Unknown Speaker
Everybody, welcome back to the bold sidebar. Today I have Mike McDermott back again, he was just here a couple weeks ago, because the PPP everyone's talking about it was the hot topic. Well, since then, on June 5, the government, the federal government changed the rules again, making it frankly much easier to achieve forgiveness of your entire PPP loan, but not much easier to figure out how to achieve forgiveness. So I've asked Mike and he's generously offered to come back and we're going to keep this one a little bit short and sweet. Just it's a follow up on the last episode that Mike was on today is the 16th of June. I'm going to get this one out as fast as possible. So probably will be the 18th or 19th when you guys are listening to this. So it should still be fresh information. Mike, thanks for coming back.
Unknown Speaker
Always a pleasure, Jeff.
Unknown Speaker
Well, let's just get right into it last time. We will confection over 75% is going to be payroll. 25% is going to be other stuff. Now it's 6040. So let's let's break down, what's the 60? What's the 40? How are people going to utilize this money, be compliant and earn forgiveness?
Unknown Speaker
Sure. So you said June 5 is the kind of new date, right so that that's an important date. We'll come back to that. So the biggest thing was to the biggest things is they've extended the eight week covered period, if you remember, Originally, it was soon as you got your loan, you had eight weeks to spend that loan amount. And if you spent 75% on payroll costs, including payroll, plus health insurance, plus retirement, employer retirement contributions, only 75% was spent of the loan amount during that eight week period. And you could spend up to 25% on other cover costs, rent, utilities, more mortgage interest, those type of things, you know, what made it difficult is the loan was based on the average of two and a half times two and a half months payroll, you only had two months to spend. So if you didn't have high rent if you you know, if you're maybe a lot of people, so their payroll actually decrease. So made a challenge, I think common sense prevailed here where they realize, listen, you know, maybe especially high rent areas to perhaps like a place like New York City, if someone's looking to reopen, well, their rent is probably going to be more than 25% of their payroll costs of their total costs. So they looked at and said, Let's, let's kind of make it a 6040 split. So now 60% has to be on payroll related costs 40% on those other covered expenses, and they've also extended the period from eight weeks and out 24 weeks.
Unknown Speaker
Right. And we were talking about this before, the 24 week for the eight weeks starts on a mysterious day that the taxpayer doesn't even know Know what that day is?
Unknown Speaker
Yes, it they've clarified it. It's first day was when you were funded, but now we're being told it's when the SBA assigned your number. God only knows what that is. I mean, I think maybe a day before, you know, it's probably when you were notified that you were approved, I guess. Who knows? You know, I mean, I think hopefully, this 24 week period will make that a moot point. Anyway, I think most people should kind of qualify for that forgiveness during that extended period of time.
Unknown Speaker
Right, right. So if you got your money early on, and you went to scrambling to maybe even manipulate some of your numbers to fit into the forgiveness criteria, and you are just a little bit short, right? I mean, I'm talking a few thousand bucks, right? Sure. You know, do you think it's going to be worth it for people to now try to redo all their numbers again, and try to extend out To 24 weeks, or you think this is really designed to help the people who got the money a little bit later on in the cycle?
Unknown Speaker
Yeah, I think it's designed for those guys a little bit later on, and also probably for those that couldn't reopen immediately, okay. I mean, I did have a few clients who initially were approved for a PPP, but they're still closed for the governor's order. So it was kind of like, you paid people, employees to stay home. At the time, we kind of advise them, you kind of have to do that you have to pay these employees. Of course, after the fact now they've extended 24 weeks, it would have been nice to say you have a longer period of time so that we kind of ramp up to that, you know, kind of full capacity, if you will. So I mean, I mean, I, I think if you're close that's going to be a determination that you have to make because it is still only a 1% loan. I guess it depends on your situation. Some people are going to be I just wanted over with I met wait weeks I spent the majority of it, submit my paperwork be done. I'll pay a little bit with back. I mean, either way on the right now the if you got an ideal grant, that component of it's not forgivable anyway, with the PPP. So, you know, it's kind of may not matter anyway. So I mean, I would say Generally, if you're pretty close, I probably type in you and I very similar just, I'm not gonna worry over a few thousand dollars, I'd rather just pay it and get it, you know, get it done and know that my paperwork is in and it's off my books, because remember, it is alone, but still sitting as alone until it's forgiven.
Unknown Speaker
It's absolutely sitting. If you're looking at your bank account online, you look at the bank that you did business with. It turns out, I had the same bank that I use from my day to day business account. It's it's on there, and it's accumulating interest. Yes, it's going up. So how did this happen? Why is it Why is it higher? Because it is indeed alone, and I'm glad you reminded me about that. Ideal because I got that little bit of money early on. So something is getting paid back anyway.
