Ever since March 13 when President Trump declared a health emergency, the federal government has eagerly tried to help individuals and businesses in at least nine different ways. Their new laws, …
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Ever since March 13 when President Trump declared a health emergency, the federal government has eagerly tried to help individuals and businesses in at least nine different ways.
Their new laws, loans, grants and credits have created a kettle of alphabet soups, from FFCRA to CARES to PPP, with edicts and rules that conflict, bump into each other and often even intimidate the people they are supposed to help.
For the small business person who is just trying to survive these difficult times, I have some advice: Don’t be afraid to accept the financial help! If you suspect there might be problems with the loans and grants etc., let the government sort out its own mess!
Just remember how rapidly things are changing and will continue to change over the next several months while we all try to get this right.
We have one client who came to us asking whether his small business should participate in the PPP (Paycheck Protection Program). His clients were heading into lockdown mode. They were canceling contracts and not even bothering to look at pending proposals for products and services.
His business has had a banking relationship with a local credit union, which had previously provided the business with the required services. Unfortunately, in the early days of the PPP, credit unions were not SBA lenders. We directed him to a couple of smaller banking institutions, and he was able to receive PPP funding to continue his and his wife’s paychecks, pay their health insurance, and even fund into their retirement account, with a loan of over $13,200! And all of it will be forgiven.
We have another client who asked us if they should apply for the PPP loan, even though their construction company seemed to be on track with sales through early April. At the same time, he was losing confidence in outcomes for the second quarter and beyond.
Should he apply? Yes! Initially, the PPP specified that business would have to demonstrate actual cancelled contracts to qualify for the loans. But this client became eligible after the passage of the CARES Act, when Treasury Secretary Stephen Mnuchin assured borrowers that they only need to make good-faith attestations that the loan is required due to the current economic uncertainty. The loans did not require personal guarantees, and even if none of the PPP loan was used for the intended purpose of continuing paychecks and contributions to overhead, the loan terms were extremely generous (1% interest and a then 24-month payback period).
His forgivable loan is more than $188,000, giving him the ability to continue payroll for all his existing employees without any furloughs!
Along came the PPP Flexibility Act June 5, modifying the PPP loan terms and giving businesses 24 weeks instead of eight to bring back their full workforce and to justify the loan forgiveness with payroll and certain operating expenses.
Is this all too good to be true? Will Rogers, the Depression-era humorist, said “I don’t make jokes. I just watch the government and report the facts.” Speaking just as cynically, President Ronald Reagan, said “The nine most terrifying words in the English language are: I’m from the Government, and I’m here to help.”
So maybe this manna from Washington will turn sour. But I don’t believe the government will let the innocent small businesspeople pay the price.
Will there be problems? Will there be changes? You can bet on it.
The business world is not for chickens right now but if you stay alert to all the changes (most of them designed to benefit businesses), the more likely you will come out the other end in one piece.
Fran Coet is a partner in the accounting firm of ATLAS CPAs and Advisors in Westminster, www.AtlasCPAs.com. Call 303-426-6444.
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