On Friday afternoon we had a chance to sit in on a webinar hosted by Kiln to learn about new updates to the federal Small Business Administration programs for COVID-19 relief program.
Salt Lake City’s emergency loan program is intended to help businesses keep their employees and stay afloat during a time of economic hardship. It is meant to bridge the gap for what may be a shortened financial hardship period until the U.S. Small Business Administration’s programs kick into gear. If you haven’t considered applying for Salt Lake City’s Emergency Loan, we strongly encourage you to review the program. Second round applications are now open, and due April 2nd at 11:59 pm. Our staff is working around the clock to fulfill this request. Applying for Salt Lake City’s loan will NOT disqualify you for additional funds from the SBA.
While local City government doesn’t represent the SBA loan process, the timing is critical at this time to address new information that can help your business stay afloat. It’s a lot of information, and we encourage you to dive in now.
There have been some big changes with the SBA, just in the last few days.
Nearly 2 weeks ago, the Economic Injury Disaster Loan (EIDL) program was released. The SBA approved the entire state of Utah as a “disaster area,” allowing eligible small businesses and private nonprofits across our state affected by COVID-19 to apply for disaster relief loans. An SBA EIDL loan provides a working capital loan of up to $2 million.
The CARES Act brings some new, significant developments:
- A Grant Opportunity. Within the Economic Injury Disaster Loan (EIDL) program is a new Grant Program created by Congress in the CARES Act and advances up to $10,000 of an EIDL loan to be available within 3-days from when the SBA receives the loan application. Grant recipients are not required to repay advance payments, even if subsequently denied for an EIDL loan. If a small business receives an EIDL loan, the grant will reduce the amount of such loan.
- The $10,000 is meant to hold your business over while waiting to get the funding for the disaster loan.
- As of 3/27/20 the grant aspect has not yet been activated to the EIDL loan but will be coming soon.
- While the local Utah SBA office does not have the ability to tell you when your loan has processed, they are available to answer any other application questions for the program. Reach them at utahgeneral@sba.gov or call 801-524-3209.
- The EIDL offers up to $2 million dollars in loan assistance.
- Even if you ultimately are not approved for the loan, you still get to keep the $10,000.
- This loan and grant is administered directly through the SBA.
- Another SBA Loan Opportunity – the 7A Loan Program Enhancement. Under this is the Paycheck Protection Program (PPP) which provides 100% federally-guaranteed loans to eligible small businesses and nonprofits. Loan payments are deferrable for at least six months and up to a year. The maximum loan amount is determined by a business’s average payroll costs, up to $10 million. Portions of the loan may be forgiven if an employer maintains its payroll and employees during COVID-19.
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- It is not available right now, but will be soon.
- This loan is administered directly through your lender, not the SBA.
- Offers up to $10 million in loan assistance.
- Many Utah Banks and Credit Unions are already SBA-approved lenders and can choose to participate in the PPP loan program. Tell the bank you want to sign up for a Paycheck Protection Program loan. Start collecting documentation together NOW- tax returns, financials, etc.
- In the 8 weeks following your loan signing date, portions of this loan may be forgiven (things like payroll, mortgage interest, rent, utilities)—as long as the employer maintains its payroll and employees during COVID-19.
- The idea behind this program is to keep employees on the payroll. The amount that is forgiven will be reduced for businesses that lay off employees during the first eight weeks following the loan.
- It also provides help for startups. With the 7A loans the SBA is waiving the requirement of having been in business for a year in certain instances. Watch the webinar for more details.
- The 7A loan may allow for some debt consolidation, but the Economic Injury Disaster Loan (EIDL) does not.
- Overlap and options. It is free to apply for the EIDL. So even if you have already applied for the EIDL and later think the 7A loan is a better fit, there is no obligation to take it. As of March 29th, the only available program to apply for is the EIDL. Therefore if EIDL is a potential fit for your business, we encourage you to get your paperwork submitted to keep your options open. The intent is the SBA Economic Injury Disaster Loan (EIDL) and the 7A Emergency Loan cannot be used for the same purpose but you can refinance the Economic Injury Disaster Loan (EIDL) made after January 30th 2020 into the 7A emergency loan, as a rollover.
- Tax credits have also been announced with the CARES program, including payroll tax. More on that later.
Get a recap of all of these changes at https://coronavirus.utah.gov/business/
Senator Mitt Romney’s page has a great summary of some of these new changes with the CARES Act for small business.
Senator Mike Lee’s page goes into more benefits of the CARES Act, including additional funding for small business development centers, women’s business centers, and the Minority Business Development Agency.
Participants on the call were:
- Marla Trollan, District Director, SBA (Small Business Administration)
- Jon Gygi, District Council, SBA
- Miles Hansen, President and CEO of World Trade Center Utah
- Dave Wilson, Partner of ProvenCFO – who provides a service to small businesses applying for these loans
- Jon Cheney, Founder & CEO of Seek – who has just completed the process of applying for an SBA loan and joined the call to share learning so far.
- HOST: Arian Lewis, CEO of Kiln
Marla Trollan suggests signing up for the Utah SBA Newsletter, to get the latest updates. She expects to see more announcements on Monday March 30th. Click here for national SBA customer service and FAQ, or you can reach our local Utah office at utahgeneral@sba.gov or call 801-524-3209.