Unknown Speaker
Yes, absolutely. Yeah. And while we're talking about the ideal, you know, there was a mad rush for people to kind of apply for it. Then there's kind of silence some people, I think like yourself, that PPP was delayed, but you got the grant initially, then the PPP came, and then all of a sudden I've getting clients saying, oh, by the way, I got approved for $250,000. And that really only met people who kind of really filed that within the first couple of weeks, because then it clearly got shut down because there's so much abuse by larger companies and whatnot. Then the government kind of shut it down and just made it available for agricultural related companies. Just last night, as a matter of fact, they've supposedly reopen the EDL so if you haven't applied for that, you can still apply for the ideal so there are some people who may be exhausted their people He or maybe didn't qualify for the PPP because they, you know, they were close and they were concerned about it. He ideal might be another option. So I would say if you're listening to this and you haven't you're thinking about it, apply and see how much you get. And then you can always say no, if you want, but I mean, they kind of opened the window, again that most of us thought was closed.
Unknown Speaker
That's great. I mean, the just a reminder that the ideal is 3.75% 30 year fixed. Yeah. So again, that's not very bad terms. And like Mike was saying, you know, I mean, make the application, you can always turn it down and not take the full amount. You always pay it back. There's no prepayment penalties with these kinds of loans. You know, really, you just can't take it and buy a Rolls Royce, like we're talking. Yeah,
Unknown Speaker
yeah. And under $25,000 there's no personal guarantees no collateral. So it's, you know, it's not a bad deal if you really needed it. Once again, that is only alone. There's no Forgiveness. But if you're struggling and you know, maybe it's gonna help a few people get back in business.
Unknown Speaker
So I feel like we weren't making such great decisions, whether I'm talking about the federal government, or down to our micro small businesses, our brains were all over the map. And people were saying to me why I'm not going to take a loan because I don't need it. And I was saying to timeout, who are your customers? Yes, your customers are about to be broke in three months, six months down the road. Oh, you sell only to local government, guess what local governments going to be going tighten the belt. So I don't think it's such a bad idea to take a loan. And both of these have deferrals in terms of when your first payment is even due as I recall,
Unknown Speaker
yes, six months. So so you know, really, it kind of buys you time, you may pay a little bit of interest, but you know, hopefully by then things are back to somewhat normal, but you'd like to get the uncertainty of it all who knows.
Unknown Speaker
Yeah. Not a bad deal. So speaking of payment terms when payments start so forth and so on. We'll go back to this June 5 thing. So there's a differential between those that received their well their number was assigned, I guess, before or after June 5, as to what your payback term is, right?
Unknown Speaker
Yeah, I mean, they should have made it June 6, so we call it D day, you know, something so if you if you received your loan, or were assigned your loan before June 5, you still kind of fall under the old payback terms of two years. If it's post June 5, you actually now they've increased the maturity to five years so made it even more attractive to those who got shut out or thinking maybe contemplating whether to do it. Now, if you got it post June 5, your you do not have the option of going the eight week period of covering you know, the covered period, you have to do 24 where prior you have the option. I say, one or the other if you had a pre June 5,
Unknown Speaker
so we have five years if it's after two years if it's before That's right, discretionary. But
Unknown Speaker
the covered period, if it's pre June 5, you get to choose the, you know, if it's post June 5,
Unknown Speaker
that you received your loan, and you're, it's a 24 week period. Gotcha. Now, when we first talked about this, if it seemed that you had to bring back a FTS, full time equivalent employees, by the 30th of June to deal with the headcount issue, yes. That forgiveness, right, the forgiveness that seems to have changed, but I wasn't clear if that changed for the pre and post June 5
Unknown Speaker
loan assignments.
Unknown Speaker
So that's changed now to make it to December 31st. So you can as long as you're bringing back your headcount to kind of full capacity, if you will. By December 31, then you still meet that kind of forgiveness period. Yeah.
Unknown Speaker
So we might do what effing things. But what if someone brings back everybody? September 1, right? Maybe that be maybe that would be in excess of optimism, right? I'm going to bring everyone back. And I'm gonna have a work couple months. And then, you know, whatever we call it the second spike, or just we don't know what the economic impact of all this is going to be. Your customers all of a sudden dry up because they've been hit by this thing. Is it going to be sort of a magic? Who is on payroll at the 31st of December? Is that how they look out? Because you know, when you go back, you had two options right last year as of 2019, or you have the first couple of months 2020 to say, this is the period and want you to judge my headcount by Right.
