Tiana Clewis: Hey Dreamers and welcome back to my channel where we tackle all things money so you can stop looking at it as an obstacle and start looking at it as what it is: a tool to help you create a life that you truly find worth living.
Today I want to continue the discussion that we started last week about the CARES Act, an act that was passed as a stimulus package on March 27th by Congress to help the economy get back in order with this coronavirus pandemic.
Last week we started our discussion about the CARES Act by walking through the facts and the rumors around the stimulus checks, something that impacts roughly 80% of the American population. Now, if you want more details about those coronavirus stimulus checks, don't worry. You can just click the link above my head to check out that video.
Then on Wednesday, we continue the discussion by talking about the Paycheck Protection Program, which is specifically designed to help Americans stay off of unemployment by covering payroll for small businesses, for 501c3 organization, sole proprietors, and even independent contractors. The cool thing about this program is that the loan that you receive under the program from the SBA is actually forgivable if you simply follow the rules.
If you want more details on that because you're interested, I recommend that you click the link above my head ASAP. In this case, this is something that's going on right now. It's super active and the $350 billion set aside for these loans is kind of first come first serve. So I recommend that you act fast because applications are being taken right now.
Today I want to talk about three other programs that were either expanded or created as a result of the CARES Act or the coronavirus pandemic. The idea is once again, to help small businesses stay afloat during the pandemic so that once the economy is able to get back started, the businesses can just go do what they got to do without any worries.
Before we start diving into the particulars of these three programs, let me first introduce myself to the newbies on the channel. My name is Tiana B Clewis, and I'm a Financial Lifestyle Coach and Start-up Strategist with my labor of love, Selah Financial Coaching. All that really means is that I've dedicated my life to helping women entrepreneurs build a life that they truly find worth living, and we're going to do that by escaping the nine to five grind, using money strategically and just hitting all of our financial goals.
That's something that I've been living out each and every day, even in the midst of the pandemic.
If this journey sounds like it's right up your alley, go ahead and let me know by liking the video and subscribing to my channel. Don't forget to hit the bell, so you're notified every time I drop new money tips and strategies each Saturday and Wednesday.
Now that you know how to get connected and stay connected, let's get back to talking about these SBA program.
Now as we start walking through these three different programs, let me clarify something because you're going to hear me say it a lot, and I want us to have the same understanding. For the rest of the video, when I say a small business, I'm talking about everything. I'm talking about the 501c3 organizations. I'm talking about sole proprietors. I'm talking about independent contractors. I'm talking about anyone who's considered self-employed. I'm talking about the tribal businesses, the veterans organizations that qualify, which most of them know who they are. I'm talking about all those things. So I'm using small business to encompass a lot of stuff because it will simplify my life and it will simplify yours.
So now let's talk about the first program and this is the one that we're probably going to spend - no, definitely - we're definitely going to spend most of our time on this particular program.
The first program that I want to talk about, and again, the one we're going to spend the most time on is the Economic Injury Disaster Loan program. This is something that has existed for quite some time and it's very effective because what it does is it provides working capital to businesses that have been impacted by a disaster.
Now, when we say disasters, typically you're talking about things like tornadoes. We're talking about things like floods and droughts and tsunamis, those sorts of things.
Basically, when a city, a town or a state is considered to be in a state of emergency, many of these events that happen, many of the disasters that have come along results in revenue loss for the different businesses. The problem is if you want to get the economy for that city, town, county, or state going again, once everything's cleaned up - guess what you need. You need the businesses to still be functional and able to proceed. These loans are designed to provide working capital so that that can happen. If we can keep these businesses going, then we're okay.
Same thing with the Paycheck Protection Program that we talked about last time. The only difference is, instead of focusing on just the payroll, we're talking about with this program, anything in the business that's impacted because you no longer have the revenue to pay for what you needs to pay for.
So with this program, the loans that are available are up to $2 million. It's a pretty good amount right - depending on the size of the business. But for a small business, $2 million is available and you would pay the loan back over a certain amount of time and your interest rate would be pretty decent. We're looking at 3.75% for a business and for a 501c3 nonprofit organization, we're looking at 2.75%. So these interest rates are not that bad on a up to $2 million loan.
Now in the case of coronavirus and the CARES Act, there are some additional things that come along with it, or should I say additional terms, perks and benefits that are available for businesses that existed before January 31st of 2020.
