The Paycheck Protection Program promises aid for small businesses in need. But some business owners wonder if it’s unpatriotic to take the money.
On The BIGG Success Show, we discuss the question underlying certain questions we’ve had, from a number of our clients, about the Paycheck Protection Program (PPP). Some wonder: Is it unpatriotic to participate in this program? Here’s a summary of that discussion.
Business owners – we are an independent lot, are we not? Well, that’s why the idea of taking money from the government is like fingers on a chalkboard to some of them.
Some entrepreneurs think that taking government money through something like the Paycheck Protection Program is unpatriotic.
So is it unpatriotic?
N – O. No!
We are encouraging our clients in any business to take advantage of this program. Let’s talk about some FAQs about the PPP, including some you may not see anywhere else.
Talk with your professional advisors
The main professional advisor to talk with is your banker. But you should also want to talk with your CPA, just to make sure you understand the PPP and its implications on your finances. And you to your attorney to cover all the bases.
An overview: How does the Paycheck Protection Program work?
The deadline to apply is June 30 2020. It’s first-come, first-serve. We suggest you “get in line” right away.
You can borrow up to your monthly payroll times 2.5. Think about that. The government is giving you money to cover two-and-a-half months of payroll.
There’s no collateral. There’s no personal guarantee. There are no fees. You don’t see small business loans like this.
There’s a two-page application. They say it takes about eight minutes to complete. If you have your paperwork (i.e. payroll information) in place, that’s probably a good estimate of time to complete.
Note that it’s not like a regular loan application, where you have to provide three years of financial statements – Income Statements, Balance Sheets, and Cash Flow Statements, and a few years of personal and business income tax returns. The only numbers asked for on the application is your payroll data. It’s about the simplest loan you’ll ever see.
The interest rate is 1%. How often can small business owners borrow at 1%? You won’t have to make a payment for six months, although interest does begin accruing immediately. You have two years to pay it off.
But – and this is the biggest “but” you’ll ever see, but it’s only spelled with one “t” – there’s a kicker. Now usually- when we’re financing, the kicker usually goes to the person giving the money. In this case, the kicker goes to the person getting the money.
If you meet certain conditions – in general, if you keep your payroll where it was last year and levels at 75% or more of what you had paid last year, then the government will let you apply to forgive this loan.
So in other words, this loan can very simply turn into a grant. It’s like the government investing in your business at the rate of two and a half times your monthly payroll!
Want to learn more? Check out the application form and a great infographic summarizing the Paycheck Protection Program from the U.S. Chamber of Commerce
Am I crowding out others who need the money more?
No. First, the only way to NOT participate in this program is if they don’t apply. So, if they apply, and you apply, you’re both in line. Second, there are hints that there’s more coming.
So don’t look at it as a finite pool. Right now, look at this as the government wanting to get things going. And they have finally caught on – small businesses are the drivers of good economies. This is designed to help all businesses stay on their feet. So don’t look at it as “taking money away from another business owner”. See it as keeping somebody on your payroll.
Don’t stand off to the side and end up needing the money for something unexpected that you didn’t think about. It’s so hard right now, with all the uncertainty, to know what could happen, what unexpected costs could come on top of everything else.
We don’t know how long this pandemic is going to last. We don’t know what else may hit us. It seems the best course of action is to apply if you qualify.
Aren’t my kids and grand kids going to have to pay this down the road?
We’ve had clients who are looking at our national debt and thinking about $2.2 trillion (yes – trillion with a “t”) getting added to it. Which just means more money for their kids and grand kids to pay back.
Our answer is to simply step back and look at the macro-situation. Not your micro-situation. The macro-situation is that we are facing something we have never faced before. We have had businesses ordered to close down by the government. The economy has been shut down, with the exception of absolute essentials.
Because of that, we want to try to get back on a stable foundation as quickly as possible. Not taking this money, not getting profitable, not getting the growth train going again, may add more debt.
Smartly, the federal government realizes we need to get small businesses through these troubling times. Then we need to help them get back to the growth plans they had before.
By taking this money, you have all of that possibility in your hand. So by all means, take a look at this program. And don’t think that it’s going to hurt your grand kids in the long run. Think about how it’s going to help them, because you help the economy by employing people.
How to think about the Paycheck Protection Program
Get past the current situation. Just think about your whole business and the future.
First, find the patch for any issues you may have in the short run. Let the money keep you and your people going in spite of the shocks you faced to your finances.
Think beyond the past. What will happen if a major customer can’t pay or a vendor suddenly can’t supply what you need? These are some things you have to think about in the short term.
Second, think about the long term. Even if you had stockpiled cash and don’t need the money in the short run, how will you grow in the long run? You may be able to use this capital to jump-start your growth plans as soon as the pandemic is under control and the economy is back in business. After all, growth takes money.
Call your banker. If they won’t help you, find another one. There are plenty of banks wanting to make these Paycheck Protection Program forgivable loans – especially community banks.
Here’s to your BIGG success!
George “The Professor” & Mary-Lynn
Co-Founders, BIGG Success
Direct link to The Bigg Success Show audio file | podcast: