stimulus dollars Getting the most out of your · 1.1 - Stimulus programs: Recap (PPP) Paycheck Protection Program 1st round of $349 billion, depleted in 13 days 2nd round of $310

Getting the most out of your stimulus dollars

Can’t make heads or tails of this? You’re in the right place

Presented by: Wilfrid Baptiste blindspotfin (Facebook- Twitter - Instagram)

Presented by: Wilfrid Baptiste | [email protected] | 866.667.2737 | @blindspotfin (Facebook-Twitter-Instagram)

Who will benefit from this presentation?1. For- and Non-Profit Companies

a. PPP recipientsb. EIDL recipientsc. Local loans & grants recipients

2. Advisorsa. Accountantsb. Attorneysc. Insurance professionalsd. Consultants

3. Forward-thinking business owners and professionals

Getting the most out of your stimulus dollars

1. Stimulus programs: recap2. Stimulus programs: issues3. Stimulus programs: the

holistic view4. Shifting ground5. Tools & strategies6. Tracking & adjusting7. Options8. Q&A

This presentation is less about clear-cut answers and more

about positioning - so you are as ready as can be reasonably

expected


1.1 - Stimulus programs: Recap (PPP)Paycheck Protection Program

● 1st round of $349 billion, depleted in 13 days● 2nd round of $310 billion. Approximately $150 billion still available

○ A $60 billion tranche has been reserved for smaller lenders○ Big companies with access of other means of financing have been

shamed into returning their PPP loans○ Uncertainty around the rules has has a cooling effect on demand


1.2 - Stimulus programs: Recap (EIDL)Economic Injury Disaster Loan Program

● Initially funded for $10 billion, received $400 billion of applications● Includes the grant initiative: up to $10,000 ($1,000 per employee)● Second round of financing of $60 billion

○ $10 billion for the grant program○ $50 billion for the loan program


1.3 - Stimulus programs: Recap (Debt Relief)Debt Relief Program

● $17 billion worth of funding● Picks up the tab for non-disaster SBA loans for 6 months● Provides payment relief for the first 6 months of new PPP loans


1.4 - Stimulus programs: Recap (Loans/Grants)Multiple initiatives at the city/county/state level. Generally consist of:

● Payroll grants● General purpose grant● Zero-interest loans● Bridge loans● Low interest loans


2. Stimulus Programs: Issues● PPP

○ Design○ Forgiveness provision

● EIDL○ Effectively stopped○ May not re-open for COVID-19 purposes

● Loan & Grant Programs○ How do those local initiatives interact with the federal programs?


2.1 - Stimulus programs: Issues (PPP)1. Short-term solution to a long-term problem

a. 8-week clock is inadequate and is closing in for the 1st wave of recipientsb. Provides 8 weeks of relief, and then what?

2. Competes with other relief effortsa. Workers earning minimum wage have no financial incentive to come backb. Some industries are unable to bring back workers due to lack of business

3. “Fox in the hen house” situation with forgiveness provisiona. Benchmarks for forgiveness are determined by the banks

4. Shifting guidancea. Eligibility - Forgiveness


2.2 - Stimulus programs: Issues (EIDL)● The EIDL program is overwhelmed

○ Over $400 billion in applications for $70 of funding○ Grants are generally too small for most businesses○ Pipeline is so backed-up the program may not re-open (for COVID-19)○ Much longer process, tough underwriting, and collateral is required for offers

over $200,000○ Based on the volume of applications, receiving a loan from this program is

going to be hard.


2.3 - Stimulus programs: Issues (Loans/Grants)The big issue with these is “how do they interact with

the federal programs”?

● How do I handle the money if I get a payroll grant and a PPP?● Can I pay off a bridge loan with the PPP? Or vice-versa?● Can I pay PPP-ineligible workers with my grant/loan?● What does the fine print of my loan/grant say?


3. Stimulus Programs: Holistic ViewTunnel vision: defective sight in which objects cannot be properly seen if not close to the center of the field of view.

● Revisit your business model○ Was your PPP eligibility hurt because most of your people are 1099 or because you did

not pay yourself?● Working capital

○ Delay in receipts (services) - Trade credit & inventory issues (physical goods)● Need more runway

○ Your business may need more than 2 months worth of help● Facing disruption

○ Your industry is changing and you need capital to fund your pivot


3. Holistic View (continued)Unpopular Observation : What’s the name of Title I of the CARES Act?

● Keep American Workers Paid and Employed Act

Practical Consideration: Forgiveness vs, Business Survival

● Forgiveness should be a perk, not the main feature○ What decisions makes the most sense from a BUSINESS perspective?○ THEN, maximize forgiveness within that framework


3. Holistic View (continued)There are multiple ways the various stimulus packages can help you. Focusing on a few of them while neglecting the others is a mistake.

● Paid Sick and Family Leave● Expanded Unemployment

Coverage● Extension for Filing and Paying

Taxes● Stimulus Checks for Individuals,

Couples, and Children● Mortgage, Rent, Foreclosure, and

Eviction Relief● Student Loan Payment Suspension

● New Charitable Giving Incentives● IRA RMD Holiday● Penalty-Free Withdrawal from IRAs

and Retirement Plans● Low Interest, Possibly Forgivable

Loans for Small Businesses (PPP and EIDL)

● Payroll Tax Credit and Deferment


4. PPP Flexibility Act


5. Tools & Strategies● Loan/grant documents review

○ What do your loan documents say?● Cash flow projection tools

○ What does your cash flow look like for the next 3 months?○ What is your cash conversion cycle?○ What levers can you pull to improve your numbers?○ Will you need additional funding besides your PPP loan?