One things they added that had people super excited is the emergency grant. Now, this is a grant of up to $10,000 that you're supposed to receive within three days of submitting your application. The thing about this particular grant is that it's all about helping you get some quick cash while they're still processing the rest of your loan to make sure that you actually need up to $2 million, like you asked for.
Here's the thing about this: the only way that this stays a grant and it's not something you have to repay as part of the rest of the EIDL loan that you applied for, is that you have to use it for approved purposes. So that's going to be things like paying for sick leave for one of your people who's been impacted by coronavirus, like they're sick or one of their family members is sick. It might be something like covering payroll in general. It might be something along the lines of paying for your rent or your mortgage and...
What else did they have? They have other things on the list. I can't remember them off the top of my head. But you can check it out, but basically if you pay for the preapproved items, then that up to $10,000 that you received within three days of submitting your application, you don't have to pay it back.
So that had a lot of people super excited because you're supposed to receive that grant even if you don't get approved for the EIDL loan at the end.
Now, let me, let me give you a very important caveat. There's two things, two reasons why you shouldn't get too excited about this though.
Most of you who follow my channel are sole proprietors. You're independent contractors, you're self employed. It's just you. One of the things that the SBA said is that they're actually going to base the amount of the grant on the number of employees that you have. Which means that you miss mompreneur who's working by herself, who's managing things on her own. Hey, you single person who's just running this, you're a solopreneur. You're doing this yourself. You're only going to get $1,000.
They're talking about a thousand dollars per employees. So basically you only get the full $10,000 if you have 10 employees or more.
Now there's been conjecture that there might be a way that you can object to that and show, no, I need more than 10,000 - I need more than $1,000 or $2,000 or whatever it is you received. They're saying there might be ways to be able to dispute that, but we don't know that for sure yet. So I don't know what to tell you. But don't get too excited about that grant, because if you're doing this by yourself, you're only going to get $1,000. But hey, if $1,000 is all you really need, then bless you. Do what you gotta do. Apply for the loan.
One more thing. Whew. Have you been on the SBA Twitter account lately? If you have, you know that they are being slammed right now with people who are upset because this thing has been going on for what, two weeks? The legislation was passed roughly two weeks ago, and yet people who have applied for the EIDL loan have not yet received their funds, at least last I checked on Twitter.
Yeah, that's pretty bad. So if you applied, say March 30t,h you probably should have your money right now. Right? Definitely been more than three days. Right? Yeah. People just have me getting their money yet again. That was last time I checked her Twitter, and mind you, I'm recording this on what's this Thursday. It's being dropped on Saturdays, so this was like two days ago.
Hopefully they've gotten their act together in the last two days, but I'm just telling you, last I checked, people hadn't even received their grants yet, so again, don't get too excited about that part. It's been kind of a let down for people.
Two more things that were expanded for the EIDL program underneath the CARES Act.
One is that you actually don't have to pay back the loan for a whole year, so payments don't start for a year. Normally under the program, it's a six month deferment, but they expanded it. They doubled it. So you have one year until you have to start making payments on your EIDL loan.
The other thing is that you can take out an EIDL loan and you can still apply and take out a loan under the Paycheck Protection Program. All you have to do is make sure that you don't use the funds for the same things. So basically you can use your EIDL loan, maybe for your working capital, paying for, um, I dunno, paying for your regular expenses other than payroll. And then you take the Payroll Protection Program money and you use it. All of that for payroll. If you - as long as you do it that way, it's not considered double dipping. So you could actually get both, which means you can still get your payroll 100% forgiven even though under the EI- EIDL, you still have to pay the whole thing back.
So when I look at the program overall, it's not quite as impressive or as awesome as the Paycheck Protection Program, but it's one of those things where if your situation is really just that bad and you absolutely have to have the money, then it might be something you want to consider. The terms aren't too too bad: a year for repayment, your interest rate is 3.75%, 2.75% if you're a nonprofit, so it - it's workable. It's doable. It's okay.
But don't apply for the program expecting that grant to come really fast because it's not going to be very much, and even if you are actually going to get it, it might take you longer to get it than what they said it was supposed to be.
Now, the second program that we're going to talk about is the Express Bridge Loan Pilot Program, and again, that's something that was expanded underneath the CARES Act that already existed with the SBA.
Now I'm going to be upfront with you guys about it. I am not a huge fan of this program and as you listened to me talk about it, you're probably going to understand why very quickly.