Unknown Speaker
Right. So you remember you still are following in that 24 weeks, which is basically six months. So they I think they purposely did that December 31? June 15. Do the math, it's about six months, either way, right? So you got it, I think it's gonna be pretty close. So they're looking at that 24 week period. So you know by that, by the end of that 24 week, you're supposed to be kind of at full capacity, full head count, if you will, to where you were pre. Now remember, if you're, if you can get there and you spend all of the funds should be able to spend all those funds, hopefully within that 24 week period. You may just want to submit your application then so that you can say, hey, look, I'm up there, especially if you think perhaps it might be changing it count.
Unknown Speaker
Okay, gotcha. So submit your forgiveness application. Correct? Correct. So you showed me the forgiveness application about two weeks ago, and I printed it all out. And I said, Oh, my God, this is way harder than the loan application. Yeah. and way more complex when we weren't pages questions. I said, this is this is not now. Is there a new application for forgiveness or that is coming
Unknown Speaker
to be determined to be to becoming, if you will, Secretary minuchin actually said that he's hoping to release and I'll say anything quotes, he can't really say me simplified form and actually there's talk to they're gonna, you're gonna be able to submit it via portal. So I think really what, what's going to happen here is I think the banks are going to want to kind of see wait a little bit more and probably ask for a little bit more information than even the SBA is going to need to kind of, you know, calculate that forgiveness. So, I think your banks are probably gonna want similar really to the application process. Some banks wanted various bank statements and payroll reports, others were just kind of a few items and, and then it's kind of on them. I think it's going to be the same thing that the banks, their comfort level to how the money was spent, but really, this admission to the SBA is going to be what it sounds Sounds like a much more simplified method. You know, another point I want to bring out is, you always hear the talk of change and whatnot. First, we first heard it going from the eight weeks to 24 weeks. You know, there's a pushing Congress now to actually just forgive every loan under $150,000. Because I think they said that 85% of the applicants, or the people receiving loans, were under $150,000. So I mean, I think in kind of looking at the paperwork requirements, that might happen, and it's something that both sides seem to rarely in Congress now agree with. I mean, this went through pretty quickly. It's kind of common sense, I think, because of benefits. Excuse me, both sides of the table here. It just makes sense. So who knows, I mean, hopefully simplify might mean if you're under 150, or now, you're golden. Now, I wouldn't count on that. I think you stopped be prudent because remember too, that the First thing that, you know, everyone was concerned about was, what does it mean to decline in business? What you know, and they came out, and they said, If you got under $2 million in TPP alone, you don't have to worry about that. So it's possible that might happen. But, you know, I don't think anyone should plan on that. I mean, you have to 24 weeks, you know, kind of stick to the guidelines there. Once again, I said in the first part, just document just kind of stay on top of that, kind of do
Unknown Speaker
it early. Get, you know, keep copies of what you should have.
Unknown Speaker
Like, I read somewhere, it's 10 months from the end of your cover period when you have to see forgiveness applicant. Yes.
Unknown Speaker
Yeah. pretty long time it is. Yeah, so that was it. They It was a much smaller time. I think it was two months from one year forgiveness period you had to submit by, so you have time. So really, now, I wonder if that's not also to kind of buy time so that people don't send it in because maybe there's going to be future changes. I don't know. But you know, there is Jeff. There's something I think it's very important that I know near and dear to your heart. And that's the treatment of felons. Hmm, we talked about a few. Well, they're not felons yet, but I think, perhaps, maybe headed that way in hot water last time. Yeah, about this. So the new law, you know, there was a question on there. Have you been convicted of a felony within the past five years? And I think there was a lot of pushback that, you know, people are trying to start over someone issue now. They've only made that criteria a year, unless it's related to a financial crime. So I think our friends in Rhode Island in Massachusetts, probably wear, you know, should never apply to begin with given their past. discretions there but so that's I think so I think they're just looking at this saying, you know, really trying to open this up to if you have a business if you're a business owner, and you've been a good boy
Unknown Speaker
or gal
Unknown Speaker
for a year and you really need it, because, once again, if you're an owner and you might be employing, you're going to employ Other, it's really hurting the employees.
Unknown Speaker
They're really Who cares? Yeah, what shady stuff? You sold a Bag of Weed five years ago. Here's about that if you're employing people now and you're doing a big job painting someone's house, like, let's let's get back to the blanket forgiveness, you know, I served on the board of habitat. And it was a wonderful organization experience and they would give people loans. That was before you buy the house on a on an income based mortgage interest rate, but still people would fall behind. And we would get into arguments about what we ought to do, and we had to be shepherds of that money. So you know, in as much as I'm in that category of having a small loan, and don't want to fill out paperwork and everything like that. I at least want the government to be a semi Good Shepherd of this money. At least make people swear to something that they that they made a good good faith effort to spend it on the required stuff. So you don't have like the guy we talked about last time that had the Rolex and the Rolls Royce and stuff like that, you know, make him at least swear to something.
