At 1pm EST on April 16th we went live with Master Elva Pai Adams for Walk Through of the US Stimulus Package Part#2 at facebook.com/2020armor!
The seminar discussed the latest developments in the US Stimulus package and what school owners need to be aware of when filling out their applications. She also revealed that the PPP has been capped (all the money has been tapped out) but she expected that Congress would be offering more money soon. She has also shared the latest information on rule changes for applications.
Elva Pai Adams is the VP of small business lending for Jefferson Bank in San Antonio TX. Adams brings 23 years of commercial banking experience and was the past recipient of SABJ 40 under 40 as well as Financial Service Champion of the year awarded by US Small Business Administration. Master Adams runs her own martial arts school and knows what you’re going through. She has been incredibly generous with her time to keep her community informed.
Master Elva Pai Adams wanted to make sure everyone had access to these documents which detail the latest rule changes that came out yesterday and frequently asked questions regarding the Paycheck Protection Program:
PPP Interim Final Rule Additional Eligibility Requirements For Certain Pledges Of Loans:
PPP: Frequently Asked Questions
While we did document the most important insights from the conversation it's best to watch the whole seminar rather than relying on our summary. Financial decisions should be made working directly with your accountant for your best chance of making the most out of the US Stimulus Programs.
Latest News on the PPP
The Funding for the PPP program has tapped out right now. The program is completely gone. Can’t submit more applications now. Congress is working on putting more funds back in. So that we can continue to process. This was only four days into Sole Proprietors being able to apply. So Master Adams believes it likely more money will be coming down the pipe.
Yesterday the SBA and the US Treasury Department published a new rule for the PPP program and added more questions and answers to their list included in the link above. What changes is that it makes it more clear on how the calculation on PPP will be for sole employee or Sole Proprietor.
For those whose application is in process, they are not going to be kicking back your application to you until further guidance has been offered.
PPP opened April 3rd and by April 16th it was tapped out. It went by really fast. SBA doesn’t allow electronic uploads. Because with this program we can’t do online upload. Everything has to be done manually. Everything has to be manually input. That’s why there is a big backlog.
How Can the PPP Be Forgiven
75% for PPP has to be spent on payroll to be forgiven. The forgivable is about the calculation of the employees you had before and after COVID. Talk to your account or CPA for the details.
Before the government asks the lender system to close and fund the PPP. Once it has been approved by the SBA. If you get a notification from the lender you will know within ten days whether you got it or not. The forgiveness clock, begins when you are funded. During the 8 week you have to know how to use this fund to get it forgiven. At least 75% has to be used for the payroll.
Tips for Keeping Track of PPP Loan Spending
Heard a lot of recommendations from CPAs, that you establish a separate checking account to keep track of the fund and how you use it. Eventually the lender will ask for your registered payroll. You will need bank statements and cancelled pay checks to show how you used the fund. You have to be super organized. With a spreadsheet to track how you use it.
Has Money Run Out for EIDL?
The funding for PPP has capped. Do not know if that includes EIDL as well.
If you haven’t done 2019 taxes, you need to prepare a schedule C and get that information ready. The bank will use a draft based on profit and loss statement. Not that you have to file 2019 tax return but it does make it easier.
The 10,000 forgivable is under EIDL. Separate from PPP. The EIDL originally was set up for up to %10,000 to forgive. The maximum loan amount is 2,000,000 with maximum amortization of 30 years. Seems to me right now, that government will cap that program to 15,000 but first 10,000 will be forgiven. It’s based on how many employees you put on your application. Master Adams put 5 employees and got 5,000 dollars. Master Nam submitted 9 and got 9,000. So advance is based on employee numbers.
EIDL can be used for rent, lease, utility or payroll. I can’t use it for refinance. If I use any of those categories it can be forgiven. But it’s not focused on payroll like PPP. And that’s assuming if you didn’t apply for PPP.
Let’s assume you have EIDL and you have PPP. A lot of people apply for PPP before EIDL was advanced. You have to figure out what you are going to use from different programs. Use EIDL for non payroll. So you can dedicate your loan amount from PPP to payroll. That means you can get forgiveness for EIDL and PPP. If you use EIDL for your payroll, you have to use PPP to refinance your EIDL. You can’t use these loans for the same purpose.
Question About Average Payroll
To come up with maximum loan amount you can only use payroll from last 12 months.
How Long Until You Know If You God EIDL?
When you first applied you will get an application confirmation number on your screen. I applied March 27th. Got the money on April 15th. They are running 2 weeks behind. If you have an application number you should be able to get something.
