There have been a lot of opinions and platitudes that have come out over the past week to discuss the killing of George Floyd, and the ensuing protests.  Systemic racism exists, and since we are devoted to developing a healthy entrepreneurship ecosystem in Hendricks County, we wanted to see if (and how) it showed up in small business data.  With this in mind I dove into several studies and looked at the numbers and found that we have to do better.  Minority-owned businesses (specifically Hispanic or black-owned), while starting at a similar rate, just do not grow at the same rate of their nonminority peers.  I welcome discussions on this topic and all of the information included in this post, but mostly I wanted to share the data that I found, so at least you could see it with your own eyes.

There is no doubt that small businesses of all sort face challenges.  Most are owner-operated firms with no other employees (nonemployer), so the business owner has to wear multiple hats and put out all the fires themselves.  Small Business owners and entrepreneurs also have additional stresses which can lead to depression, especially in times like these when you bring in all kinds of uncertainty into the mix.  Now, imagine if you add lower home values, lower credit approval rates, entrenched biases and discrimination to the mix.  This is the reality that many minority business owners face every day, and can be a huge reason their businesses do not grow at the rate of their nonminority peers.

We will examine this disparity in a 3-part series.  The first part, which we will be reviewing today, will go over the data, so we can see that a disparity exists.  Part 2 will look at some of the reasons for the disparity that result from years of systemic racism and why it matters.  Finally, Part 3 will look at some of the resources available to combat these issues, and what we can do to help.

Racial Disparity by the Numbers

In 2012 8 million minority-owned businesses contributed $1.38 trillion in revenue and 7.2 million jobs to the economy.  Also, from 2007 to 2012, which encompassed the great recession, a net 2 million minority-owned businesses were created while a net 1 million nonminority-owned businesses closed.  This increase was driven by a 34% increase in Black/African American business ownership and a 46% increase in Hispanic-owned businesses.

While those stats show a positive trend in minority business ownership, when we look further into the data we see that there is still room to grow.

When we dive into the numbers we see that even though minority-owned businesses are on the rise, they still do not represent their full share of the population.  For instance, while minorities made up 37% of the US population in 2012, they only made up 29% of all businesses and the numbers for the black community are 12.6% of the population and only 9.5% of all businesses.  The data for Indiana is not much better.  Black/African Americans made up 10% of the working age population in Indiana in 2012, but only had a 7% share of all businesses, and only a 1% share of all Indiana employer businesses.

If these trends continue, we could reach parity in business ownership levels in relation to population.

When we dive even deeper into the numbers we find a large disparity in the average number of employees and the average of sales for each business.  For another example, let’s take a look again at black/African American owned businesses.  While this cohort made up 9.5% of all businesses in 2012 they only made up 1.7% of all employment and 1.3% of all sales.  For Hispanic-owned businesses the numbers are 12.2% of all businesses, 4.0% of all sales and 4.2% of all employment, which is a bit closer to parity.  When you compare those numbers with the fact that nonminority-owned businesses made up 71% of all businesses but 88% of all sales and 86.5% of all employment you begin to get a picture of just how big the disparity is.

Now, lets take a look at sales receipts per firm from 2012.  For our black/African American business owner friends, we see that their average gross receipts were $58,000 while Hispanic-owned businesses were about 2.5 times greater ($143,000) and nonminority owned businesses were more than 9 times greater ($546,000).  These numbers are mitigated a bit when you take out  nonemployer firms.  When this is done, you see that the average sales are $948,000 for black/African American-owned firms, while Hispanic-owned firms are 1.5 times greater ($1.3 million), and nonminority-owned firms are  2.5 times greater ($2.3 million).

One reason for the huge discrepancy in the gross receipts per firm can be pointed back to the average employees per firm.  For nonminority-owned businesses, ~22% firms are employer firms compared with 8.7% of all Hispanic-owned firms and just a mere 4.2% of all black/African American-owned firms.

I know, I know, so much data.  I am sorry as no one really wants to see this many numbers, but I am trying to share the information.

Credit Disparity

Please bear with me a little while longer as we discuss credit, which is probably where the most eye-opening data exists.

In the Federal Reserve Board’s 2016 Small Business Credit Survey we move forward 4 years in time and look at the results from over 12,000 small businesses.  This data points us to the fact that black-owned firms were less profitable, had lower funding approval rates (by 19%), and received a smaller percentage of the requested amount than their whited-owned business counterparts.  Another shocking stat was that 40% of nonapplicant black-owned firms did not even apply for financing because they were discouraged, and those that did apply usually steered clear of small banks, but instead opted to apply at CDFIs (community development financial institutions) or online lenders.