The way this program is designed is to provide quick cash to anyone who already has a good relationship with the SBA Express Lender. So if your bank qualifies as SBA Express Lender, you already have a relationship with them, you actually have the ability to apply for one of these loans.
So as you can see, there's already a limitation there, which irritates me, but that being said...
With these express loans, you're able to get up to $25,000 that you can use for your working capital, whatever it is you need for your business. The idea is that if you only need $25,000 great, or if you need that money fast so that you can actually keep going until you can get your EIDL loan approved and funded, then it can do that as well. Then what ends up happening is that $25,000 basically just gets added into your EIDL loan.
In the case of the CARES Act, the changes to this particular program are really not that big. It did two key things. So the first thing is that any - any small business that has the relationship with the SBA Express Lender is able to apply for this program because of coronavirus. That's simple.
The second thing is that it expanded how long you have to actually apply for the program since the date of the disaster declaration. Normally how it works is if a disaster is declared on August 1st, you have six months from August 1st to apply. In this case, they took it from six months to an entire year. So President Trump declared a national emergency on March 13th of 2020 which means that you have until March 13th of 2021 to apply for an EBL under this program.
Now we can get to the two biggest problems that I have with this program. I've already mentioned one that's a minor irritation, but I have two very real and very legit issues with this program.
The first one is the interest rate. The way that it's designed is that the interest rate is the prime rate plus up to 6.75%. Note prime rate plus 6.75%. Now mind you, 6.75% by itself is not really considered a good interest rate, but that's plus the prime rate.
Now, if you don't know what a prime rate is, that's basically the rate that. Banks in general have agreed to use at this given point in time for people who have really good credit. So let's say that the prime rate right now is 3.25%. Okay. If they take that 3.25% and they add the full 6.75%, that means you've just taken out a loan with a 10%. Interest rate.
There is nothing good about a loan with a 10% interest rate. What? No! So, um, yeah, thanks, but no thanks.
The other problem I have this program is that it has a bunch of restrictions and I'm actually gonna read some of them, and this list that I have that I'm reading from, it's not the whole list. Like I left a bunch of things off, but here are five that really caught my attention.
Um, so the first one that caught my attention is that nonprofits, don't qualify. Not sure why, but whatever. Nonprofits do not qualify for EBLs. Now, if they do have a subsidiary that's a for profit subsidiary, so say like a church that runs a for profit daycare, that daycare would actually qualify for an EBL, but the church itself would not.
Another thing is that you actually have to show, certify somehow that you couldn't get credit anywhere else, that you had to come particularly to this SBA Express Bridge Loan program like you have to show, you couldn't go anywhere else to get your funding. You had to come here.
Also, life insurance companies, um, or companies that engage in lending of any kind, don't qualify, including most pawnshops. As you know, most pawn shops, the process of pawning is actually considered a loan. So most pawnshops don't even qualify. I don't understand that, but whatever.
Also, private clubs that limit membership for reasons other than capacity don't qualify. Now think about this. How many clubs, organizations have you joined where it was like a women's only club? Or a youth club or a, you know, race-related club, a religion related club. You know what I mean? That there are plenty of clubs that limit membership based on something other than capacity. Yeah. Those clubs don't qualify here.
Also... man. And this was one that I found very interesting. So the loan actually includes a series of calculations that have to be done to determine how much the owner of the business can actually contribute to address whatever the shortfall, the problem, the issue is for the business with the program.
Now, I don't know if that particular calculation goes away, if you're trying to, um, apply for an EIDL loan. I don't know. I feel like it should, but that wasn't clear. So if you still have to do this calculation to show that "I as the business owner could have contributed this much money to address this situation," I hope they don't require you to actually give that money. Like what? I don't know. Whatever.
Again, this is not a fully inclusive list. This is just some of the restrictions I saw that caught my attention. Not a fan. So crappy interest rate. A lot of restrictions. As you can see, I'm not a huge fan of this program, but hey, it's, it was expanded under the CARES Act. It's part of what the SBA is using. And when you actually click on the SBA website at sba.gov and look under the coronavirus, um, page, they list this. So I covered it.
The last thing I want to cover and something that technically is not part of the CARES Act, but it's part of the SBA's coronavirus response, are the debt relief programs that they put in place to help, again, small businesses to stay afloat.
Now, I like these programs because they're designed for people who already have an sBA loan in existence it would really suck if the Small Business Administration, which is here to help small businesses stay afloat, is part of the reason of why some of these businesses go bankrupt. So I like the fact that they've implemented these loan programs.