We are grateful to you as a small business owner for building our local economy. Now let’s do everything we can to protect that investment.
For more information and resources to help your business bounce back from COVID-19 and the earthquake, visit http://www.slc.gov/ed/covid19
To follow is a transcript of the call. Refer to the call or the SBA for final, definitive answers. We have transcribed this webinar as a means to learn and absorb this new information as quickly as possible.
HOST Arian Lewis, CEO of Kiln:
Thank you very much. Really excited to have everybody here. This is Arian Lewis. I’m the CEO Kiln. We have a couple hundred callers and people who are joining this meeting today. We’re really grateful to have some experts from around the state here to help us talk through SBA Loans and what it can mean for your business, specifically small businesses. Many of our companies at Kiln are early-stage tech companies and so we’re going to be focused, later in the conversation, we’re going to talk with Dave from ProvenCFO and John Cheney from Seek. We have Miles who’s joining us from the World Trade Center here in Utah. And we also have Marla and John who are joining us from the SBA. Marla is the District Director of the SBA, and John is on the district council. And if I didn’t mention this already John Cheney, he’s the founder and CEO of Seek and Dave is also founder and partner of ProvenCFO. Miles is the President and CEO of the World Trade Center. So let’s go ahead and get started with Miles. If you’d like to give us a little update on the work that you’ve been doing with the governor, and I know you mentioned that right off the bat you have some helpful resources to point some of our companies on the call too, so if you could go ahead and share that with us, we appreciate it.
Miles Hansen, President and CEO of World Trade Center Utah:
Absolutely Arian and thank you to you and your team for pulling this webinar together. We all know that small businesses across the state are under tremendous pressure right now. And so we’re grateful for you to convene this group and for the experts that are on today to help our companies understand where they can turn to get resources to help them as we all deal with the effects of covid-19. So very briefly a little bit of context that could be helpful for everybody listening in today.
Most people have heard of this task force that the governor has organized to help us deal with the economic challenges we’re all facing. The purpose of the task force is just as our health professionals are working to flatten the curve of growth of covid-19 here in Utah, the economic task force is working hard to flatten the economic dip that we all are experiencing. And so part of the task force is focused on maximizing, to the greatest extent possible the number of Utah businesses and individuals are able to benefit from the many federal programs and resources that exist. Those are significant, A few days ago, but for anybody watching the news and has looked into the stimulus package that’s being debated in the house right now will likely pass the house and be signed here very shortly knows this is a big deal. 2+ plus trillion-dollar stimulus. The biggest bill that has ever gone through Congress and its interesting with a little bit of context on the purpose of the stimulus package. If you look at the numbers it is roughly equivalent to 10% of U.S. GDP last year and speaking with Senator Romney and Senator Lee and others have been involved in this effort, the idea behind this package is across the country we’re seeing many aspects of our economy being put on pause. This package is designed to fill the gap between where we are now and where we’re going to be when we get to reopen, when we get things back up and we get back into recovery phase. The more companies that are able to keep the lights, on keep making payroll, keep paying their rents– the easier it’s going to be for us to bounce back as we get through the far side of this pandemic and so the stimulus package is built around 5 different pillars
- There’s a health pillar
- A small business pillar that we’re going to hear about today
- A pillar for workers and families. Those are the direct payments people have heard about in the news as well as significant increases in unemployment benefits
- There are many tax changes as well on that fourth pillar
- The fifth pillar is a support both distressed Industries, like the Airlines and Hotel Industries as well as state and local governments.
So for the state, we are likely to receive that $1.5 billion dollars of additional resources here in Utah that the governor and his team will have an opportunity to shape how they’re used here. But of course for today’s topic that the key focus is the small business loan and grant program. It is fantastic that Marla and John from SBA are joining us. They are the ones at the point of the spear here in Utah. They have been doing everything that they can to support as many businesses. And so I really encourage everyone to listen to what they have to say because they are going to be tremendous resources for all of us here in the state over the next few weeks.
Very quickly where do you go to find more information about this. You can go https://coronavirus.utah.gov/business/ . We have a team right now from several different Federal departments and agencies as well as our Congressional Delegation working on putting together a key overview of all the federal programs and resources that exist by the end of today. It’ll be up there on the website and then Marla’s going to talk a little bit more about other places where you can go to engage in these small business loans and grants that they were going to hear about today. So again, thank you to everyone for joining and thanks for organizing this and really look forward to what John and Marla have to say.
HOST Arian Lewis, CEO of Kiln:
Well, thank you Miles and appreciate the work that you’re doing behind the scenes to help shape the narrative for the governor in terms of what small businesses need. Marla and John, we’re really grateful to have you on the call. I’m sure that your schedules are very tight right now. So if you wouldn’t mind giving an introduction helping the community understand just a little bit more about who you are and what you do, and then we can go into some great questions on the SBA Loans and the processes that are being rolled out right now.