In a report from 2016, The Ewing Marion Kauffman Foundation dove into some more credit data from the 2014 Annual Survey of Entrepreneurs to give us some more insights.  This data shows us that the more minority-owned businesses faced negative impacts on their profits from the cost of capital or access to financial capital, as compared to their nonminority peers (16% vs 10%).  As we dive deeper, we find that the profits of black entrepreneurs were even more negatively impacted.   For this group, their profits were 3x more likely to be negatively impacted by access to capital and 2x more likely to be negatively impacted by the cost of capital than their white peers.

There is a boatload of data out there that continues to confirm these disparities, but I will save you the boredom of reading any more of it.  If you would like to read for yourselves, you can check out the links below:

2016 FED Small Business Survey

Minority Business Ownership:  Data from the 2012 Survey of Business Owners

Businesses owned by women and minorities have grown. Will COVID-19 undo that?

Startup Financing Trends by Race:  How Access to Capital Impacts Profitability

THE STATE OF MINORITY BUSINESS ENTERPRISES:  An Overview of the 2012 Survey of Business Owners

Entering Entrepreneurship: Racial Disparities in the Pathways into Business Ownership

We will examine some of the reasons these disparities exist in Part 2 of this series.

I understand that some may disagree with the information from this post, but I just wanted to show some data and start a discussion.

 

John C. Anderson

Level Two Inc – Executive Director

 

 

On Wednesday we wrote a blog post about the PPP Forgiveness process.  And true to form, lawmakers are already throwing a wrench in how and when forgiveness may be awarded for small businesses.  Yesterday, the House of Representatives voted to ease restrictions on how the PPP could be spent.  Now, this has yet to pass the Senate, and time will tell if it will as the Senate will not be back in session until next week.  Then, if it does pass the Senate, it will have to be signed into law by President Trump.  The Senate also introduced a similar bill, but have yet to pass it.

So let’s look at the differences in the two bills.

House Bill Summary on PPP forgiveness (passed yesterday):

  • Reduce the share of aid money small business are required to spend on payroll from 75% to 60%
  • Extend the window businesses have to use the funds from two months to six months
  • Push back a June 30 deadline to rehire workers
  • Extend the time recipients have to repay the loan
  • Let companies that get loan forgiveness defer payroll taxes

Senate Proposed Bill Summary on PPP forgiveness:

  • The bill would extend the time frame in which businesses needed to spend the money from 8 – 16 weeks
  • Push back the deadline to apply to the end of the year (from June 30th)
  • Ensure lenders weren’t liable for certifications provided by borrowers
  • “Allow borrowers to use loan funds to purchase personal protective equipment for employees and to pay for adaptive investments needed to reopen safely,”

Obviously there are some differences here, and some Senators are already giving push back to the House Bill that just passed, but it is likely that restrictions will ease to some degree.

Benefit to Independent Contractors and Self-Employed individuals:

While the time to add back employees is not a factor for the Self-Employed, allowing borrowers to use loan funds on other sources and giving them extended timelines would definitely be helpful.  Due to the fact that we have some time, it may be helpful to not apply for forgiveness until we have a bit more clarity on how the PPP restrictions may be eased.

 

Disclaimer:  Please note that we are not CPA’s, so anything you see on our blog is just for your information and should not be considered advice as we do not know your specific needs or issues.  Please consult your CPA or Advisor.

 

On May 18th, the SBA and Treasury came out with the long awaited PPP Forgiveness application with some preliminary guidance.

Then, two days later on May 2o, they issued “final” guidance.  They may release even more guidance as we move forward, but we seem to have a good start, so let’s dive in.

If you have employees, you can visit the following sites to get more information:

How to Fill Out Your PPP Forgiveness Application Form

May 22 PPP Final Interim Rules Provide Further Guidance And Some Surprises

 

First, we will define two important terms:

PPP Loan Disbursement Date: This is the date that the loan funds showed up in your bank account, which is very important because it starts your Covered Period.

Covered Period:  The eight-week period beginning on the date you received the loan funds and ending 8 weeks later.