Unknown Speaker
I mean, I guess similar to your tax return,
Unknown Speaker
right? You're, you're kind of on the honor system, you submit, but it's subject to audit. So you could probably do that. And then just like tax returns, you know, you're probably going to look at the higher value loans anyway, because
Unknown Speaker
it's probably the most bang for your buck there,
Unknown Speaker
and maybe have a sliding scale. But I agree. I mean, listen, this was a lifeline that the government gave for sure. All businesses here that are eligible. And I think, you know, it's it isn't too much to ask to submit, or at least attest to the fact that you've used the money appropriately.
Unknown Speaker
And before no one throws a tomato at me for saying, you know, you should swear to God, one should want the government to be good shepherds of the money and maybe they're not such great shepherds of the money. I'm not saying create audit teams of humans to go around and check on the Small dollar, who cares? You got money into the economy. And and it's doing what it supposed to do, right? The whole point was acceleration of money. And yet all the money stopped dead. And now you got some money sloshing around in the economy, you know, people are able to pay bills, and not everything came crashing down all at once. Right? We're talking about flattening the curve. This flattens the financial curve. I mean, I'm not sure I'm no economist, but I'm not sure that we're done with the curve once some of the stimulus starts to be spent down, that there won't be other industries that are impacted. And I don't think it's going to be just even a few months or even just this year, before the dust settles, I had Kurt Ryan heimer on who does tons of bankruptcy, and just had Josh denbo, who does the foreclosure defense work, and they're looking at next year in the following year, you know, ripple on effects here.
Unknown Speaker
Yeah, I mean, unless this was a lifeline. It's Not going to stave off a business that's on the brink. Anyway, I think Unfortunately, there's probably a lot of good businesses that were thriving before but we're living in a new world now and who knows if he see what happens, you know, we live in New Jersey and we see you know that it seems like the rules change constantly as to when things are allowed to open when what you're allowed to do so
Unknown Speaker
just ask people in Asbury
Unknown Speaker
though, they'll give you some choice words there. I mean, it's, it's for all businesses right now their outdoor dining when is, you know, that's great, but what about someone's not equipped for that? Or, you know, the weather starts to turn. I don't know people gonna sit outside in February and have a meal. I would I like to call it snowing or raining. I'll go
Unknown Speaker
long as I can grip my utensils. That's my standard, you know, and one of the articles we're looking at in the Forbes great article. By Gasman See, he quotes Secretary minuchin saying we're going to need another bipartisan legislation to put more money into the economy aside from that's coming sometime this year.
Unknown Speaker
Yeah, and I think that would probably be even targeted more to specific industries, restaurants. Yeah, team, those that have really been, you know, probably affected the most hairstyle, you know, hair salons,
Unknown Speaker
those type of things. Now for the small employers that didn't take the PPP, there are some other resources out there when talking about maybe this employer tax credit, you just highlight Yeah,
Unknown Speaker
for Oh, really what that is. That's also is something the government tried to institute to help maintain jobs. So if you, you know, didn't take a PPP loan, which, just also to let you know that the applications do close June 30. And good reminder, anyone that's eligible, go apply. There's no reason not to apply for VPP I can't stress that enough. But let's say you didn't qualify or you didn't want that or whatever, if you're still maintaining employees, and you can show you've been impacted still dropping revenue or, you know, the government shut you down. There is an employer tax credit basically, it's gonna allow you a credit for the federal
Unknown Speaker
Social Security, Medicare the employer match of that for a period of time.
Unknown Speaker
You know, that will you can, you can actually have both a PPP and those get beginning the federal tax credits, but once your loan is forgiven you you no longer eligible for the tax credits.
Unknown Speaker
Okay, gotcha. So, either or, but it's not exactly an either No,
Unknown Speaker
but what I've said is people who have applied for the credits, you know, you can still do that. And then just once you get the forgiveness, though, that's when it's supposed to stop. I gotcha.
Unknown Speaker
All right, very good. I'm gonna let you go. You're not keeping here for an hour, two hours, whatever. I said Today's the 16th. This should be should be hearing this on maybe the 18th or 19th. And I'll just say a quick thank you. So I've been plugging my new book, the first eight days of your divorce. And as we sit here, I showed Mike, we are number one, Amazon new releases in the divorce and family law section. So thank you very much my pre ordering friends, obviously, continue ordering. On the Amazon first eight days, if you're divorced, it's very simple. You press a button. It's the deal of the century in terms of the ebook, and then I will have the paperback books in a couple of weeks. So thank you very much for that. And with that, we will sign off on this quickie PPP update. If we get another big change and other big set of guidance or regs. We'll be back again. Thanks a lot. Thanks, Mike. Take care