April 10, 2020

News Roundup for Small Business Owners

The latest news about relief efforts for small businesses, particularly via the Paycheck Protection Program (PPP) and Economic Injury Disaster Loans (EIDL).

• Today’s big economic news was the release of another sad weekly unemployment report, which found that an additional 6.6 million workers sought unemployment benefits last week, bringing the total to nearly 17 million new claimants over the past three weeks. In news that shouldn’t surprise most, small businesses bore the brunt of the layoffs. Just using March numbers, layoffs at small businesses spiked over 1,000% for small businesses, and April will be much, much worse. (NPR, CNBC)
• In an interview today, SBA Regional Administrator Dan Nordberg said that 500,000 PPP loans valued at over $130 billion have been approved, implying an average of $260K per business. As far as loan amounts go, that number is in line with the the latest crowdsourced data, where the average loan size is $243K, and the average number of employees is 18. However, of the 1,260 small businesses who have been entered their data, only 1% report they’ve been approved. (KDVR, Covid Loan Tracker)
• Sole proprietorships can finally apply for PPP loans as of today, which was promised upon passage of the CARES act but had yet to actually come to fruition. This includes solopreneurs who pay themselves via distributions. Nonemployers are the largest segment of businesses in the economy, amassing a whopping 25.7 million of the approximately 30 million small businesses in the U.S. (CNBC)
• Lenders and critics have, rightfully, expressed concerns about fraud. Since these applications are scant on details, the onus is on the applicant that the information is accurate. It is crucial that small businesses do their due diligence before applying, as fraud will be a huge focus after funding. You should assume there will be random and targeted reviews of PPP loans, and you should keep records to verify the information in the application and how the funding is spent. This article from Forbes is something every applicant should review before they apply. Their suggestion is that optics matter; if you appear to be taking advantage of the program, even if you’re not, they will come after you. This is NOT free money; this is a relief program to help small businesses survive. It goes without saying, but if you don’t need the PPP, you shouldn’t apply. Let someone who needs it use that money. (Forbes)
• Now that businesses are getting their PPP loans, they’re being faced with the hard reality of how they are forced to spend it. For example, to be forgiven, most of the money must be spent on payroll in the 8 weeks following disbursement, but with so many businesses on lockdown (restaurants, etc.), companies will be re-hiring staff just to have them sit at home. This is your reminder that the PPP is about keeping people employed. But companies should think of it as an opportunity: you now have staff to do special projects and dream up new initiatives. We’d love to hear ingenious ways people are utilizing their re-hired staff to help promote new revenue streams. You shouldn’t be paying people to sit around; if you don’t have their regular position available, use your team to think about our post-corona world (this will be a blog post topic for us next week). (CBSNews)
• I haven’t written much about the Federal Reserve’s Main Street Lending Program, since our heart is more with smaller small businesses. There are two programs available for medium-sized businesses who have 500–5,000 employees. The loans start at $1,000,000 and from what I understand, maximum loans will be based on either 4x or 6x 2019 EBITDA, less existing debt, depending on the program. Which of course implies that 2019 EBITDA would have to be positive. Since the loans start at $1,000,000, my basic math says that a company must have a 2019 EBITDA of at least $166,666 (and also no other debt) to make those standards. (MarketWatch)
• Have you received a PPP loan? We’d love to hear your story and get insight into how the process and experience was for you. As so many businesses are waiting for relief, we want to help share some of the good and positive things that are actually happening.

Previous Entries:

Monday, April 6 | Tuesday, April 7 | Wednesday, April 8 | Thursday, April 9

Masterplans is a veteran-owned business that specializes in providing the highest-level business development consulting located in Portland, Oregon. For 17 years we have helped thousands of entrepreneurs launch new businesses and put their ideas in motion. Now, more than ever, we want to see these same businesses survive the largest economic disaster of our generation.