Second, let’s look at some important information:

If you want to include utilities, mortgage or loan interest, or lease payments in the forgiveness, they had to be in place before February 15th.  There will be no adding fancy cell phone packages or office spaces to up your forgiveness amount.

The applications cannot be submitted until after the covered period ends, but should be submitted as soon as possible.  You may need to wait in order to get your next months utility bills to factor those costs in.

Once your PPP Forgiveness Application has been submitted to your lender, they have 60 days to review and request payment from the SBA, who then has an additional 90 days to review and then remit the appropriate forgiveness amount to the lender.  After the SBA has made their decision, the lender is responsible for notifying you.  This means that you could be waiting for up to 5 months to receive confirmation that your loan was forgiven.

Finally, you will need to submit the required documentation listed on page 10, and they also give you a list of documents to keep “for six years after the date the loan is forgiven or repaid in full.”

Now down to business. 

The application has 5 parts.

  1. The Application (pages 1-4)
  2. Schedule A (pages 5-6)
  3. Schedule A Worksheet (pages 7-9)
  4. List of required documents  (page 10)
  5. OPTIONAL PPP Borrower Demographic Information Form (page 11)

Demographics

This is the last page, but I encourage you to do this first.  Everyone hates to answer these types of questions and there is quite a bit of skepticism over what is really done with the data.  I think and hope the SBA will utilize these stats to see who this program has helped and to find out which groups have been left behind, which in turn could help them develop a better program the next time a need arises.

Schedule A Worksheet and Schedule A

Self-Employed individuals, independent contractors, owner-employees should not have to fill out Schedule A Worksheet or lines 1-8 on Schedule A, so you can move directly to Schedule A number 9.  This number was your net income from self-employment last your, which can be found by dividing the amount on line 31 of  your 2019 Schedule C by 52 and then multiplying that number by 8 (up to $15,385).  Since you did not have to fill in lines 1-8, line 10 is the same number as line 9.  Lines 11-13 will also not apply, so you can move on to the actual application.

PPP Application

After you fill in the necessary business information, you can copy the information from Schedule A Line 10 on Line 1.

Lines 2-4 can get a bit complicated if you do not have an office space.  If you have an office space, you include costs that are either paid or incurred during the covered period, just remember not to double count expenses to try and get extra forgiveness.  If you have a home office, and it was set up and in use as a deduction on your 2019 taxes, you can use that formula to figure out how much mortgage interest, lease payments, or utilities to input on these lines.  One thing to keep in mind here is that if you use PPP to pay a portion of these home office expenses, you most likely will not be able to deduct that portion on your 2020 taxes.

Line 5 does not apply to those without employees.

Line 6 is the total of Lines 1-4, and Line 8 should be the same as line 6.

Line 9 is the total amount of your loan.

Line 10 is the value of line 1, which is your “owner compensation replacement” divided by 0.75

Line 11 is just the smallest number from Lines 8,9, and 10

Here Come the Certifications

Check and double check your math and information, so that you can certify that everything on your application is right, and that you are using them for the correct purposes.  We all remember the hullabaloo that ensued with the last PPP certification.   

And there you have it, your Self-Employed Payroll Protection Program Loan Forgiveness Application is complete.  

If you need a deeper dive with examples, you can visit this article on Forbes.

Also, if you need information on PPP Forgiveness with employees you can visit the links below:

How to Fill Out Your PPP Forgiveness Application Form

May 22 PPP Final Interim Rules Provide Further Guidance And Some Surprises

 

Disclaimer:  Please note that we are not CPA’s, so anything you see on our blog is just for your information and should not be considered advice as we do not know your specific needs or issues.  Please consult your CPA or Advisor.

In our ever changing world, we aim to keep you up to date on all of the recent changes.  Here are some new additional resources that have just come to our attention.  These resources include a small business grant for Town of Plainfield small businesses, the Indiana Small Business PPE exchange, and the new application that you will use to receive forgiveness from the PPP.  Also, do not forget that Back on Track Indiana Stage 3 starts this weekend, and here are a few guidelines on what that looks like.

  • Hoosiers 65 and older and people with known
    high-risk medical conditions should limit
    exposure at work and in their communities
  • Continue remote work when possible
  • Face coverings are recommended
  • Social gatherings of up to 100 people
    may take place following the CDC social
    distancing guidelines

 

12 Week Virtual Acceleration Program.

Our friends up at MatchBOX (a coworking space in Lafayette, IN) have set up a 12 week virtual acceleration program called MatchBOX Venture Development.

