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Yesterday, I did a webinar for @Inc on a 90-day survival plan for businesses. There were a lot of questions we did not have time to answer, so I have tried to answer them here. Questions are in quotations.
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“If we laid off our employees, should we try to have our PPP loan start as close to when we are opening back up? If lenders are allowing us to dictate our starting date.”
This is a balance between the risk of employees bolting and cashflow management. For cashflow, you want to start employees later, but you have to look at the risk that you incur with losing employees permanently. There is no hard and fast rule...
... Use good judgment. I do always worry about losing good employees permanently.
“What is your advice for biz that use mostly independent contractors like gym teachers...? They are not included in the PPP loan calculation but the company is providing the infrastructure like facilities, systems, marketing support, and is responsible for rent, utilities, etc.”
I am a little unsure of the question, although I do appreciate it & understand we are living in pretty complex times. Depending upon your business, good contractors can be as important as good employees. This is why I think the PPP plan has some major flaws.
“Can you please address the best path forward for sole proprietors? PPP, EIDL? I& #39;m a consultant and am losing clients but not sure what to do about SBA options.”
This bums me out because I believe another flaw to PPP is geared almost exclusively to employees. However, the specific regulation seems to be changing every day so you should check the provisions. 17M people in the US are in your exact boat. I really feel bad about this.
“Who do we nudge at the bank for the PPP loan? It was uploaded onto the website…my banker doesn’t know anything?”
This question points out a flaw in my thinking so I appreciate it. I was hoping that every listener had a contact at the bank to which they are applying. This may be incorrect. Remember, though, you can always find someone at any institution who you can nudge along.
“I have had to lay off 10 employees because of the crisis. I don& #39;t know if I should get in the line for a PPP loan. I almost am thinking it could help my business in the long run to reboot and not rehire them. Have you heard of other business owners feeling the same way?”
Yes, I have. This is a decision only you can make.
“If we get approved for the PPP loan, should we immediately start using that money and save our company& #39;s cash reserves?”
This is similar to a question I answered before. My main concern is not losing good employees who cannot or will not wait things out. You might have to go employee by employee on this one. I wish Congress understood the tenuous nature of cash flow in a smaller enterprise.
“Do you know the basis of forgiveness of the PPP loan as far as maintaining all employees after the 8 weeks the loan is meant to cover? I understand what we may and may not spend the loan on and the records that must be kept; I don’t understand the full terms of forgiveness.”
This is a great question that I hope everyone can read. I do not know the basis of forgiveness. But, more importantly, to me, this indicates a major flaw in PPP because Congress incorrectly thinks you can pay Peter (the employee) and not Paul (other overhead)...
...This is silly, and we need more business owners in Congress. Every business owner knows that bills come due jointly & have to be paid at regular intervals. This includes personnel costs & other costs. In specific answer to your question, keep good records & document everything
“What is the difference between the PPP loan and the Economic Injury Disaster Loan? How does it apply to small business owners with all 1099’s?”
PPP loans are a function of your payroll costs. I believe the Economic Injury Disaster Loan is a $10,000 lump sum payment to any business adversely affected by our current situation. I want to be right on this one, so here is a link you should check out. https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program-ppp">https://www.sba.gov/funding-p...
“I’m a small business owner (with 3 partners) with no employees or payroll. It seems to me that businesses like mine have been forgotten by the Government Main Street bailouts. Is there a program I’m missing?”
Thank you very much. Not that I know of under the current regulation (I may be wrong). I’m worried about the 17 million other people just like you.
“I& #39;m a sole proprietor dead in the water. I& #39;ve applied for an EIDL loan & the $10k advance. What about additional funds needed to survive? How is that calculated and when is that info going to be available? When are any of these funds actually going to be available?”
I am sorry to hear that. I don’t know the answer to any of these questions. I may be wrong (I truly may be wrong), but you are pointing out a whole in this program. However, it is very important for readers to note that the regulation is changing daily as Congress and the SBA...
... get their arms around the things that are screwed up. For me, a better plan would have been to get checks from the Treasury directly to any and all small businesses adversely affected by the virus.
“What would you recommend for an independent beauty professional? I lease space to beauty professionals and my revenue is down 100%.”
I’m really sorry to hear that. I was thinking about that the other day. I don’t know the laws around doing work in people’s homes if they would even let you do that.
“We have non SBA loans with a smaller bank, they are refusing to allow interest only payments for a few months, any ideas?”
At this point, they are going to take what you can give them. You can’t get blood from a stone. Just do the best you can.
“We have a reserve of $100K - our payroll is $38K/month. Haven’t gotten the PPP loan yet but did apply. I don’t want to go to 0 before laying off employees. What do you think would be the “close up shop, preserve the cash I have so I can open up after it’s over” level of cash?”
That is a great question, and the best person to answer that is God, but Mt. Sinai may not be available. The second-best person to answer that is you. If your total burn is $38K a month, you got about 3 months to survive without any revenue. I wish I could really understand...
... your cashflow to answer this. The best way is to do two- or three-monthly forecasts that have two or three different scenarios. Maybe your accountant can help. I want to crawl into your business to really understand it, but I don’t have enough data.
“What about the overhead not taken care of by PPP, do I cut deeply? 100% 50% what should I have for a goal?”
This is really frustrating to me because it points out a major flaw with PPP. Congress incorrectly assumes that we can delineate between personnel costs and other overhead costs. In specific answer to your question, cut the costs you can live without. Live to fight another day.