EIDL AMOUNT: Number of employees x 1000 dollars seems to be what is coming back for EIDL from Master Adams direct experience. Example 5 employees = $5000.
Most banks are only accepting applications from existing customers. Some banks are putting out a lot of resources. Rest assured we are trying to run against the time.
More Funding From CDLF?
I have heard more funding will go to CDLF, think congress is putting more money into that. That's Community Development Financial Institutions. They have money available. They have a disaster fund.
Can I Apply for Unemployment?
If you are a W2 employee, you can apply for unemployment insurance. If you have a W2 you can apply. If you are a 1099 you have to go through PPP program. That’s why sole proprietors and self employed workers can apply to the PPP.
How Do I Get My Loans Forgiven?
In order to have forgiveness you need to be organized and provide good documentation for PPP and EIDL. You need to only spend the money on what they tell you they'll forgive.
In my opinion with most school owners if you have one location, the biggest expenses are rent. My rent is almost $7000 dollars. That exceeds my payroll. That’s why PPP is not good for me. That’s why I used the EIDL loan. I was hoping the loan would be higher. Now I have to have a plan B. Now what's the other part? I have to look for disaster loans that offer better interest and better maturity.
What Does Better Maturity Mean?
It means the terms for paying them back are longer. PPP is 2 year. EIDL is maximum 30. Talk to your banks about refinancing your loans for longer maturity. At PPP loan for a 10,000 dollar non forgivable portion loan, the payment is 560 dollars per month. Will your business be generating enough resources to pay for the unforgiven portion when you are up and running? That’s on top of all of your other expenses. Then you have to ask your bank to refinance that to a longer maturity. Longer maturity gives you breathing room for repayment. There is a huge difference between paying back in 2 years, in 5 years or 10. You have to calculate what’s best for you dependent on your financial position.
Can I Use my 401K?
If you do have a 401K there is discussion that they can forgive the 10% fee for withdrawing from it. That is a good source of income to tap into. You don't want to put loans on top of loans.
Best Advice for Using EIDL and PPP in Conjunction
Use EIDL for rent and utility. Use PPP for payroll. That way you make sure both are forgiven.
Master Elva Pai Adams was generous enough to give us her time. She told us that she'll be back to talk to our community when every major changes come down to the Stimulus Programs. We can't thank you enough for all of your amazing work on behalf of our community.
On Thursday, April 9th we had an incredible live seminar with Elva Pai Adams ,VP of small business lending for Jefferson Bank in San Antonio TX, who will be discussing how to navigate the US Stimulus Package for martial arts schools. The whole of the live seminar linked above. We highly recommend watching the entire live stream yourself. We will be providing bullet points but mention that we aren't the financial experts and you're going to want to listen specifically to Master Elva Pai Adams as she explains the intricacies of these loan applications.
Elva Pai Adams is a noted financial expert and can provide tips to help you get through this difficult time. She has 23 years in small business banking and has worked for some of the largest companies in the world. Master Elva Pai Adams is not only a former VP at Wells Fargo, she is an incredibly accomplished martial artist with three decades of experience. She was an Olympic athlete in Taekwondo, and she was selected as the first female international referee representing the USA for the 2016 Summer Olympics. She is also a school owner so understands your concerns in the realest possible way.
The most essential quick bite of information is that you need to get a checklist specifically from your lender of what you'll need to submit before you do. There will be huge line ups for submitting these forms and you don't want to make a mistake.
An important thing to know is that Master Elva Pai Adams has generously agreed to come back next week at the same time and address the latest developments that are happening with the US Stimulus Program. Because this situation is constantly changing. So Thursday, April 16th, 1PM EST we will be hosting another live stream that give you the latest information you need to know including developing details about K1s and Sole Propertiers as they become available. As martial artists we go out of our way to serve our communities. We'd like to celebrate Master Elva Pai Adams amazing dedication to the martial arts community when we need it most giving us time for her extremely busy schedule.
A Second Word of Caution
We took notes from the live webinar to provide further insight but the writer of this article isn't a leading expert in this financial world and you should take the time to listen fully to the expert herself. Small points may be wrong in the article that are different in the video. You're going to want to watch the whole of this seminar and watch it carefully. But if you don't have the time a summary of the most important points will be coming soon.
We talked in detail about EIDL program, the Paycheck Program and the SBA Disaster Loan during live stream and the differences.
Economic Injury Disaster Loan
These are the programs you can receive directly with SBA on their website. That process has changed many times. This is a very easy program to complete. Takes 10-30 minutes to finish. 4-5 pages of yes or no eligibility questions. Because so many applications are being sent in, they need to make sure people eligible. This is why there is no loan amounts. They just want to make sure you can take part. As of yesterday the first run of approval will come out today or tomorrow.