 

Rapid Recovery Series by the Indy Chamber

The Indy Chamber is launching the Rapid Recovery Series beginning May 26.These virtual courses will be led by Kelley School professors and are crafted to teach small business owners best practices and strategies on how to effectively reopen and recover from the COVID-19 pandemic.

 

Here are the other links to resources that you may find useful.

Indiana Small Business PPE Exchange

Town of Plainfield Small Business Grant

SBA Small Business PPP Forgiveness Application

Creating a Return to Work Action Plan

Sample Return to Work Action Plan

Gener8tor Next Steps Webinar

LinkedIn Tips and Tricks part 1

Web Writing Made Easier

Look for a new article with more information on PPP Forgiveness on Tuesday morning!  Have a great Memorial Day Weekend.

 

John C. Anderson

Level Two Inc

As more and more Self-employed individuals (including independent contractors and freelancers) are approved for PPP funds, some are left wondering if you can receive the new Unemployment (Pandemic Unemployment Assistance) benefit from the CARES act, in addition to the PPP loan proceeds.  The answer to this question is no, you cannot “double dip.”  This leads to a unique choice, which would be better for you, the Paycheck Protection Program or Unemployment.  Let us break down the differences real quick:

  • PPP Details:
    • It is based on 2.5x your net profit last year.
    • It is a 1% loan with a 2-year term, but can potentially be forgiven, if used for eligible expenses.
    • Forgiveness is for “Owner Compensation Replacement”, which is figured by taking your 2019 Net Profit on your Schedule C and multiplying it by 8/52 (or 0.154)
    • That number will get you close to 75%, the other 25% can be utilized for mortgage interest, rent, or utilities.
      • If you have a home office, you can utilize the Home Office Deduction formula to figure out your eligible expenses.
      • If you do not have any other eligible expenses, you can either pay back the remainder or use it as a 1% loan (with a 2-year term) to help mitigate future losses.
  • Pandemic Unemployment Assistance

Now, down to the nitty gritty.  How do you decide?  Well let’s say you had a net income of $40,000 on your schedule C in 2019.  This would mean that you would qualify for $8,333 in PPP benefits (40,000/12 x 2.5).  $6154 (40000/52 x 8) would be forgiven as “Owner Compensation Replacement,” and you would need to find $2179 in other eligible expenses (rent, mortgage interest, or utilities) for the rest to be forgiven.  You could pay the rest back quickly, or you could save it and use it as a cheap line of credit in case you needed to help keep your business afloat for a while longer.  Payments are deferred for 6 months.  Here, the PPP is clearly the winner, because unemployment insurance will only provide you with $4800 worth of benefits in those 8 weeks, and those benefits will be taxable.  The crossover is around 2019 schedule C income of around $22,000.

We hope this helps a bit.

Please remember, if you did apply for PUA through Indiana, because you did not think that you would receive PPP, you can withdraw your application.

It seems like forever ago that the second round of funding for the PPP and EIDL were signed into law, but in reality it was only 2 weeks ago.  Since that time, the SBA and Department of Treasury has continued to release new FAQ and Guidelines.

Some of the recent changes include:

  • Companies have until May 18th to pay back PPP loans that they received but may not need.
    • If companies received less than $2 million in PPP Funds, there is a safe harbor that states, “will be deemed to have made the required certification concerning the necessity of the loan
      request in good faith.”
    • If they do, they can qualify for the Employee Retention Credit.
  • PPP Forgiveness rules continue to be updated including:
    • You have to pay employees at least 75% of their earnings of the 1st quarter.
    • PPP funds that have been used and forgiven are not included in your expenses for 2020.
    • If you make an offer (written and in good faith) to bring back someone at the same pay and hours, but they refuse due to Covid-19 fears or unemployment benefits, they will not count against your forgiveness.
  • PPP Forgiveness for Self-Employed, Independent, and Contract Workers
    • Forgiveness is for “Owner Compensation Replacement”, which is figured by taking your 2019 Net Profit on your Schedule C and multiplying it by 8/52 (or 0.154)
    • That will get you close to 75%, the other 25% can be utilized for mortgage interest, rent, or utilities.
      • If you have a home office, you can utilize the Home Office Deduction formula to figure out your eligible expenses.
      • If you do not have any other eligible expenses, you can either pay back the remainder or use it as a 1% loan (with a 2-year term) to help mitigate future losses.
  • The PPP breakdowns for the second round have included more small loans.
    • 91% of loans in the second round have been $150,000 and under (compared with 74% in the first round)
      • 73% of all loans have been $50,000 and under
    • Average loan size is $73,000 (down from $206,000)

Now comes the even more difficult part.  You have to be diligent in documenting the offers for your workers to come back to work, where your PPP loans go, and more.