So the first thing is that for a period of six months, they are going to pay the principal, interest and any fees related to the loans of people who have a 7a loan, a 504 loan or a microloan.
Now a 7a loan is basically just like a general loan under the SBA, and that 7a actually stands for the piece of legislation, the section of the legislation that created the loan. A 504 is... What is that? That's for commercial buildings, uh, buying commercial properties and building commercial buildings, refurbishing commercial buildings, that sort of thing. And then the micro loans are basically loans that were issued by the SBA that are less than $50,000.
Now, here's another cool element that they added on top of that. Let's say for example, that you were already interested in one of those loans anyway, and you applied for one and you got approved before September 7th of 2020. Well, what they decided they're going to do is that if you're approved by that date, they're going to do the same thing for you. They're going to pay the interest, the fees and the, uh, principle for your loan.
Now, I don't know if it's still going to be up to six months or if it's just going to last through September 7th. I don't know. But just the fact that they're willing to do it at all is really cool to me.
The last thing I have to mention related to that debt relief that the SBA is providing is the relief that they're providing to people who already have some sort of disaster loan already.
Now, if your loan is in active servicing status, what they're doing is they're going to actually delay your payment, so they're going to forbear all of your payments through the end of 2020. So you don't actually have to start paying on that loan again until January of 2021.
Now the thing is interest is still going to accrue on that loan. So if you can pay the loan, go ahead and pay the loan. Do not stop paying it because you want to cover the interest. You want - you don't want to just stack the interest on top of itself and make how much you have to pay in the long run more if you don't have to.
But if you're in dire straits, you really need that temporary relief in your cashflow, then go ahead. Do what you gotta do. Pull it back together as quickly as you can and start making the payments on those loans even before the end of the year.
Now that you know all about the programs that have been implemented or expanded by the SBA under the CARESAact, or just in a general response to the coronavirus pandemic, you should be ready, like between this video and the video Wednesday on the Paycheck Protection Program. You should be ready. You should know exactly what you need to know so that you can start protecting your business and therefore your family from the financial impact of the coronavirus pandemic.
But before you run off to your bank, go to the SBA website to actually start to apply for these programs. I want to let you know that they're not the only ones out here trying to help the people. You know me, I am in a season of trying to help the people out because it's tough out there in the streets. Some people, we're doing very good. We're safe, we're good. The - our lives really aren't changing, but for other people, this is major.
So if you find yourself as one of those people who needs help, you need help figuring out how to overcome your obstacles. You need help figuring out, "Okay, how am I going to actually succeed in this season? How am I going to make adjustments to my business so that by the time I come out of this, I'm in a better position than I was when we went into the coronavirus shutdowns."
If you need help with those things, I'm offering a special rate on all of my one hour Dream Builder Strategy Sessions. I'm going to offer a 50% discount on the normal investment, so that means that you can get an hour session with me that normally would cost $149, for less than 75 bucks.
To take advantage of this special rate, all you have to do is head to my website at tianabclewis.com/bookonline. Once you're there, scroll down to the Dream Builder Strategy Sessions and click that "Book Now" button.
Then go ahead and get your session setups. Select your time. Select your date and then tell me who you are. Then when you get to the checkout screen, what I want you to do is hit to enter a promo code and you're going to use the word CARES - C, A, R, E, S, in order to get that special pricing.
As always, the link is going to be down in the description.
Now that you know how to get the cash infusions that you may need from the SBA programs and how to get linked up more one-on-one help, let's get connected on social media. You can find me on Instagram and Twitter with the handle tianabclewis, or you can find me on Facebook under selahfinancialcoaching.
Also make sure that you let me know that you found this video useful by liking this video, subscribing to my channel and hitting the bell so that you're notified every time I drop new money tips and strategies every Wednesday and every Saturday. Trust me, you don't want to miss out on those.
Finally, if you're looking for more videos, that's going to help you learn how to budget like a pro so that you can actually conquer this coronavirus season and be ready to take over the world when we're set free. Then I have two videos right here that you definitely need to be watching.
With that you have some watching to do and yeah, I got my work to do, so I'll talk to you later. Bye. Bye.
If you’re one of those people struggling to figure out how you’re going to keep it all together in the midst of this insanity, I want to help. From now through the end of April, I am offering everyone a special rate of $74.50 for a Dream Builders Strategy Session. That’s 50% off of the normal rate! Just use promo code “CARES”: https://www.tianabclewis.com/bookonline
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