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Ask the Expert: Small Business Recovery Loans and Small Business Finance Tips

Join us here now through Monday, April 27th!  Click Reply to Post Your Question!

 

Small and diverse businesses are feeling the impact amid this COVID-19 crisis, especially as they try to stay afloat and navigate current economic challenges. This important conversation will help you understand how to navigate through these tough times. 

 

Join AARP Expert Felicia Brown along with guests from the Small Business Administration (SBA) and Abacus Financial Business Management to talk and answer questions related to Disaster Recovery Loans, the Paycheck Protection Program and tips on how to manage your finances now and in the future.

 

 

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Finance Coach

Right now, there are thousands of small businesses offering online courses in everything from marketing and podcasting, to budgeting and coding. Many are offering free classes and programs during the pandemic. You can use this time to learn a new skill or build upon your existing trade.

 

You can also follow suit and grow your online presence by offering online classes, teaching others about your unique business and expertise.

 

 

Belva Anakwenze
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Looking forward to this discussion 

Thank You

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Newbie

I am self employed(small Chinese food carryout in Baltimore city Maryland State), I don’t have W-2 and have 1040 Schedule C, can I apply the SBA-PPP ? 

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Small Business Coach

Liksun,

 

You are eligible to apply for both programs, the EIDL and the PPP. For self-employed persons the PPP loan amount is based on the net profit on your schedule C. Thus it might be a small loan amount. The EIDL might be a more useful option for you even if it is not forgivable like the PPP loan. You should apply for both to see what's best for your circumstances. 

 

David Hincapie

Economic Development Specialist
Washington Metropolitan Area District Office (WMADO)
U.S. Small Business Administration

david.hincapie@sba.gov

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Newbie

Hi!

 

By last reply:You are eligible to apply for both programs, the EIDL and the PPP. For self-employed persons the PPP loan amount is based on the net profit on your schedule C.

 

where can I apply the ELDL and PPP? I had applied at SBA website by it did not receive any new application for PPP? I had applied ELDL at April 1, 2020 and the application confirmation number I had still received any feedback from ELDL? Can I re-apply the ELDL and where can I re-apply from internet? Thanks!

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Small Business Coach

The time for an EIDL decision is about thirty days. If you have an application number that means your application is in the queue. 

 

You apply for a PPP through a bank or non-bank lender. Most banks do not give business accounts to sole-proprietors and we know banks are only doing PPPs for their business account customers. You can apply with an online lender such as www.kabbage.com, www.lendio.com, or www.readycapital.com. 

 

Best, 

 

 

David Hincapie

Economic Development Specialist
Washington Metropolitan Area District Office (WMADO)
U.S. Small Business Administration

david.hincapie@sba.gov

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Contributor

My wife and I have our B&B set up as a 2-person LLC in Virginia so all income and profits pass through from the business to our personal 1040 for income tax purposes. Our income from the business is highly variable and we pay ourselves through EFTs from our business checking account to our personal checking account. We are closed by the governor's mandate so we have lost our income. We don't have any employees beside ourselves and we don't issue paychecks to ourselves so we have no traditional proof of income. I know there are forgivable SBA loans for small businesses but none seem to apply to businesses like ours. How do we get a forgivable loan with just EFTs for proof of income?

Larry

Gracefield Hall ™ Bed & Breakfast

Your hosts, Larry & Patricia Reynolds
https://www.GracefieldHallBnB.com

 
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Small Business Coach

Larry and Patricia, 

 

Partnerships like yours are eligible for the PPP and the EIDL. For the PPP we will use the partnership's net earnings to calculate your compensation and with that your PPP loan amount. That is, you do not apply individually, but instead apply at the partnership level as rent, mortgage interest, utilities, etc. are incurred at the partnership level, not as individual persons. As long as you meet the conditions for forgiveness, you will not have to repay this loan. You can apply for a PPP through your bank, if they are already an SBA Preferred Lending Partner or if they have recently signed up to be a PPP lender. 

 

You are also eligible to apply for an Economic Injury Disaster Loan (EIDL). It is a direct loan from the SBA and you apply for it at disasterloan.sba.gov

 

This loan is for six months of working capital. We will calculate the loan amount using the financial information in your application. The loan money can be used for payroll (if you have a payroll), mortgage notes, notes payable, accounts payable, and other fixed costs and obligations that you cannot pay now because of the emergency. This loan is not meant to replace profits or lost sales. It is working capital to help you meet the obligations your business has. 