Also, a note about those that took the PPP loans and may not need them.  When the Paycheck Protection Program came out, it was the height of uncertainty.  Many businesses were looking at declining trends in revenues and were afraid (and rightly so) that there was no end in sight.  They also might have been worried about the possibility of laying off or furloughing several workers, which this program was intended to prevent.  Remember your feelings in late March, early April, and how crazy everything was.  Now, in Indiana, we have a bit more clarity of the steps the economy will take to open up, even though customer behavior is still a guess.  So, with this in mind, when the names come out of everyone who received PPP or EIDL funds, let us try to take that into account.

Webinars and other Resources
As you continue to work to improve your business during this Pandemic, Level Two will do our best to provide you with actionable information that you can use on our Business Resource Page, which we continue to update with links to various organizations involved in the recovery effort.  We will also be hosting two Workshops this week and will continue to do so Digitally until we can meet back in person.

Town of Plainfield Rolls Out Small Business COVID-19 Relief Grant Program

PLAINFIELD, IN — The Town of Plainfield is rolling out a Plainfield Small Business Crisis Response Grant Program to help small businesses recover from the economic downfall of the COVID-19 pandemic. The grant program will allow small businesses, employing 50 or less employees, to apply for a grant of up to $2,500.

Grant applications are currently being accepted.

Other Small Business Grants

Elevate Small Business Grants
Hello Alice Covid-19 Business Resource Center
Salesforce Care for Small Business Grant Program
Save Small Business Fund (not all zip codes apply)
Verizon Small Business Recovery Fund

 

Indiana Small Business PPE Marketplace
This online hub serves as a resource for Indiana small businesses employing up to 150 associates that are in need of personal protective equipment (PPE) to ensure the health and safety of their workforce during the COVID-19 pandemic. All businesses are encouraged to first source and procure PPE on their own. This service is designed to serve as an alternate backstop for employers most in need. Click here for more information and to place a request.

All Week at Noon – gener8tor’s Emergency Response Program,

  • gener8tor is hosting a series of free, “Next Steps” webinars for small businesses, nonprofits, startups, freelancers and artists affected by the COVID-19 outbreak.

Thursday May 21 at Noon – Web Writing Made Easier with Scott Flood

HR Webinars

Wednesday May 13th at 1:30 – Return to Work: What Chamber Members Need to Know on Unemployment Insurance

Thursday May 14th at 2:30 – Return to Work:  Creating a Viable Playbook (The Wagner Law Group)

Tuesday May 19th at 12:00 – COVID-19 Protection Planning for your Business

HR Replays

Designing a Comprehensive Re-Entry Strategy in your Workplace

Indiana Business Leaders on Returning to Work

Mental Health Resources from Care to Change

  • Tuesday’s ZOOM chat at 5pm on the topic of Being Creative with Kids during COVID (Meeting ID: 864 1044 4736, PW: 357698)
  • Wednesday Mental Health Awareness ZOOM at Noon topic is Mental health and your family (Meeting ID: 861 4172 4821, PW: 551879)
  • Wednesday’s men’s ZOOM Bible study topic is on Finding Treasure in Darkness (Meeting ID: 396 010 186, PW: together)
  • Thursday’s ZOOM chat at 7pm will be on the topic of “Why do I feel so stressed?”The biological impact of COVID (Meeting ID: 826 5076 1879, PW: 528598)

 

Last Friday Governor Holcomb released his plan and guidelines for Back on Track Indiana, which is a 5 stage plan to get Indiana fully open by July 4th.  Stage 2 started yesterday in Hendricks County, but will be pushed back a week in Marion County, along with a few others as long as their local governments allow it.  As this process continues, the Governor has put in a caveat that a certain stage could be paused for longer or even reversed to an earlier stage if the data suggests.  With this in mind, what are some things you can do to make sure your business is ready to open back up?

