The Cares Act

Using The CARES Act Strategically in Your Small Business

The following is a breakdown or rough transcript of our two-hour interview with the Profit Hero ladies, Marilyn Parham and Jessica Mae Stafford.

If you go to the original interview and type “congress” into the comments, JumpyBot will pop up and 1. Give you a PDF of all the CARES Acts so you can have them in one place
2. Access to a $197.00 Masterclass for FREE
3. You will get an offer at a 71% offer if you want to go alongside these ladies inside their community. Promo code bella350

You can watch the video here or start scanning below.

Let’s Get Started:

We have three things that we need to understand about securing our financial foundation to know what opportunities are available to us. We have to:

    1. Secure our financial foundation
    2. Know financial facts
    3. Understand financial funding.

Secure Our Financial Foundation

Strong relationships are everything!

What are your relationships looking like for your business?

In particular, what do your accounting and finance business relationships look like? Who are they? If you don’t have a banking relationship, get one! Securing your financial freedom comes from these strong relationships.

Right now, we are either so grateful that we have these relationships already in place or we’re kicking ourselves for not having them during this crisis. Our bankers will be able to help us through this mess.

We have to have scalable systems. Things that don’t break when you scale them!

 

2. Knowing the financial facts.

This seems like a no brainer right?! But when we’re busy trying to grow a business, and things like COVID and other disruptions come into play it can be challenging.

Having financial facts is key to that process.

It’s hard to produce the facts if you don’t have the systems, relationships or compliance checks to take care of that stuff.  This is about your money.

We all different reasons we started our business, so understanding your personal needs, upgrades, and dreams is so important.

Profit Planning

Profit planning is how can we create the business to produce the fruit of what I want personally? How can we achieve our goals?

Cash management. 

Here’s an easy formula for you: Sale- Profit = Expenses. It’s the only way you should be doing business. You should be paying yourself and playing! Make sure you have your taxes paid and you know your operating budget.

3. Understanding financial funding

  1. What are my assets?
  2. What are my cash assets to run my business?
  3. Will I be able to take care of my family?
  4. Will I be able to take of myself? You can’t drop your self-care. You have to be 100% right now. This is an unprecedented time in our lives and we have to be on top of our game.
  5. What is my debt service?
  6. How will I pay my mortgage and bills?
  7. How am I  not ending up broke and homeless?  You have to know your options.

We are all in the same boat. If there was ever a time to get whatever help you needed, now is the time thanks to COVID.

Economic aid.

What are the options and opportunities do I have?

Bankers are going to be asking you questions that you’re not used to being asked or thinking about until tax time. We need to be thinking of this now!

SBA EIDL

SBA Economic Injury Disaster ADVANCE Loan.

  • This is something you work directly with the SBA, not your bankers.
  • It’s an easy application to fill out but we’re unsure of when we’ll be receiving funds, we’re thinking 4 weeks.
  • It’s a 30-year loan with an interest rate of 3.75%.
  • You also have the option of accepting a $10,000 advance when applying for the loan. This advance is not something you have to pay back. It’s supposed to be considered an emergency grant. You have to apply for it to be forgiven.
  • Even if you don’t think you need the loan right now, you don’t know what your business will look like 60 days or even 6 months from now.
  • Be strategic about opportunities given to you, even if you don’t need the grant stock it away … just like all that toilet paper, we stocked up on! Remember, you can do both this loan and the payroll protection loan.

EIDL

SBA Economic Injury Disaster Loan

  • This is a 30 year 3.75% interest rate or 2.75% for a non-profit which is approved based on your credit.
  • There is no fee for applying for the loan, so even if you don’t think you’ll qualify there’s no harm in trying.
  • If you have under 500 employees you qualify, no matter if you’re a sole proprietor, LLC., etc.!
  • The loans up to $200,000 are not going to require collateral or personal guarantee.

There are two camps right now. One camp is, I don’t trust this. I get it, I was originally in that camp. So what could possibly go wrong? Nothing really, just pulling your credit.

So as long as your under those six credit inquiries a year, you should be fine.

If you’re worried, write to the credit company and ask that they remove it.

Remember, you’re just applying doesn’t mean you’re going to get it or you have to accept it.

You have to be fighting against that stigma of debt right now, these are very unique times.

The other camp is those who are just paralyzed in fear, don’t go forward alone. Talk to someone who’s knowledgeable and can truly help you through this!

PPP

SBA Paycheck Protection Program (PPP)

  • This loan gives employers a direct incentive to keep employees (including you) on the payroll.
  • This loan will be forgiven if employees are kept on the payroll for 8 weeks.
  • 75% of the funds must be used for payroll, the other 25% can be used for rent, mortgage interest, or utilities for the business.
  • Small businesses with less than 500 employees can apply for this loan.
  • Loan forgiveness MUST be requested once all qualifying payments have been made.
  • There are no credit checks or personal guarantee is required.
  • It’s a 2-year term loan with at 1% interest, with payments deferred for the first 6 months.This is where securing your financial systems comes into play!