● Forgiveness projection tools○ Track your PPP money and forecast forgiveness○ Compare forgiveness forecast with actuals


6. Tracking & AdjustingThe biggest takeaway from this presentation is that the situation is very fluid and that you need to be on top of

● Guidance. New guidance keeps coming out, sometimes clarifying things, other times introducing more complexity. A new bill could upend many of assumptions the accounting and legal industries have been operating on.

● Documentation. Regardless of where guidance ultimately falls, the burden of proof is going to be on you. Document, document, document!

● Numbers. As things evolve, what makes sense in the moment might not make sense a week or two later. Keep track of your numbers so you can plan adequately and then pivot if necessary.


TOOLS


7. Service PackagesCash Flow & Protection

● Monitor company cash conversion cycle

● Assess, track, and forecast company cash flow

● Ensure protection and/or retention of company assets

Valuation & Growth

● Benchmark company valuation & personal assets

● Identify personal and business growth objectives

● Build and preserve business value and personal assets

Continuity & Transfer

● Implement business continuity workbook

● Plan for efficient transfer of business ownership

● Ensure lifestyle continuity and transfer of generational wealth


LOAN FORGIVENESS PROCESS1. Complete and submit the loan forgiveness application to your

lender2. Lender has 60 days from receipt of a complete application to issue

a decision to the SBA3. If your lender approves part or all of your forgiveness requests, it

asks the SBA for payment4. SBA has 90 days to remit the appropriate forgiveness amount to

the lender, plus any interest accrued through the date of payment


LOAN FORGIVENESS ORDER OF OPERATIONS1. For the 8-week period, determine total Forgiveness Payments (subject to caps)2. For employees employed during the 8-week period, determine wage reduction amount3. Subtract Step 2 from Step 14. For the 8-week period, calculate total FTEs, including FTEs from rehiring cure rule and

rejected offer rule5. For either [1/1/2020 to 2/29/2020] OR [2/15/2019 to 6/30/2019], calculate total FTEs.

Take the lower FTE result6. Divide step 4 FTE result by step 5 FTE result7. (FTE reduction adjustment): Multiply Step 3 result by step 6 result8. Take lesser of [Step 7 result] OR [Total Payroll Costs for 8-week period divided by 0.75]9. Subtract Step 8 result from PPP loan principal. Remaining balance must be repaid


Q & A1. Can I use my PPP loan proceeds for back pay?

a. Difference between Permitted Expenses and Forgivable Expenses

2. What are allowable expenses?a. Cash compensation to US-based W-2 employeesb. W-2 employee benefitsc. State payroll taxesd. Rent on leases, utilities (in place before Feb 15, 2020)e. Interest on any debt incurred before February 15th 2020

3. Can I, as an owner, increase my pay?a. Compensation for owners is capped at the 2019 levelb. Owners of multiple businesses are capped at the $15,385 across all businesses


Q & A4. What happens if I can’t spend all loan proceeds on permitted

payments in the 8-week period?a. Unspent loan proceeds can be repaid at the end of the covered period or carried out as a

loan at 1% over 2 years, with a 6 month deferral on interestb. Difference between unspent loan proceeds and unforgiven loan proceeds

5. What happens if I can’t spend at least 75% of my loan proceeds on payroll costs?a. It will decrease your forgiveness amount

6. Can I use 100% of my loan proceeds on payroll costs?a. If a sole owner, remember your compensation is capped at 2019 levelsb. Otherwise, it is a plausible scenario if you hired more people at the beginning of the year.

Nothing in current guidance says you can’t.


Q & A7. Can I use PPP loan proceeds for permitted payments that are past

due or not yet due?a. There is a certain level of flexibility with payroll expenses, as well as non-payroll expenses

other than mortgage interest

8. Will the SBA audit my PPP loan?a. The SBA has stated that they will review every loan at the $2 million level and above.

Other loans will be subject to random audits

9. When I apply for forgiveness, do I put in everything I can and see what sticks or should I follow the guidance to the letter?a. Guidance is evolving as we speak. The very nature of this program could change

drastically in the coming weeks. The best course of action is to be prepared


Q & A10. What do I do if my employees are refusing to come back?

a. Your loan forgiveness will not be reduced if you document a) your offer for them to come back, and b) their refusal to come back. Side note: this will in most cases hurt their eligibility for unemployment benefits

11. Do I have to re-hire the same people?a. No. Your FTE calculation is what matter. How you arrive at the FTE is largely irrelevant.

12. What do I do if the date I received the loan doesn’t line up with my payroll schedule?a. You will have the option of an alternative 56-day period to start your forgiveness clock,

starting on your nearest payroll date, to align your PPP disbursements with your payroll schedules.

Documents

stimulus dollars Getting the most out of your · 1.1 - Stimulus programs: Recap (PPP) Paycheck Protection Program 1st round of $349 billion, depleted in 13 days 2nd round of $310