  1. Develop or Strengthen your Marketing Campaigns
    1. Social Media Utilization is up 50% or more as several are staying home to work remotely and/or give care and education to their children.
    2. The Good – Despite this fact, advertising budgets have gone down, which lowers the cost of ads.
    3. The Bad – With more eyeballs on Social Media, you are competing with others to get your content seen.  So make sure your content is informative, relatable, and timely.
      1. The Best times to post on Social Media during Covid-19
  2. Make sure you communicate with your customers and employees to make sure they know your plans.
    1. Make sure you are continuing to sanitize your establishment based on the CDC guidelines, to maintain your customers’ and employees’ health and well being.
    2. Make a plan for getting your customers served or back in the door.  For appointment only businesses like salons, you may want to start booking your best customers first as you will most likely have a lot of pent up demand.
    3. If you have been doing business so far, make sure you are collecting email addresses and maintain an email campaign to stay in touch.  For Emails, we use MailChimp, but Constant Contact and others work as well.
    4. Make sure you are communicating with your employees on when you plan to rehire them, and what you are doing to keep your workplace safe.
    5. Some employees may not want to come back due to the added benefit of the $600 weekly Federal Unemployment Benefit from the Cares Act.  This is understandable due to the remaining uncertainty.  For these employees,  make sure you make an offer in writing for them to come back to work.  If you do this, they will not count against your PPP forgiveness.
  3. Did you apply for the PPP or EIDL yet?  Here is the most recent FAQ and guidance on PPP program.
    1. If you applied for the PPP and have not yet received it, check on the status of your application.
      1. If you have a number, congrats, you are in the queue.  If not, ask your bank where you are in line.  If you are with a big bank and are far behind, you may want to contact Home Bank, PayPal or Stripe to see if they are still taking applications.
    2. If you have received your PPP funds and can certify that they were “necessary to support the ongoing operations” then make sure you can document a couple of things.
      1. Why it was necessary
      2. Where the money goes.  Remember, the loan is forgivable if 75% of the funds go to payroll costs.
    3. If you have received your PPP funds, but have new clarity that you did not really need the funds.  You have until May 7th to pay it back.
    4. If you have already applied for the EIDL and got a loan number, they are continuing to work through their applications.
    5. If you have not yet applied for the EIDL, they have opened the portal to submit applications for Agricultural businesses, but not any other businesses yet.  
  4. If you are a freelancer or Independent worker and are still not seeing any return to normalcy for your business, you can file for unemployment.
    1. The CARES Act (Section 2102) also allows for self-employed individuals and Independent Contractors to file for Unemployment if the filer:
      1. is diagnosed with COVID-19 or experienced symptoms or is seeking a diagnosis
      2.  has a member of his or her household that has been diagnosed with the illness
      3. is providing care to a family member with COVID-19
      4. has primary caregiving responsibility to a child that is unable to attend school due to COVID-19
      5.  cannot reach his or her place of work because of a quarantine or advice of a health care provider to self-quarantine
      6.  has become a breadwinner after the head of household has died from COVID-19
      7. has had to quit his or her work as a result of Coronavirus, or
      8. has a work location that is closed as a direct result of a COVID-19 public health emergency.
    2. Indiana began to accept applications for Independent Workers and Self-Employed Individuals on April 24th.
    3. When applications are accepted, benefits will be paid retroactively back to March 29th and will consist of the federal $600 per week.  Here are tips on how to add yourself as an employer to the Indiana system.

Yesterday evening the House passed the $484 Billion relief package that passed the Senate early in the week, and now it is on to the President’s desk for it to be signed into law at noon today.  This is another lifeline after the PPP and EIDL programs ran out of money in less than two weeks.  If you are looking for things you can do now, you can skip to the bottom of this email.  Also you can register for this free webinar from the US Chamber that will cover this new legislation and some steps you can take to find helpful resources during the pandemic.

Before we get into what is in this bill, however, let’s look to see how the first tranche of funding was spread out through April 16th. 