You should be tracking everything regarding the impact of COVID for your business. Keep a list of every cancel request you’ve received.

If you’ve been waiting to get a business checking account … do it now!

The Cares Act

Some Q&A:

Q: I have a Profit 1st Accountant, and I was doing OK until all this, now my only distribution is to my HST (Canada) account. I actually had to borrow money from my profit account to make payroll. Once I get the government help in a few weeks should I put money back into my Profit account from it?

A: First off, CASH IS KING! When you get the money from the government help, I would say yes, put that money back into your Profit account. That’s your safety net. Remember, the paycheck protection loan you have to spend it for payroll. So when that comes in just replace the money in your profit account and move forward from there. The profit account is power. It’s the whole reason you got into this business.

 

Q: Can our accountants talk to our bankers?

A: Yes of course! Now the bankers will probably want your permission, and that can be either via a conference call or it may require a Power of Attorney. Remember, our bankers are incredibly inundated. Ask them first if this is a service provided? Does this cost me anything? How can you help me?  The last thing we want is a bill shock. You can also call your banker first and get a list of what they need and then maybe make a list to send to your accountant to make this process a bit easier.

 

Q: What’s the difference between a grant and loan?

A: A grant you don’t have to pay back, a loan you do.

 

Q: Can you apply for both the SBA & the PPP?

A: Yes!

 

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Q: What are the downsides for applying for the grant & loan combo?

A: The credit report check, if you’re against this.

 

Q: We have to use 75% of loan for payroll. Can I give myself a raise to help meet the goal?

A: The head count is part of the process. You should be hiring people back.  Use this time to build your team and develop those marketing ideas.

 

Q: You mentioned you can pay yourself if you are on the payroll with the PPP. So that would be for only the S & C Corp right? I’m an LLC and take a draw? Also, does the PPP loan really apply to a sole proprietor with IC (Independent Contractor) or only if using employees?

A: The loan application hasn’t been geared towards those sole proprietors even if it doesn’t feel like it! Be prepared to provide financial information no matter the type of business you have.

 

Q: I just started my sole proprietor business when all this started, so my income is basically zero. Is any of this based on current income?

A: If you have no income, there’s probably no documentation to submit, so this will probably disqualify you.

 

Q: It seems unrealistic to be back to full employment in 8 weeks, so my fear is that it will be a loan not a grant, and 2 years is a short time to pay back $85k.

A: Put some strategies in place. You have an 8 week period in time to cover these employees. You can always get the money and put it aside. Remember, if you laid people off, you don’t have to hire that exact employee or position back.

 

Q: Does interest accrue during the 6 month period?

A: We’re unsure, but we’ll find out!

 

Q: What kind of proof do you need to apply for the forgiveness of the PPP loan?

A: The same information needed to apply for the loan, but also may need to send proof of canceled checks. Here’s a little reminder to have get a business checking account and get that banking relationship to secure your financial relationship.

 

Q: Don’t employees make more collecting unemployment and &600/weekly than if I pay them their regularly hourly?

A: Remember this is based on the state’s ability to pay, which means it will probably be delayed. But depending on how much you pay them it could make them whole. Remember it’s also UP TO $600 and we haven’t even seen that money yet … this could be us living on a prayer! Use this opportunity to convince and excite your employees to stay!

 

Q: Should I be putting the pay of the independent contractor’s on the PPP loan app?

A: You should NOT be putting the pay of IC, this is per the IRS as of 4/7/20. IC’s can be applying for their own assistance, since they are their own business!

 

Q: Can you use the PPP to pay employees who are not actually working?

A: Yes you can! Also try to find things for employees to do! But yes you can pay them even if they’re not necessarily working. Pay them for personal growth or self development …. GET CREATIVE!

 

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Q: I was in the process of hiring 3 people when this hit? Can I use the PPP to pay them?

A: You can, if you had to have payroll prior to COVID.

 

Q: Regarding submitting proof. What if I use direct deposit compared to checks?

A: As long as you can document it. Bank statements are helpful for direct deposits.

 

Q:Do they know yet if they will be forgiving a percentage based on how much we miss the 75% payroll , or do they just completely throw out the forgiveness part if you miss the 75%?

A: It’s our understanding that they will forgive based on percentage, but we haven’t’ seen data on this yes.

 

Q: What if I’m willing to keep the staff but they quit within the two months?

A: Then hire more people!

 

Q: My new two employees are currently furloughed and collecting unemployment, which I understand they can still work small hours. If I did the PPP and paid them would that affect their unemployment? They’re getting more from unemployment than from me since they do not have an income history with me yet.