Paycheck Protection Program
The second program is: Paycheck Protection Program is where you actually apply through your lender or banking institution. There are pro lending programs, start with your own banking relationship and see if they are participating and they will be able to help you. A lot of lenders are only using their customers as a priority first. You apply with the lender, first come first serve. I haven’t heard a lending cap. Each bank has their own cap limit. But it depends on the funds ability of that bank. Larger institutions have bigger caps.
SBA Disaster Loans(Another program up to 25,000. Apply with the lending institution. They may have some programs. This is a bridge program designed for business owner with immediate needs. They need money within the next month or two. If you participate for that program, it can be paid out with Payment Protection Program.
Which One Is Right for You?
EIDL: Maximum amount is 2 million. $10,000 dollars will be forgiven. Can be used for operating costs. Interest payments. You can’t use it to pay down existing debt. You can use the loan proceeds to pay for that. Only for normal operating expenses. Currently they are looking for eligibility. Once you are eligible they will send the 10,000 to help with your immediate needs. The 10,000 will be forgiven.
Payment Protection Program: is to give you money to cover pay checks. The formula is at least 75% to be toward payroll. Approximately 75% for payment protection. The formula is still very complicated. The SBA law is that specified it’s based the number of employees you have before covid19 backdated to Feb 15th. It looks at reduction of your work force. And how many you hired back. And we use that complicated formula that will be forgiven if you use it towards payroll. If you are a company who doesn’t have employees this isn’t a good program. But think about the number that can be forgiven. You have to know that the loans that will not be forgiven, you will be stuck with 2 years of amortization at 1% interest rate. Think of what will happen when you have to pay back principle and interest. If you don't have a lot of employees you have to seriously think about not applying for this program.
As owner you have to think of what your normal operating cost look back. Can you afford to pay the loan payment over all the payments that you already have? If you can’t do it after that you are back to square one. And then you have to go back to lenders. You have to consider that thought process. Because you don’t want to add more money to what you owe.
If you don’t have too many employees, you might not want to do PPP. You have to use your own common sense. You have to think about is this the right program for you.
If you are a sole proprietor the loan application opens tomorrow. All the lenders have big difficulties. Not that we are slow. We don’t have a clear direction. We want to do what we can to help business owners. It’s nerve wracking because with SBA application, will this come back and have a problem because things are changing so rapidly. And that's from a lender. A professional who gets the best information. The situation is unprecedented.
Existing SBA Loan Payments
For existing SBA loan payments, they don’t have to make a payment for the next six months. Don’t do any deferring a loan payment. I tell them to hold off paying right now due to lack of clarity. We are waiting for SBA to issue guidance to lenders to see how we can collect for our customers. If you have existing SBA loan, do not make a payment as ruling is coming down.
EIDL Process Note
SBA receives applications. You get email that tells whether you are eligible. If you are eligible someone will contact you and put 10,000 into your account. The maximum loan is 2 million dollar. So someone from SBA will contact you and provide the documentation, supporting what your loan amount is. If you already apply for EIDL loan. You can still apply for Payment Protection Program. One of the questions on that is that you have been funded from the SBA, then you have to add the loan calculation.
Once you come up with the total loan amount you add in your EIDL. If you applied for a confirmation you don’t add the 10,000 dollars that is forgiveable.
When you draw the loan amount you go back with the loaner, to get what you actually spend, to find the amount of the loan that you forgive. This is to give the lender a basic estimate for the SBA. To cover yourself make sure the lender there is a disclaimer that this amount is just for estimated for purposes. This isn’t used for loan forgiveness purposes.
The Full-Time Employee Equivalent Number is Very Important
Why the FTE is important is full time employee equivalent. For this school with 2 time full time employees, you need to find out your FTE equivalent number. This is important on the back end. Because the SBA uses this number to calculate how much of the loan can be forgiven.
Loan forgiveness is based on full time equivalent, is important on the back end. Includes full time, part time. How many you lose, how many you hire. It’s very complicated to look at the rule. We are waiting for further guidance.
Everyone is trying to make sure they fit the specific new guidelines to find out what you can forgive. They need to know that. If your expenses don’t qualify you are going to find yourself in big trouble. When you get into this program you have to really think about it. The purpose is for pay check payment program is to pay for employees. That’s why you have to be careful on your application.