Marla Trollan, District Director, SBA
Thank you to the World Trade Center and thanks to Kiln for hosting this webinar, we really appreciate it. Good morning to everyone. As Miles said I am the SBA District Director for all of Utah, and I have here with me Jon Gygi who serves on my staff as the District Council and can help answer some of the questions. So what I want to do is walk through the registration under the CARES Act and what that means for small businesses here in Utah. This CARES Act is going to provide relief for small businesses and employees who are adversely affected by the covid-19. Under this legislation, there will be a Paycheck Protection Program, which will provide small business loans on favorable ?turns to our borrowers affected by the economic injury. I need to caveat this by saying until this becomes law, things could change. So once it does become law, you will have more information in terms of what it means for small business lenders. (garbled, ..reset). So, under this legislation is a 7A Loan Program Enhancement and the legislation would provide $249 billion dollars in business loans made by lenders under SBA. These loans would be 100% guaranteed by SBA and all payments on principal interest and fees for SBA is to loans undertaken prior to enactment of itself, will be covered by SBA for six months.
HOST Arian Lewis, CEO of Kiln:
Okay, so let’s pause just for a moment. What does that mean? You’re saying that anybody who’s already received a loan is benefited?
Marla Trollan, District Director, SBA
Yes that’s correct. So those that already have an SBA loan will benefit from that. The covered period for these loans under the legislation is February 15th, 2020 through June 30th, 2020 and the use of the loan proceeds would be to use for paying payroll costs, and health care benefits, employee salaries, and commissions, mortgage interest payments, rent, utilities, and interest paid on pre-existing debt. Eligible entities will include small businesses, private and public nonprofits, veterans organizations, tribal business concerns, sole proprietors, independent contractors, self-employed individuals. And we’re going to use our standard of generally 500 employees or less, and it will be operational on February 15th for those businesses that were operational as of February 15 2020. It does include restaurants and hotels as well. Businesses with multiple locations of 500 employees or less, that would be per location.. and they need to have a NAICS code starting with 72. So that would include accommodations and food services such as hotels, restaurants, etc.
Dave Wilson, Partner of ProvenCFO
I had a question on the criteria for those. When you have typical SBA Loans, there’s a requirement with anyone that’s has 20% or more ownership of the entity needs to be part of that underwriting, does that still apply for these type of programs?
Jon Gygi, District Council, SBA
Actually that requirement will be waived under this new legislation. No personal guarantees or collateral will be required on this loan.
HOST Arian Lewis, CEO of Kiln:
I’m going to just repeat what you said John because it’s so important. You’re saying that no collateral is required on the loan? Is that correct?
Jon Gygi, District Council, SBA
Yes that’s correct.
HOST Arian Lewis, CEO of Kiln:
So there is no collateral required and no personal guarantees. Is that what you said?
Marla Trollan, District Director, SBA
Under this legislation it waives the guaranteed (garbled)…, It waives collateral and personal guarantee requirements, and it waives the repayment fees.
HOST Arian Lewis, CEO of Kiln:
And the repayment fees. Still really hard to hear you guys. We’ve got six hundred and twenty people watching now. So anything you can do on your microphone. Let me just make sure that everybody knows – I think John you are referencing a bill and as I understand the house just passed it in the last little bit here. Congress just passed the bill.
Dave
Yep.
HOST Arian Lewis, CEO of Kiln:
So this is very different than a normal SBA loan because normally an SBA loan requires some sort of collateral or guarantee, but you’re saying these SBA Loans will not require any collateral or guarantee, correct?
Marla Trollan, District Director, SBA
Yeah, that’s correct. Let me kind of walk through a little bit more of these this might help you understand it. The terms of the loan would be up to $10 million dollars for small business (garbled)
HOST Arian Lewis, CEO of Kiln:
Sorry that didn’t come through, so you said up to $10 million and we’ve heard $2 million by the way, so the $10 million is new news, I think.
Marla Trollan, District Director, SBA
Yes that is correct. So the 7A under this legislation would go up to $10 million for those businesses that are affected by this crisis situation and the maturity for it would be up to 10 years. So pretty substantial. The interest rate wouldn’t be any greater than 4%. And the payment deferment for the first 6 to 12 months is also in place. So again, it’s going to be really beneficial for those small businesses. Now this is important to note because I know that some of our small businesses here in Utah have already applied for the Economic Injury Disaster Loan (EIDL) through SBA. What I want to point out here is that you will not be able to have the Economic Injury Disaster Loan (EIDL) and the 7A Emergency Loan and use it for the same purpose. But you can refinance the Economic Injury Disaster Loan (EIDL) made after January 30th 2020 into this 7A emergency loan. So that’s important to note. There will be a sort of a rollover so to speak. For those folks that have the disaster loan. Again the guaranteed amount is 100% through December 31st, 2020 at which point (garbled)…
HOST Arian Lewis, CEO of Kiln:
So Marla, for those on the call that aren’t familiar with standard lending, can you explain in very layman terms what it means when you say “the guarantee will expire in December 2020”?
Jon Gygi, District Council, SBA
So what that means is any loans made up until that time will carry a 100% guarantee (garbled) loans approved after that, they will revert back to the original guarantee percentages.
HOST Arian Lewis, CEO of Kiln:
Okay, got it. So any loans issued between now and December, these special rules apply to. That’s what you’re saying.