 

Very best, 

 

David Hincapie

Economic Development Specialist
Washington Metropolitan Area District Office (WMADO)
U.S. Small Business Administration

david.hincapie@gmail.com

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Newbie

We have applied for and received the SBA advance. We are also interested in the loan and want to know when that will be coming? 

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Small Business Coach

Ellen,

 

I'm glad to hear you finally have the advance. It's not much but I hope it helps at least a little. We continue to process every application after the advance is sent. As of now a loan decision takes about thirty days. I know this is a long time but we have had millions of applications, something that has never happened before, even during major natural events like Hurricane Harvey a few years ago. We are also in the process of hiring temporary loan processors to help us get through all the applications. This is our normal practice during big surges in applications but the current surge has dwarfed everything that came before it. 

Of course this means we cannot communicate as frequently with you as you would like. Here's what I mean. Let's say I get the job of calling or e-mailing applicants with status updates, and let's say each of those takes me two minutes. If I do that 200 times/day, that's 400 minutes, or 6.67 hours/day making calls or sending e-mail updates. 
But how many loan applications can I process in 6.67 hours? 
That is the fundamental problem we have. But as I said, we are hiring more people and we should be able to speed things up. 

For now, just know if you submitted the application before last Wednesday and got your application number, then you are in the queue and we will get to it. 

Best, 

 

David Hincapie

Economic Development Specialist
Washington Metropolitan Area District Office (WMADO)
U.S. Small Business Administration

david.hincapie@sba.gov

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Newbie

meeting APRIL 27TH

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Finance Coach

Tons of new lenders are emerging to participate in the anticipated second wave of funding of the SBA PPP loans.  Many payroll providers, including QuickBooks are helping small businesses gather the necessary documentation and information in advance of the programs roll out.  Some of these payroll providers are working with SBA lenders, to process the applications seamlessly.

 

 

Belva Anakwenze
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AARP Expert

It is day four of our conversation with @DavidH519566 and @BelvaA who are serving as AARP's coaches this week to answer questions about how we can help small businesses survive druring this tough time.  @DavidH519566 recently mentioned that we are close to getting another stimulus package signed that will help more of our small businesses - good, good news.  This will also help those businesses who do not have a traditional banking relationship. 

 

Again, I want to remind you that AARP is here to help.  For employers or who have employees who are caregivers go to www.aarp.org/caregivingresources and visit www.aarp.org for more COVID-19 related resources.

 

We stand ready to take your questions!

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Finance Coach

@FeeBrown 

 

We do know that this will not last forever, but we do not know when the economy will rebound.  We of course, would never suggest anyone pull from thier retirement accounts prematurely.  Individuals should exhaust every other possiblity first.

 

We should be looking at ways to adapt our business to keep up with the changing times.  We should also look at small business loans and grants.

 

Only once we have exhaused all other resourses, should we look at tapping into our retirement funds.  If that become necessary, there is some good news. The recently passed coronavirus bill allows individuals to withdraw as much as $100,000 from 401k and IRA accounts without a 10% early withdrawal penalty if you have been affected by COVID-19. 

 

 

Belva Anakwenze
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Contributor

@DavidH519566 Yesterday, the U.S. Senate passed a bill that provides the next wave of small businesses forgivable loans, needed funds to the nation’s health care institutions and aims to boost testing capacity. Can you please provide more insight on that?

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Small Business Coach

I'm sorry I don't have any more to add. Until both houses of Congress and the President sign it, it's not official. All I can say is I'm happy to see the Congress has taken up the question and is discussing it. Best,
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AARP Expert

@DavidH519566 this is great news!  In preparation for the passing of the new stimulus money, is there something small businesses should do, now?  I know many of our small businessese dont have a banking relationship with traditional banking institutions and thus perhaps they can work with their local CDFI's and credit unions.  What can you recommend our businesses do in preparation for what we all believe will be a postive outcome?

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Small Business Coach

The most important thing to do is to understand the difference between the SBA programs.