  • Paycheck Protection Program (as of April 16)
    • Over 1.66 Million Loans and over $342 Billion  were approved (not necessarily disbursed)
    • Average Loan size was $206k
    • Loans $150k and under represented 74% of all loans but only 17% of money disbursed
    • Loans over $1 Million represented 4% of all loans but 35.53% of money disbursed
    • Indiana accounted for 35,990 loans (2.17%) and just under $7.5 Billion (2.19%)
  • EIDL Advance Program (as of April 19)
    • 755,476 Advances Processed and almost $3.3 Billion
    • $4,360 average advance
    • Indiana accounted for 9,658 Advances (1.28%) and $46 Million (1.4%)
  • EIDL Loans Program (as of April 19)
    • 26,919 Loans approved and $5.567 Billion
    • $206,802 Average Loan
    • Indiana accounted for 385 loans (1.4%) and just over $75 Million (1.36%0

The most outrageous part that most of us already know, and I have already written about, is that $243.4 Million of the first $349 Billion of the PPP went to publicly traded companies, including $20 Million to Ruth’s Chris Stake House parent and $10 Million to Shake Shack.  Since that time, Shake Shack has decided to give back the money, which will go back into the PPP program and will be reallocated with this new round of funding.

What is in this new package?

  • $310 Billion goes to replenish the Paycheck Protection Program (PPP)
    • $30 Billion of this is earmarked for banks and credit unions with less than $10 billion in assets.  State Bank of Lizton, Home Bank, Stockyard Bank and Trust, and Citizens Bank are in this category.
    • $30 Billion of this is earmarked for banks and credit unions with between $10 and $50 Billion in assets.  Old National and First Merchants are in this category.
  • $10 Billion additional added to the Economic Injury Grants Program
  • $50 Billion additional funding for EIDL Loans, which now is available to our farmers
  • $75 Billion goes to Hospitals
  • $25 Billion goes to testing
    • $11 Billion of this is to help the states with testing

What is not in the package, but might be fixed with guidance?

Well, there are no additional safeguards in this package to make sure that large companies do not gobble up all of the money that was supposed to go to small businesses.  However, there is some good news.  On Thursday morning the SBA and Department of the Treasury issued new guidance that would “make it unlikely that a public company with substantial market value” would be able to qualify for the loans.  This will hopefully keep them from requesting PPP during this next round.  They also ask that the companies who are not able to certify that the PPP loan request was necessary pay back the funds by May 7th, but no guidance on where those funds will go once paid back. All of the loan parameters are staying in place, including the 1% interest rate, 2 year term, funding criteria, and forgiveness requirements.

What steps can you take to give you the best chance to qualify for this round of funding?

  1. If you have already applied for the PPP or EIDL and your loan is in limbo (IE you got a loan number but no funding yet), you are not able to apply for another PPP loan.
  2. If you think your particular bank has not been up to the task or slow in handling your loans, and you have not gotten an SBA loan number, get ready to apply with Paypal, Square, or Intuit, which may be better to suited to handle a higher volume of applicants based on their technology.
    1. Know that you can only apply for one PPP loan, so if yours in currently in the SBA queue, you should not apply with another lender.  If it has not been put in the queue, contact your bank and ask where you are in line, and if you are far behind, take your app somewhere else.
    2. Some larger banks including Chase has been asking some of their clientele to request funding from other sources.
    3. Home Bank is accepting PPP applications from businesses that are not currently customers as well.
  3. If you have not applied for the PPP loan yet
    1. Fill out the PPP application
    2. Get your Formation documents, Entity report, structure, ownership and legal organization documents ready.
    3. Payroll Reports if you have employees
    4. Mortgage or Rent Documents
    5. Utility Expense documents
    6. Proof your business is active and in good standing
      1. Run a Business entity report on INBiz to make sure you are in good standing, if not, get it fixed ASAP
    7. Documentation on how the pandemic has impacted your business
    8. If your business is seasonal, make sure you have information based on your February 15 – June 30th time frame.
    9. If you are Self-Employed or an Independent Contractor:
      1. You can qualify for 2.5x your 2019 monthly net profit up to $100,000
      2. You need to have your 2019 Schedule C even if you have not filed taxes
      3. You can use proceeds on Owner Compensation (see 1), employee payroll costs, mortgage interest payments, and a few other things.
  4. Remember, you can apply for both the PPP and EIDL programs, but you have to spend the money from each program on different items.
    1. EIDL Advance Grants up to $10,000 should be available again, and have been funded at $1000 per employee.  This advance does not have to be repaid if used for:
      1. Providing paid sick leave to employees
      2. maintaining payroll to retain employees
      3. making rent or mortgage payments
      4. repaying obligations that cannot be met due to revenue loss
    2. The EIDL Loan is a 3.75% loan up to 30 year term, payments deferred for a year, and requires collateral for loans over $25,000
      1. EIDL Loan can be used for any of the above items as well as fixed debts, payroll, utilities, accounts payable and other bills that cannot be paid
    3. To qualify for forgiveness, at least 75% of the PPP has to be spent on payroll costs.
      1. Besides Payroll, you can use the PPP for healthcare costs and insurance premiums, rent, utilities, etc.
  5. If you are self-employed or an independent contractor and your business has been impacted by COVID-19, you can file for the $600 weekly federal unemployment benefit from the CARES Act.  Indiana has been working tirelessly to update their systems and can now accept applications today!  PUA payments will be made in May and can be retroactive back to March 29th.