–16:00 minute mark
Jon Gygi, District Council, SBA
Yes. Well, not necessarily—(garbled) there’s different covered periods for each section of this act so it depends upon what you’re talking about. So if you’re talking about the forgiveness course, we’ll talk about– it’s only for loans made up to June 30th. But the guarantee part of it is up through December.
HOST Arian Lewis, CEO of Kiln:
Okay. Alright. So keep going with what you’re saying Marla and there’s going to be a lot of good questions.
(TECH ISSUE) alright let’s give that a moment.
John and Dave, you’ve just both recently gone through this. Can you comment at all on what Marla was explaining and because I know both of you have done some in-depth research on this as well. John, let us start with you. Any comments on what Marla and John from the SBA were just explaining?
Jon Cheney, Founder & CEO of Seek
What Marla just brought something to my attention that I wasn’t aware of. I did very early in the process as soon as I heard it was available and it was gonna be very favorable terms. I said hey, I need to make sure that my employees stay employed right, as long as possible without any Interruption and so I dove in. But I did apply for the Economic Injury Disaster Loan (EIDL), right which it sounds like he is going to be different than the one that’s going to hopefully be approved in Congress today. But it sounds like Marla said that’s going to be a relatively easy roll over.
Miles Hansen, President and CEO of World Trade Center Utah
I can jump in and provide a little bit of clarity there. So you’re exactly right. So there’s the emergency disaster loans that people have been applying for. With the stimulus package there will now be these paycheck protection loans that Marla was describing. And there are some trade-offs. For those watching, just because you now have the paycheck protection loan, it doesn’t mean you necessarily want to go that route and not the emergency disaster loans. The perk with the emergency disaster loans that are being expanded with the stimulus, is that as soon as you apply, you get an advance of $10,000. Even if you ultimately are not approved for the loan, you still get to keep the $10,000. And so for companies that have –you notice it’s really significant. So for a company that has really really tight cash flow right now and there’s a lot of companies out there… that $10,000 advance right up front is a big deal. Still take a look at the emergency disaster loans. They are being expanded.
HOST Arian Lewis, CEO of Kiln:
Let me just let me just repeat that. Marla, can you just can you just kind of verify it? So you’re saying that if a company applies for the Emergency disaster economic, what’s the term of the loan? If a company applies for the Emergency Disaster Loan, there’s an immediate issuance of $10,000 is that correct?
21:00 minute mark
Marla Trollan, District Director, SBA
Alright, so. Under this legislation it includes $10 billion that has been set aside for a grant. And that is an emergency grant that Miles is referring to where a small business owner can get $10,000 within 3 days of their application. This can be combined as part of the EIDL and if it’s approved for the Economic Injury Disaster Loan (EIDL), then that $10,000 would be subtracted out. But again that would hold them over while they’re waiting to get the funding for the disaster loan.
Jon Cheney, Founder & CEO of Seek
I did not hear anything about that. I applied probably eight days ago. I think I applied last Thursday and have not been notified. I haven’t heard anything. That was one of my questions. How do I find out about the status of anything?
Marla Trollan, District Director, SBA
Again, we have to implement this through the legislation. So it’s not available right now, but it will be soon. Hopefully. The status of your applications is not something that we can go in and look up. It’s done through the office of Disaster Assistance. And so I do have some folks on staff that can help walk small business owners through that application process. However, we can’t get in there to check your status.
Jon Gygi, District Council, SBA
There is a way for you to go in and check the status on the website. (garbled)
Dave Wilson, Partner of ProvenCFO
The website has been down for the last 24 hours and then they updated it with just a space for us to drop documents in or to email directly to that disaster. So the status checking has been overwhelmed by applications, I think.
Marla Trollan, District Director, SBA
Yeah, you’re right about that.
Dave Wilson, Partner of ProvenCFO
I had I had a question Marla. So it sounds like the with the stimulus package that just barely passed the 7A loan would be able to be used for this economic stimulus package for disaster recovery. Typically in the past we see all 7A loans going through banks. Is that still going to be the case where instead of applying directly with the SBA like we’re doing for the Economic Injury Disaster Loan (EIDL), will we be applying through the banks?
Marla Trollan, District Director, SBA
Yes. That’s correct.
Dave Wilson, Partner of ProvenCFO
And tell me about the idea about some of the guideline changes, the underwriting guidelines changes that we would see on those 7A loans? Are we still going to see some of the same criteria that we get with a regular 7A?
Jon Gygi, District Council, SBA
No, as we mentioned earlier, for example they’re waiving credit elsewhere requirement. And the collateral requirement. The repayment ability, I’m not sure about. I’m sure they’re analyzing that still. A lot of the guidelines have been changed.
Dave Wilson, Partner of ProvenCFO
Do you have any ideas of where we can read through any of that? I mean the stimulus package has been going through so many iterations. Is there any space that we can find information on that? We’re trying to keep our ear to the ground for hundreds of companies about these underwriting changes because there is a lot, typically with the 7A loans. We want to figure where we can find those things. Do you have any?
Jon Gygi, District Council, SBA
Yeah, I mean I’ve seen three different iterations of the bill itself that I’ve gone through this week. I did get the final language yesterday. So I’ve been going through that and trying to sit the site but we’re going to really wait for what comes out of headquarters. So we’re going to put some put some stuff together and then we’ll be able to pass on that information so it’s more available for businesses so that they really know what this act says.
