles.

3. More time: The PPP forgiveness intention hasn’t changed, but the process has. In early June, forgiveness forms were sent out to early participants when eight weeks was the qualifying period. The first forms were 11 pages long and looked like homework only a CPA could love. But then everybody got a cherry on their sprinkles with a homework reprieve when the forgiveness period was extended to 24 weeks.

4. New forms: The 3508 EZ Loan Forgiveness Application Form (replacing the homework) is less than three pages (thus the “EZ”). Even I can complete it (I won’t – I have people.) This one is for PPP borrowers who did NOT reduce employee compensation or hours. The other form, 3508 (non-EZ), is for those who DID change those two payroll parameters. This one is only five pages long, but it’s still homework for your CPA. You should be able to find both forms on your bank’s website.

5. Relax: For now, don’t get your tidies in a twist about submitting the forgiveness documents. You have more time and, according to my bank sources, even if you submitted a completed 3508 today, apparently banks currently don’t have “a conduit through which to submit your form to the SBA.” But stay tuned and stay close to your banker (six feet, please).

6. EIDL grant: The Economic Injury Disaster Loan Emergency Advance program was a funded SBA legacy program years before anybody heard of coronavirus. So, when the first pandemic distress signal was raised, EIDL was the first responder.

For now, an EIDL grant is still available, based on $1,000 per employee with a max of $10,000. Apply at SBA.gov and if you qualify, bada-bing-bada-bam, these funds will be deposited straight into your bank account. Please note that your ultimate forgiveness number will not exceed your PPP loan amount. So, if your PPP loan is fully forgiven, you’ll have to pay back the EIDL advance.

7. EIDL loan: Subsequent to the EIDL grant, there’s now an expedited EIDL loan offering direct from the SBA. You choose the amount – within the number the SBA sets for you – and then pay it off at 3.75% interest over 30 years. If you’re already an EIDL applicant, you may receive this offer by email. You can see the array of SBA assistance, including EIDL options (read the terms), at https://disasterloan.sba.gov/ela.

Finally, when I started my small business 31 years ago, I didn’t have white hair and was three inches taller. I’ve been around a long time and have seen a lot of things. But never anything like the Three U’s of the Apocalypse: Unprecedented coronavirus pandemic – Unprecedented political, economic shutdown – needing Unprecedented government bailout of small businesses.

And I pray none of us ever do again.

Write this on a rock … From this laissez-faire true believer: Let the government show you the money.

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