Hey there Colin Exelby, Certified Financial Planner here and if you are a
business owner than this video is for you! I'm about to provide a CliffsNotes
version of the Coronavirus Aid Relief and Economic Security Act or [CARES] for short.
And this is, I believe the largest stimulus program in US history. And a lot
of it is there to help small business owners weather this storm and #survive2
theotherside Now within it is a three hundred and forty nine billion dollar
Small Business Administration loan program. Now you can google this phrase
and hundreds of articles are already up and written on it and many of them read
like an encyclopedia article. And for those of you who are under 30
I've got explain what an encyclopedia i. It's really similar to Wikipedia except
it was a bunch of books that were arranged alphabetically that had
different topics in it. But either way it read like that and so I know that a heck
of a lot of business owners out there are not going to read through it and
understand it. I spent half of the weekend (when I wasn't smoking ribs with
my daughters outside) I spent the rest of the weekend reading up on this stuff to
see how it affects my clients. So I thought I would begin sharing some of
that with you. What I'm going to do here is I'm going to give you the nitty-gritty,
the short version.. what you need to know so stick around and we'll dive right in.
Hey there Colin Exelby, CFP® here and we are
getting into the details of the just-released coronavirus aid relief and
Economic Security Act or [CARES] for short and this, I believe is the largest
stimulus program in America's history. Now the Small Business Administration's
website has been overrun with traffic over the last few days and has been down.
I think probably because they're updating it with this new information so
I want to make sure that we hit the key points of it so let's dive right in.
First, and what most business owners should be knowledgeable about, is the
Payroll Protection Program. Now who is this for? The SBA is offering government
backed loans to business owners with 500 or less employees and also sole
proprietorships and 1099 contractors. Now you must have been in business and in
operation on February 15, 2020 with employees or contractors in order to
qualify and this thing is designed to cover expenses from February 15th
through June 30th. The maximum loan size is 10 million dollars, so it is a good
amount of capital that business owners can get for their businesses. Now this
provides payroll support for expenses that are including but not limited to:
salary for yourself and employees, paid sick leave, insurance premiums, healthcare,
rent, mortgage, utilities, and interest but not the principal that you're paying on
any other debt. Now there's one key caveat here that I want to make sure to
point out, is that salaried income is eligible only to $100,000. So if you or
other employees that you have, have salaries in excess of $100,000 this is
only eligible for the first hundred thousand dollars. So, then that's a key
point for many of us business owners out there. Now this is extremely important
and beneficial for most businesses because these
expenses I just talked about... other than taxes, this is typically your
largest cost. So, you want to make sure that you're you're taking advantage of
this. Now if you're a solo entrepreneur and you are your only employee this also
applies to you so don't think that you're excluded.
Now these loans have the potential to be completely forgiven and I think that's
what has people excited about this program is you won't have to pay that
money back. Now let me say that again. These loans have the potential to be
completely forgiven meaning you won't have to pay that money back.
That means this essentially turns into grants. Now there are some key points
that the government is going to be looking at in order to see if those
expenses are going to be forgiven. So your wage expenses from this year are
going to be compared with your wage expenses to last year and the incentive
is to keep employees on staff and working through at least June 30th and
if you do so your loan could be forgiven. And a key point here is that if it is
forgiven, none of that is going to be included in taxable income like it
normally would be. So, this really amounts to a tax-free gift from the government
incentivizing us to keep employees on staff, employed at least through June
30th. Now what if you can't do that? What if you're forced to have to lay people
off or if you already have? Well any amount of the loan that is not forgiven,
so if you do need to lay people off, it essentially converts into a 10-year loan
and a maximum 4% interest rate. Now that's probably some of the cheapest
working capital that you can get so again I would recommend you attempt to
take advantage of it. Now here's the issue, these loans are not up and running
yet and they're going to be working around the clock on this to get this
thing going, to get the website up and running effectively, and to get money out
there to the businesses that you know apply for it and need it. So, it's going to
take some time to get there. And what you need to do is make sure your business
can stay alive until the funds are made available. So I'd encourage you to go
to the SBA website at sba.gov to monitor when these are becoming available and
make sure you check out my blog to stay up to date at seetheforestthrough
thetrees.com. Additionally I found some great resources out there, multifunding.com
A company that was started by Ami Kasser, I believe that's how you
pronounce his name that is a great site as well as Lane Powell lanepowell.com had
some great information up there as well. Now let's talk about the second
opportunity is the EIDLL or the economic injury disaster loans. Now these have
been around for a long time as far as disaster loans, but recently coronavirus
was deemed a disaster. So this is not ready as of yet either and there's not
really a lot of information that is available related to it. But it's low
cost working capital up to a maximum of two million dollars. Continue to check
at the SBA.gov website for updates to that. Now in addition to these and the
SBA loans, many states have gotten into the act as well including my home state
of Maryland. They're initiating their own programs. So be sure to check with your
state for availability. The bottom line is the following... small businesses make
up 99.9 percent of all businesses and I'm proud to be one of them. 66
percent of all net new jobs in the United States in 2018 came from small
businesses. Let's make sure that we #survive2theotherside. Now cash flow
is king. In order to survive, you need to make sure that you're managing your cash
well. Uou want to make sure to maintain access to capital to survive. Now ideally
credit lines in my opinion are a good way to do that, and a rule of thumb that
I think that you should have is a credit line that's equal to roughly 10% of your
top-line sales or 50% of your inventory. Now this is in good times. You want to
obviously when things are not in a pressure situation that's when you want
to be applying for these lines of credit. So if you do a million dollars of sales
you should have a line available for your business of at least $100,000 in my
opinion. And you want to make sure that you set
that up in the good times so when negative events like a recession you can
access it without issue. That's how you prepare without panicking. So make sure
you talk to your vendors, you know talk to your bank, talk to your lenders.
Various states are already offering mortgage deferrals, banks like Bank of
America recently announced deferrals that they're working through their own
program, as did Fannie Mae and Freddie Mac .Now one note of caution here, a
deferral does not mean that you will not pay. All the deferral is doing is giving
you a grace period of a couple months time where you don't have to pay, but you
will pay that back in the future along with your regularly scheduled payments.
So at some point it's actually going to be increasing on you if you defer those.
But the key is make sure you make it to the other side. So if you need to reach
out to defer payments 'till when your revenue comes back by all means you know
do it. It makes sense go ahead and do it. I'm gonna grab a sip here my Bubly
sparkling water and this stuff has been helping me through this. I love it. You
should try it. Anyway okay so this was kind of part one of what I'm going to be
talking about. Part one is for business owners the short nitty-gritty of what
you need to know. Part 2 then I put together is for individuals for retirees
and what's in this for you now. To help business owners during this trying time,
I released a brand new free training. Now odds are you're learning right now
whether your business was was built to withstand something like this or where
your vulnerabilities are. I'd encourage you to visit
In it you'll learn the five-step process that our successful
business owner clients use when they're seeking to avoid unnecessary taxes,
increase their net worth, and build a legacy. Those five steps can help you
weather the storm and begin to set you up for a successful financial future.
Just enter that link, put in your name and email
address, and you'll immediately be given access to the 35-minute training. Don't
wait, I think this could be the best 35 minutes that you spend on your business
Colin Exelby, signing off. See you later.