Dave Wilson, Partner of ProvenCFO
And do you think we’ll still will have these things coming through the banks eventually or should we just keep our ears to the ground directly with the SBA disaster sites?
Jon Gygi, District Council, SBA
The SBA disaster loans which of course are direct loans from SBA, they won’t pass any information probably on through that mechanism for the new 7A loan enhancements. So that will come more from you know, the lending side.
25:00 minute mark
HOST Arian Lewis, CEO of Kiln:
Can I pause just a moment because as a non-expert on this, I’m probably similar to a lot of our listeners today on YouTube. We’ve got right now over 630 listeners, a ton of comments going back and forth on YouTube. Let’s just quickly address, triage just a few important points.
- John and Marla if somebody wants to apply for the loan, do they go to the SBA website right now? Is that the best avenue?
Jon Gygi, District Council, SBA
Which loan are you talking about? The Disaster or the Enhanced 7A?
HOST Arian Lewis, CEO of Kiln:
Okay, you tell us which one which one should we be focused on and where should we go?
Yeah, so the only one that’s available right now is the Economic Injury Disaster Loan (EIDL). Folks can go online http://www.sba.gov/disaster and I know they are having issues with the website, but if they have if small business owners have any challenges they can get a hold of us through our utahgeneral@sba.gov and we can we can help them walk through the process. They can also fill it out and submit it via FedEx.
Jon Gygi, District Council, SBA
This morning. I heard that they have changed the system a little bit. So what you do is you download the PDF fillable, fill them up, and you upload to that dropbox that you mentioned earlier. That’s how they’re doing it. You can’t go right into the application and fill it out. So you can do it that way upload the documents through the Dropbox, or like Marla said FedEx them overnight.
HOST Arian Lewis, CEO of Kiln:
I want to repeat one sitting to make sure that it’s captured if somebody has a question wants to reach out to you said utahgeneral@sba.gov or call 801-524-3209
HOST Arian Lewis, CEO of Kiln:
That’s very helpful. Okay. So if I’m a small business wanting to quickly get engaged, I can go to the sba.gov/disaster and apply. That’s what you’re saying. Correct?
Marla Trollan, District Director, SBA
Yes. For those loans that are available right now. And that’s the Economic Injury Disaster Loan (EIDL).
HOST Arian Lewis, CEO of Kiln:
And then let’s talk about the next set of loans that are coming out. Help us understand what that next process is going to look like. The next ones that come out go to $10 million. The current ones go to $2 million. Is that correct?
Jon Gygi, District Council, SBA
That is correct. So these new ones that are coming out are essentially like our existing 7a loans – they will be made by private lenders, banks, and credit unions. So the small business would go to their lender and ask them to help them get an SBA guaranteed loan under this new program. So the application process would be done through that lender.
HOST Arian Lewis, CEO of Kiln:
And when do you think that will actually happen? If I’m a company listening to this call when should I call my lender and start talking about this?
Jon Gygi, District Council, SBA
I think I would start talking to them now. We don’t know for sure how long it’s going to take to get this ramped up and going. And to get all the full guidance we need. But I would be touching base with my existing lender or we also have a list of all the SBA participant lenders in the state which will be expanding because under this new legislation, Secretary-Treasurer will be able to authorize other lenders to participate in the program too. I would look up these lenders, … start getting my documentation together- tax returns, financials, etc.
30:00 minute mark
Dave Wilson, Partner of ProvenCFO
I had a question – back to the question about venture backs and the personal guarantee issue. With some of the companies that have 20+ percentage owned by someone that doesn’t typically qualify for SBA (which are probably a lot of the Kiln clients, or series funded) you had mentioned that there has been a change. Had you seen anything where it’s just dropping that requirement off?
Jon Gygi, District Council, SBA
Dropping the requirement for guarantees on all loans?
Dave Wilson, Partner of ProvenCFO
No, so if somebody owns 20% or more and they are typically too big, meaning they own their net worth is more than $15 million dollars, right?
HOST Arian Lewis, CEO of Kiln:
Let’s say you’re a venture-backed tech company and your venture company owns more than 20% of your business, and they obviously have a net worth that’s quite high. How does that impact the small business in that scenario in that situation?
Jon Gygi, District Council, SBA
So I think what you’re getting at is, will they still qualify as a small business and meet the size standards? Right? Which is a question that’s arisen lately. I know the Venture Capitalists, because we look at affiliates that determined whether they meet the size. Affiliates are included. Affiliation is all about control. So just because somebody owns 40% of the company doesn’t mean they control it. If somebody else owns 60% and you also have to look at the management. So I know some of these VCs take board positions, whatever, we would have to look at the bylaws and see how those boards operate – who has the voting power, is there any kind of negative control being asserted? So, it’s all about control of the affiliation to determine if those will be included in the size determination.
HOST Arian Lewis, CEO of Kiln:
Okay, so it’s control, not equity or ownership?
Jon Gygi, District Council, SBA
Right it’s control which can be what that through stock ownership, management, common investments, and reliance on each other. There’s a few prongs to that control in theory.