A: Each state is different.

 

Q: Is the head count for full time employment?

A: FTE = Full time equivalent.

 

Q. With PPP can you accept it around June 1 and use it for payroll then?

A: This isn’t a bottomless bucket, there’s only so many funds available. That’s a great question for your banker.

 

Q: I’m not on my payroll for my company. I just go off the net income of my monthly numbers and consider that my “pay”. Would you recommend that to keep things clean and moving forward, should I be paid through payroll like my employees are? 

A: If you’re an S Corp, you are required to be paid. To answer your question is yes, you should be paid like your employees. If you got this payroll protection loan, you can include yourself in that  but you have to look at the whole picture.

 

Q: How late can we fund our PPP?

A: The PPP application process is open until June 30th. Talk to your banker about when you can distribute. I suggest not to delay applying and have my application filled out. 

 

Q: Does PPP cover sick leave pay? Do the workers have to be full-time? 

A: Payroll considers PTO and sick leave if your team has benefits. Also, if you have the Families First Coronavirus Act there are things in addition to emergency sick leaves and all that kind of stuff. Make sure to clarify this to your banker. 

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Q: Does PPP  cover paying for contractors? 

A: If you have independent contractors you need to give them this information, talk to them and tell them to get in the loop and make an application themselves.

 

Q: Can we do maintenance etc in a stay at home order? 

A: As long as you’re being safe and not contributing to the problem I don’t see why not?

 

Q: I have heard that payroll expenses, like federal taxes and maybe the cost of doing payroll like bookkeeper or software for payroll can not be included in the 75%

A: The payroll taxes are part of payroll. I think it is included in the 75%. But the bookkeeper and the software for the payroll, I really don’t know, I would say no and would go back to the documentation. 

 

Q: But my sitters are now getting Unemployment plus they will be getting the extra $600 why would they want to come back to get their pay?

A: You’re gonna find out who are the good workers and the lazy workers. As a business owner, you extend the offer and they have the option to say yes or no. 

 

Q: I was told in California, they will get the full $600. Illinois has said don’t even apply yet for unemployment if IC etc?

A: Our employees said they’re gonna get the $600 but it’s not even in the bank yet. Not unless the money is there, then it’s real. 

 

Q: If we offer them their job back, don’t they have to accept it or unemployment will stop?

A: It’s state by state. Not necessarily. 

 

Q: If we are offered a PPP, can we put off starting the 8 week period? Like starting the 8 week period June 1?

A: Ask your banker before you accept the loan. 

 

Q: I’m a painting contractor for a small corporation. For now I don’t have payroll nor employees. I believe there’s no reason for me to apply for this loan right? 

A: You should apply for that and see what’s available. You can weigh that out once you go to the application process. There’s no fee to apply. You might want to file for a PPP to take care of yourself. 

 

Q: I’m a Sole Prop. If I file for unemployment, then later apply for a PPP, will filing for unemployment have a negative impact on my loan application? 

A: It’s the other way around. Your acceptance of PPP will have an impact on your employment. Be very upfront with your banker like what’s happened, what you did and what you’re trying to do. 

 

Q: So, if you bring them back for the PPP funds, and don’t get enough work, do you lay them back off?

A: Define your work. Are we just gonna pay our people and take care of them? Since we’re still on containment, the business can’t return so you lay them off basically. 

 

Q: How can I prove what I pay myself as a sole proprietor if I don’t do a formal paycheck, but just periodically transfer money to my personal account from my business account? 

A: It’s about the net income of your business. It doesn’t matter if you transfer back and forth with your business and you. 

 

Q: Is it true that we can’t use the money to pay the payroll taxes on the PPP funds we pay out?

A: Payroll taxes are part of payroll. If you want to make sure on how it’s going to walk and talk, the best thing to do is ask your banker. 

 

Q: Can you create a new position, something you’ve never had before. 

A: The answer is yes as long as you use that 75% of that money to make payroll. As long as you use it and maintain the FTE at a minimum. 

 

Q: About the $600 fed unemployment, it’s my understanding that this will be “up to” $600; it’s not a flat payment of $600. Is that accurate?

A: We dont believe it’s going to be a flat $600. The whole point is to make people whole as possible. We don’t know until it happens. 

 

The previous is a breakdown or rough transcript of our two-hour interview with the Profit Hero ladies, Marilyn Parham and Jessica Mae Stafford.

If you go to the original interview and type “congress” into the comments, JumpyBot will pop up and 1. Give you a PDF of all the CARES Acts so you can have them in one place
2. Access to a $197.00 Masterclass for FREE
3. You will get an offer at a 71% offer if you want to go alongside these ladies inside their community. Promo code bella350

 

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