 

The Economic Injury Disaster Loan (EIDL) is a loan for working capital. It is the oldest of the programs and can be used for payroll, mortgage payments, notes payable, accounts payable, and other obligations the business would have been able to cover under normal circumstances. The loan is designed to be easy to pay back. The rate is 3.75% for a term of up to thirty years, and the first payment is deferred for twelve months (but interest does accrue during those twelve months). There is no pre-payment penalty. 

 

The Paycheck Protection Program (PPP) is a forgivable loan intended primarily for payroll and payroll costs. If you use at least 75% of the loan money for payroll or payroll costs, and meet some other conditions, then the entire loan is forgiven. It is intended to pay employees and keep them on your payroll even if you are shut down and they cannot work or if your operations are so reduced they cannot work their usual schedule. The purpose is to keep your trained workforce on the payroll so when you re-open fully you do not have to spend time and money hiring and training new employees. 

 

The SBA Debt Relief Program is for existing SBA 7(a), 504, or microloans. The SBA will automatically pay the principal, interest, and fees for six months to help your cash flow. The SBA will do the same for new 7(a), 504, or microloans issued prior to September 27, 2020. 

 

David Hincapie

Economic Development Specialist
Washington Metropolitan Area District Office (WMADO)
U.S. Small Business Administration

david.hincapie@sba.gov

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Small Business Coach

The most important thing to do is to understand the difference between the SBA programs.

 

The Economic Injury Disaster Loan (EIDL) is a loan for working capital. It is the oldest of the programs and can be used for payroll, mortgage payments, notes payable, accounts payable, and other obligations the business would have been able to cover under normal circumstances. The loan is designed to be easy to pay back. The rate is 3.75% for a term of up to thirty years, and the first payment is deferred for twelve months (but interest does accrue during those twelve months). There is no pre-payment penalty. 

 

The Paycheck Protection Program (PPP) is a forgivable loan intended primarily for payroll and payroll costs. If you use at least 75% of the loan money for payroll or payroll costs, and meet some other conditions, then the entire loan is forgiven. It is intended to pay employees and keep them on your payroll even if you are shut down and they cannot work or if your operations are so reduced they cannot work their usual schedule. The purpose is to keep your trained workforce on the payroll so when you re-open fully you do not have to spend time and money hiring and training new employees. 

 

The SBA Debt Relief Program is for existing SBA 7(a), 504, or microloans. The SBA will automatically pay the principal, interest, and fees for six months to help your cash flow. The SBA will do the same for new 7(a), 504, or microloans issued prior to September 27, 2020. 

 

David Hincapie

Economic Development Specialist
Washington Metropolitan Area District Office (WMADO)
U.S. Small Business Administration

david.hincapie@sba.gov

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I applied for the PPP loan on April 3, 2020.  At the time we were still classified as an essential business in our state (NM)  On April 6, new guidelines came out and by April 8, 2020 we were shut down by order of the Governor.  At that time we furloughed our employees and they applied for the applicable unemployment benefits.  On April 13, 2020 our PPP loan was approved and funding is immiment.

 

My question, since I am now closed by order of the government, do I have to utilize these funds over the next 8 weeks or is there someway to utilize it if and when we are allowed to reopen?  If we have to pay these funds right away to qualify for forgiveness it doesn't really help our business, it seems like it just makes us an intermediary for unemployment insurance.

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Small Business Coach

Patrick,

 

The purpose and intent of the PPP is precisely to keep people on payroll even if they are unable to work because it is unsafe to be open. Otherwise, if you lose employees while you are shut down, then when you re-open you will have to spend time and money to hire and train new people. 


Why would you need a loan when you re-open and have revenue? If you have revenue you can pay your employees, right?


It's all in the name: Paycheck Protection Program. While you are shut down you have no revenue and the natural thing to do would be to lay off employees. Normally one business losing all revenue and liquidating would only affect the employees and business owners directly involved.

But what if this happens to many businesses? What if it happens to fifty percent, or more, of businesses precisely because we are all staying home?

If, for example, fifty percent of American workers lost their incomes then we would enter a downward spiral into a depression, because unemployed persons have no money to spend, which means other businesses would lose revenue. And so on. 


Remember, other people's spending is your income, and by extension your employees' income. And your spending and your employees' spending is another business's income, and its employees income. 

 

So, the PPP protects your employees' paychecks and protects your business too in the long run too. 