HOST Arian Lewis, CEO of Kiln:
If you’re a venture-backed company right now. Now is a good time to take it back some control from your VC.
Dave Wilson, Partner of ProvenCFO
And is the requirement still the same then for 20% ownership or more related to that control? For example, I have a client that’s a wholly owned subsidiary of another entity that’s much bigger. But they’re still in my opinion a small business because their compensation is tied directly to the health of that entity. Is the new underwriting guidelines for 7a going to shift that or we still looking at that control the same way as before?
Jon Gygi, District Council, SBA
I believe we’re going to look at control as the same way as before. There are some relaxation on affiliation. For example in the hotel and restaurant industries, the franchises, under this new program franchise affiliation will be lightened up, but just in those specific areas.
HOST Arian Lewis, CEO of Kiln:
Okay, great. Let’s go back now. Marla you were trying to I think our sound has an improved. What else can you can you share with us? Your comments and answers have been so helpful so far. What else can you share with us about the next phase of loans that are coming, that can be up to $10 million dollars. What can you tell us about the requirements again for those loans? And you don’t know about the timeline right now, it sounds like. But anything else you can tell us would be helpful.
34:00 minute mark
Marla Trollan, District Director, SBA
I want to touch on the loan for business, the 7a loans. It will be covering a period of 8 weeks from the day that the loan (garbled) so in the money spent, within the 8 weeks of receiving the loan is forgiven. The forgiveness will equal an amount spent by the borrower during that covered period on payroll costs, mortgage interest, rent, utilities, that kind of thing.
So here’s another caveat to that if the business reduces its number of employees, then the SBA reduces the amount of forgiveness by the same percentage. Okay, so that’s important to keep in mind and likewise if a business reduces the salary it pays to an employee earning less than a $100,000 by more than 25%, the SBA reduces the amount of forgiveness on a dollar-for-dollar basis. Employers that restore their employment numbers and salaries by June 30th, 2020 would experience no reduction in forgiveness. So again, that’s important to keep in mind. And borrowers can apply for forgiveness and must supply certain documentation as you were asking about. So that would include like payroll, tax filings, State filings, verification of mortgage and utility payments, certificate from representatives, and that kind of thing.
HOST Arian Lewis, CEO of Kiln:
So Marla the concept of forgiveness, outside of our chapels — help us understand what you what you were referring to when you say forgiveness? For those that are not familiar with that.
Jon Gygi, District Council, SBA
Basically what we were looking for is, the business to maintain their staffing and compensation loans for those couple of months. If they do that, then that part of the loan does not need to be repaid back. It’s canceled. So then they only have to repay whatever other borrowings they had. So it basically it becomes a grant.
HOST Arian Lewis, CEO of Kiln:
It’s a grant and in my language, it’s free stuff but I won’t put it that way.
Marla Trollan, District Director, SBA
Yeah, there you go.
HOST Arian Lewis, CEO of Kiln:
Okay, that’s significant and it’s all about just keeping people employed. And so if you’re a big company right now, or a company of less than 500 I should say and you’re laying people off left and right. I hope you’re listening. Because I hope that before you go down the path of ripping employment out of from under too many people that you’re seriously looking at the options that you have here so you can keep people employed.
Jon Cheney, Founder & CEO of Seek
Marla and John how do we know how much we are able to borrow?
Jon Gygi, District Council, SBA
Okay, um, basically there’s a formula for that too. So they want to be able to give you basically what amounts to 2 1/2 months worth of payroll costs and payroll support. Also, you’ll also be able to include any upcoming, you know interest on mortgage obligations, rent utilities, that kind of a thing. So you’ll add all that together to get your loan amount which cannot exceed $10 million.
HOST Arian Lewis, CEO of Kiln:
You know a lot of our companies are founded by the actual team that’s there operating them. I would assume this at this accounts for everybody in the company, whether you’re the founder or whether you’re an employee? Some of our companies are only eight person companies. Can we have questions coming in on that on the on the YouTube chat? Can you just answer that?
Jon Gygi, District Council, SBA
The way I read it is that it’s all full-time, part-time, and other employees that are included in the calculations.
HOST Arian Lewis, CEO of Kiln:
So if you received a W-2 from your company, even if you were the founder of the company, then that would qualify for anybody that it receives a W-2?
Jon Gygi, District Council, SBA
Yes.
Jon Cheney, Founder & CEO of Seek
Okay. Well, what about contractors? Do they count towards the employee count?
Jon Gygi, District Council, SBA
I believe so and we can also make these loans to sole proprietorships and independent consultants and contractors.
HOST Arian Lewis, CEO of Kiln:
Fantastic. Okay. So let’s go back on both of these loan types, you’re saying there’s no requirement for a personal guarantee or collateral. On both loan types. Is that correct?
Jon Gygi, District Council, SBA
No, that’s only for the 7A enhance loans. On the Economic Injury Disaster Loans (EIDL) there will still be guarantees. There will still be collateral required for any loan $25,000 and above.
HOST Arian Lewis, CEO of Kiln:
Got it Okay. That’s really good. That’s really good to know.
Jon Gygi, District Council, SBA
But be aware that the Economic Injury Disaster Loan (EIDL) loans will not be declined just because of lack of collateral. You just have to pledge all your available collateral that you have.