Lenders are doing their best and have to interpret these programs. Because SBA relies on Lenders to verify the lenders have to certify that information. And complete package is important. Lender should give you a checklist. So everything is submitted at once. Big lenders have hundreds of thousand coming in. Thats why you have to follow the checklist your lender provides you. So you will save a lot of time.
We don't have answers on K1s, or Owners Draws. The info is vague right now. Submitting is tomorrow but everyone needs more instruction just to include.
TUNE IN Thursday, APRIL 16th at 1PM EST for our follow up with Master Elva Pai Adams on the stimulus package and the information you need to apply with your business.
Original SBA Loans Post
Everyone has been affected by what’s been happening over the last couple weeks. School owners are having to radically transform their businesses and are wondering if they are going to be able to make it through the Coronavirus pandemic with their business intact. People are worried not only about themselves but also about their employees who rely on them.
To fight back against the fear, we wanted to provide our customers in the United States with some positive news that could provide some relief for your small business.
We saw an excellent email from MAIA that we wanted to share with you:
"On March 17th, the federal government revised the criteria for the availability of disaster relief loans available through the Small Business Administration (SBA).
Under the new criteria, loans are available statewide following an economic injury declaration, whereas previously, funds were only available on a county-by-county basis.
SBA Disaster-Relief loans are low-interest working capital loans designed to help small businesses in disaster-affected areas to meet their financial obligations such as payroll, fixed debts, accounts payable, etc.
Important things to know:
- They offer up to $2 million in assistance
- Interest rate of 3.75%
- Repayment term is determined on a case-by-case basis based on each borrower’s ability to repay (with a maximum term of 30 years).
The first thing you’ll want to do is to find out if your state is eligible by clicking this link: https://disasterloan.sba.gov/ela/Declarations
If your school is located in an eligible state, you can download the necessary forms online at the SBA website. They then allow you to upload those forms directly rather than mailing in: https://disasterloan.sba.gov/ela/
I've got the forms. Now What?
There are a lot of forms to fill out, and it’s going to appear quite daunting. There are some additional resources available for assistance, though.
The SBA has dedicated help available for this process:
In addition to the SBA, each state has its own Small Business Development Center (SBDC) that will be able to help businesses in that state with navigating the SBA disaster loan program.
You can enter your zip code into the search box on the site linked below, and that’ll give you the contact info for the closest branch: https://americassbdc.org/small-business-consulting-and-training/find-your-sbdc/
When you navigate to the website for your branch, you’ll be able to register for counseling. We surveyed a few of the sites, and in most cases there’s a register, sign up for assistance, register for counseling or some similarly titled button on the home page. But in some cases, that link is deeper on the site and can usually be found fairly easily.
If you’re having difficulty registering, you can call the main number for the SBDC in your area, and they’ll be very happy to help get you the correct information. The sole purpose for the existence of the SBDC is to help small businesses in a large number of capacities, including helping them to apply for assistance such as this."
Learn About Paycheck Protection Program
The US government is offer a second system for small businesses to get loans due to business uncertainty around Coronavirus. Only this loan is forgivable if you spend it on 4 specific types of business expenses. Learn more by reading our in depth coverage here.
For Right Now: Leveling Up Your Students Training
We are offering a great deal for students who want to train at home during this difficult time. With our video scoring chest guards we give students the measurement they need to track their progress and stay dedicated to their martial arts training. These at home training kits give school owners the data they need to push students to do their best and get the most out of their virtual learning classes. Learn more at our Training At Home page.
Thinking of the Future
You have done incredible things over the last two weeks to save your business. You’ve learned how to make great video content that engages your students and you’ve gathered the tools you need to survive. But how do you get out of survival mode and start planning to make the most out of the next six months to a year and come back better than ever?
Preparing for Success When Your School Reopens
When your schools re-opens you are going to need to focus on ways you can Attract more students, Retain the ones you have and Thrive by creating new revenue streams to make up your losses. We got you covered.
Want to know how you can Attract 5x your normal amount of leads at recruiting events? Read about how Master Wong got 50 leads in just a couple hours and earned 30K in new revenue.
Want to dramatically increase your Retention? Learn how Mr. Jonathan Frank got 100% retention of his teen students and won 71 ATA District Championships by training with 20/20 Armor.
Students are going to be hungry for competition when you re-open your dojang. You can run your in house events with 80% less staff, eliminate technical delays and offer a fair judging system that will keep your students and their parents ready to participate in your next event. Learn how Master Helgi ran his best ever tournament with 20/20 Armor.
For more resources to help your school navigate these difficult times go to our Rebuilding From Coronavirus page. We're here for you and we will get through this together. This too shall pass.