We know this process is not perfect, and there have been a lot of challenges and frustrations in this program, but we will continue to try and provide the most up to date information and resources as information comes out.

Good luck and stay safe out there.

John C. Anderson
Executive Director, Level Two Inc

As of yesterday morning, the SBA had added an alert on their website that stated the following:

Lapse in Appropriations NoticeSBA is unable to accept new applications at this time for the Paycheck Protection Program or the Economic Injury Disaster Loan (EIDL)-COVID-19 related assistance program (including EIDL Advances) based on available appropriations funding.

EIDL applicants who have already submitted their applications will continue to be processed on a first-come, first-served basis.

After I saw this, I started asking around to see if some of our local small businesses had received their loans.  The results:  Some have received funds, most have not heard anything back from their lender, and some received a loan number but they are not sure where their loan stands.  Will it be funded?  Will it not be funded?  How much can they expect to receive?  Crickets.  Please note that I am not blaming anyone in this situation.  Bankers (many of whom that I know personally) have been working tirelessly to try and get funds to their applicants.  But to be honest, the whole thing was a bit of a Poop Sandwich from the start, and with the SBA approving 14 YEARS worth of loans in 14 days, things were bound to get messed up and funds were bound to go where they weren’t needed most, which can happen a lot with government programs.

Data has been trickling out about where the funds have gone, and you can see some of it here.  But the CliffsNotes as of April 13th are as following:

  • Loan Approvals (Not Necessarily Funded):  Over 1 million loans at almost $250 Billion in funds
  • Some large public companies have received millions in aid
  • 4,664 Lenders have participated
  • Indiana Accounts for 23,583 Loans (2.27%) and almost $6 Billion (2.4%)
  • 70% of Loans but only 15% of the Dollars spent were $150,000 and under
  • 9.9% of Loans were $350,000 – $1M but they made up for 24% of the Dollars Spent

Many others will be writing about the shortcomings of this program more eloquently than I can.  So without getting into any more details, here are some ideas for the next steps you can take:

  1. If you have not yet applied, or applied for the PPP or EIDL and your loan is in limbo, use this time to get your stuff together in case Congress does grant additional appropriations.  Not sure what you need?  Here is the most recent information from the SBA  which includes guidance for Independent Contractors and Self-Employed Individuals.
  2. If you think your particular bank has not been up to the task or slow in handling your loans, get ready to apply with Paypal, Square, or Intuit, which may be better to suited to handle a higher volume of applicants based on their technology.
  3. If you are self-employed or an independent contractor and your business has been impacted by COVID-19, you can file for the $600 weekly federal unemployment benefit from the CARES Act.  Indiana is still working on updating their system to allow it, but you are encouraged to apply anyway.  When it is fixed, payments will be retroactive back to late March.
  4. Call or email your Representatives and Senators.  Their information can be found here.  Our Representative is Jim Baird (the first one listed) and our Senators are Braun and Young.
  5. Sign our Change.org petition to get our Congress back to the table.

Our Small Businesses and Independent Contractors are hurting right now.  As of 2016, 406,919 of our state’s 512,348 small businesses are Solopreneurs.  Small businesses in total make up 99.4% of all businesses in the state and 44.9% of all Indiana employees.  This is a huge part of our economy and they are being left behind.  They were told to wait until April 10th to apply to the first come first serve Paycheck Protection Program that started accepting application on April 3.  Their guidance has been updated continuously and banks have been unsure how to categorize them until recently.  They cannot even get the unemployment assistance here in Indiana yet, because our system isn’t set up for it.  We need to do what we can to help.

If you know of anything else we can do to get the ball rolling, please let me know.  I will be emailing and calling our Representatives and Senators today to try and get them back to the table.

Senator Mike Braun
Senator Todd Young
Representative Jim Baird