Dave Wilson, Partner of ProvenCFO
Everything you own.
Jon Cheney, Founder & CEO of Seek
I have a question on that then since I have applied for the disaster loan already, can I just rip that up and throw it in the garbage and wait for the enhance 7A and start over?
Marla Trollan, District Director, SBA
Yes. So basically there’s no cost to apply for these disaster loans, but in addition to that there’s no obligation to take it once it is offered. So you’re absolutely correct. You could just rip it up and then go for the 7A.
Jon Gygi, District Council, SBA
I would not go and withdraw my application. Let it go through the process, get a final decision, see what you’ve got see what plays out on the 7a side in the next couple of weeks. Then you can decide whether to take the disaster loan or not.
HOST Arian Lewis, CEO of Kiln:
Okay, let’s talk about two other things. One time on timeline and the big question is, WHEN. Do you have any other detail on sort of when either of these types of loans companies could start to see approvals or some relief come through on them?
Marla Trollan, District Director, SBA
Yeah. So headquarters is working on this right now. I think they intend to roll this out as quickly as possible. So we may see movement on this as early as next week, but we will have additional materials I believe to share with everyone on Monday. And so I would suggest that folks get signed up for our newsletter because we’re blasting out advisories on a continuous basis and that way they can keep up to date on what’s going on.
All right. How do you how do you sign up for the newsletter?
Yeah, if you just go out to our district office website. So it is sba.gov/ut and then go to the bottom right page, there’s a delivery link there that you can go in and sign up. But certainly if you have any issues or whatever just email us at that Utahgeneral@sba.gov.
Dave Wilson, Partner of ProvenCFO
So Marla I had I had a question that came up in the chat here. The question was related to pre-revenue companies. So in our in our normal processes when we’re helping companies out with their balance sheets and figuring out how we’re going to get them funded, whether we can go off the debt or equity, typically, we tell pre-revenue companies – well, you’re out of luck. Is that still the case with these enhanced 7a loans or even with the EIDL program?
John (garbled)
Dave Wilson, Partner of ProvenCFO
I heard that John, you said we potentially going to be able to use projections for revenue. That’s always a tough thing to predict revenue right in the middle of an economic shift because of covid but we’re doing the best that we can. Do you know anything about those projections? Typically we’re looking at two years worth of monthly cash flow projections? Is it still the same?
Jon Gygi, District Council, SBA
Yeah. I think it’s the same and I should mention on the enhanced 7a loans they are waiving the requirement of having been in business for a year in certain instances. They are looking to help the startup.
Dave Wilson, Partner of ProvenCFO
That’s terrific. So it sounds like the government does care about startups.
Marla Trollan, District Director, SBA
Yeah, you can get it for a startup.
Dave Wilson, Partner of ProvenCFO
Yay for startups.
HOST Arian Lewis, CEO of Kiln:
Okay. So John you’ve just gone through the process of applying. Can you just give everybody who’s listening again? 623 people at the moment. What is the process like? How long does it take? What questions did you come up with is as you’re going through it real quick? And John and Marla can hopefully help us address any concerns or questions about the application process. So just walk us through in a minute what you did if you would.
Jon Cheney, Founder & CEO of Seek
So I applied again about a week ago, about 8 days ago and the process was a little bit different than now. There was there were forms you could get on and it was all digitized and I just click next next next next and it kind of put everything together for me. They did have to upload my 2019 tax return for Seek. It did ask about a few personal questions on my end. I had to fill out a lot of information on my personal debts, as somebody with over 20% ownership, which in my company’s case, I happen to be the only one there. So that’s good. We’ve managed to keep our investors under the 20, but the process has changed a little bit now.
It looks like on the disaster loan you have to print everything out and kind of do everything manually and then uploaded I’m sure their website got overloaded and they didn’t have the processes in place to make it happen. But the whole process took me about an hour, maybe an hour and a half or so. I don’t know if I was a hundred percent locked in the whole time, but it wasn’t too bad just a lot of questions and answers.
HOST Arian Lewis, CEO of Kiln:
Marla and John from SBA, do you believe – when do you think like John would hear back? He applied through the SBA website. But what do you think John would hear back? Do you think it’s a month?
Marla Trollan, District Director, SBA
So the processing time was supposed to be 10 to 15 days. Business days. So, you know, and then it’s shifted to 2 to 3 weeks. So it’s kind of taking a bit of time and again, you know a lot of folks now can’t go online because the online system has crashed and what not. But hopefully they can get these emergency grants in place. At least it’ll give businesses that $10,000 up front within 3 days to sustain them while they wait for the loan to go through.
HOST Arian Lewis, CEO of Kiln:
Excellent. Excellent. We’ve had a number of questions come through online about debt. With these loans can you consolidate prior debt? What’s the directive in terms of what can be done with existing debt that a business may have?
Jon Gygi, District Council, SBA
On the disaster loan side (garbled) On the enhanced 7a you can use help for any purposes of a regular 7a loan except for now in addition to the (garbled). Okay. Okay, that’s helpful.