 

David Hincapie

Economic Development Specialist
Washington Metropolitan Area District Office (WMADO)
U.S. Small Business Administration

david.hincapie@sba.gov

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Contributor

@DavidH519566 this is what I have seen.

 

$310 Billion – replenishes the Small Business Administration’s (SBA) Paycheck Protection Program (PPP). The PPP offers government-backed private loans that are anticipated to be forgiven if companies spend a substantial amount to continue to pay employees (covers eight weeks of costs). Of the $310 billion, $60 billion is allotted to small banks, credit unions and community development finance institutions.

$25 Billion – is allocated to state and federal authorities to develop and fund widespread testing for testing and contact tracing related to the coronavirus.

$75 Billion – is allocated for healthcare to pay for additional personal protective equipment, setting up additional hospital spaces as well as reimbursement of providers’ pandemic-related expenses and lost revenues.

$60 Billion – funds other SBA disaster loans that includes $10 billion toward small grants.

$10 Billion – covers administrative costs and other costs.

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Finance Coach

Right now, there are thousands of small businesses offering online courses in everything from marketing and podcasting, to budgeting and coding.  Many are offering free classes and programs during the pandemic. 

 

You can use this time to learn a new skill or build upon your existing trade.  You can also follow suit and grow your online presence by offering live classes, teaching others about your unique business and skill set.

 

 

Belva Anakwenze
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Contributor

I ask for myself and other businesses owners

 

Micro sized business under 10 employees and for myself (no employees) that rent retail space to service their customers.

 

Question: The SBA programs that are available have funds where up to $10,000 will be forgiven, so why are microsized businesses being denied based on employees or credit worthiness when funds are being forgiven. These funds are for expenses to stay in business thru and after the fall out from the corona virus. We were forced to close just like the "larger" small businesses

 

I think the catagory of small business 1-500 employees needs to sub divide 

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Contributor

We own a small realestate business that has all but one independent workeres (realtors) who are no longer selling houses so we are not getting a piece of the commission to pay the rent, utilities, and other necessary bills to run the business. We only have one hourly worker and we had to lay her off. We applied for a couple grants and loans but the money was gone on the first day. Are there any available SBA grant/forgivable loan programs that have funding and we can apply to for help with our bills so we will not have to close our business? It is a Rhode Island Company.

Thank you

Nicholas Oneppo

Owner of Realestate One

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Small Business Coach

Nicholas (@coneppo),

 

The SBA has two loan programs that are suspended for now because they have run out of money. There is news that the Congress is working on appropriating funds to restart the programs but until that happens we cannot accept any new applications. I'll describe them briefly here. 

 

The Economic Injury Disaster Loan must be repaid but its terms make it relatively easy to repay if your business is profitable. The loan term is up to thirty years, the interest is 3.75%, and there is no pre-payment penalty. It is a direct loan from the SBA. You can use this loan to pay for fixed costs and obligations that you would have been able to pay if the disaster had not occurred. The newer Paycheck Protection Program is a loan for payroll and payroll costs that is forgivable if you use at least 75% of the money for payroll or payroll costs and meet a few other conditions. To see the details go to the linked pages. If Congress appropriates more money for them, we will begin taking applications again. 

Best, 

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AARP Expert

It's day three and we are still available to answer questions about how to help small businesses stay afloat. in light of the recent announcement that another stimulus bill is on the horizon, if not passed, to primarily to assist small business and hospitals. @DavidH519566 can you offer any information to our listners about what's to come, how they can access and any new information they should be aware of as these resources become available. 

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AARP Expert

@BelvaA I've been hearing in the news that many small owners and individuals are thinking of accessing their retirement funds to sure up resources to stay afloat.  What are your thoughts and recommendations on people using these funds.  We know that while this feels like this will last forever, we know it will not.  As a result, we have to make quick decisions to survive.  What does the financial services industry say about this?

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Finance Coach

@FeeBrown This is the perfect time for small businesses to pivot!  Many people are using this turn in the economy and business activity to adopt to the "new normal"  We have to make lemonade out of lemons. 

 

I know several restaurants that are now making more money in take out orders, than they ever did with seatings.  They are even saving money by operating with limited hours and staff.

 

We need to be nimble and be willing to adjust.  Think outside of the box and figure out how we can meet the need of our clients.

 

 

Belva Anakwenze
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