HOST Arian Lewis, CEO of Kiln:
Okay. So other questions that may be arising. John and Dave. Dave works with several companies as he’s a CFO company, including Kiln. Any other questions that you feel are really important right now with regards to what other companies in different situations — startups are dealing with, as it relates to these loans?
Dave Wilson, Partner of ProvenCFO
Not as it relates to the loans. I know a lot of our clients that there is a fair amount of confusion just because of the volume of information that is happening. What we’ve been trying to do for our clients is just on our website. We’re keeping a running list of the resources available and from this conversation. I mean, this Kiln is always at the cutting edge. You guys are always at the sharp end of the knife. This is this is brand new information that’s coming out right in this call which is terrific. We’re going to take a lot of this and compile it so that our clients have access to that because this information is so new and so confusing. It’s really nice to hear that you’ve got this enhanced 7a program that’s coming out. We’re just gonna have to wait and see on terms of how quickly the SBA can really respond on getting this Economic Injury Disaster Loans (EIDL) back out to our businesses. John I beat you to the punch line by about three days.
I applied to the EIDL just for proven CFO. I don’t think we’re going to need it ourselves, but we went through the application process to see — even before the web site started getting real slow. Right now what we’ve reverted to doing is taking the paper copies and filling them out for our clients and then submitting them on behalf of our clients. So that’s something to be aware of right now. I think that as you’re going through this you might want Now proven CFO, we’re happy to help and there’s a whole bunch of other people that are that are moving into that space as quick as we can. Try and make sure we’re helping small businesses like yourselves.
Jon Cheney, Founder & CEO of Seek
And I don’t have a question Arian but I do want to just say one thing to anybody out there that is a small business owner that is considering whether or not to take these loans like Arian said earlier. This is free stuff. This is free money. I would make zero employment changes don’t fire anybody if you can afford it, right if you’re on your last dollars, then then you might have to get creative. But if you have 2,3,4,5, 6 months, a year, or 18 months of runway good for you. And hang on this money will come and you will be able to at least let your employees last two months or maybe a little bit longer without any interruption to their daily life. And that’s the point, right. We want to stay as close to normal as possible in this very weird new normal for us. But if people need to get fired wait 60 days. Pay them this free money right now then make the decisions that you need to do.
HOST Arian Lewis, CEO of Kiln:
That’s great. It’s a great point. It’s really difficult as the business owner right now, you’re trying to understand what the future looks like. You’re dealing with fires on multiple sides at present. You’re trying to be responsible in making sure that you can shore up your foundations for your team. It’s complex and I don’t want to not acknowledge that difficulty but absolutely if we can, you know, we’ve had just here in Lehi and Salt Lake we’ve had a number of layoffs recently and I would hope that anybody who can delay that, does.
I know that it’s affecting a lot of companies here at Kiln as well as out there in the ecosystem.
There was a few questions that came up that had been covered previously. Let me just quickly one more time repeat that the 7A loan may allow for some debt consolidation, but the Economic Injury Disaster Loan (EIDL), the current loan that’s available does not. That was one question that was coming up.
The other question that was coming up was — if you apply and get the grant, the $10,000 grant, and then choose not to take the loan, what happens then? John and Marla. Can you answer that question?
Jon Gygi, District Council, SBA
If you apply for the 7A that comes with the 10,000 grant? No, it’s still an emergency disaster emergency idle grant.
HOST Arian Lewis, CEO of Kiln:
So if you apply for the Economic Injury Disaster Loan (EIDL) and you take the grant, but you decide not to take the loan what happens then?
Jon Gygi, District Council, SBA
And you don’t take an idle loan? It’s a pure grant. You do not have to repay it.
HOST Arian Lewis, CEO of Kiln:
So it’s there to help you get through the next little bit as a company.
Jon Gygi, District Council, SBA
Yep.
HOST Arian Lewis, CEO of Kiln:
Okay, that’s very unique, pretty phenomenal. And yes, the there’s other questions about the interest rate. I think we’ve basically covered most questions. Are there any other questions Miles that you think companies out there would like to have quickly addressed by John and Marla before we end?
38:00 minute mark
Miles Hansen, President and CEO of World Trade Center Utah
The one thing that we haven’t talked about that I think it’s helpful just to put on people’s radar and then we will I think we’re all doing the work and push out this information out through many channels — but the tax adjustments as well. So we’ve been talking about the loans, the different types of loans, and again, keep in mind the policy objective is to infuse cash to small businesses as quickly as possible. So even some of the things we talked about today I think, as we dig into the law will see that the expansion of a 7A program is even more generous perhaps than what we realize it is right now because if the policy is get cash to companies as quickly as possible. On the tax side –and these get more complex, but I just would flag for people any type of capital improvement since January 1st, 2018. So say, you’ve got a business, you’ve renovated inside of your building. You can write that off immediately – put the full depreciation value as part of this bill. You can also defer payroll tax. If you’ve been hit hard by this which is defined as a decrease of revenue by 50%. But the interesting thing is you can get a credit as if you paid your payroll tax very quickly, but then you don’t have to actually pay that payroll tax until 2021 and 2022. So again, get companies cash now. Reduce expenses, and then on this front it’s not going to be a straight credit, you do have to pay that payroll tax, but you can push it off for a year or two. And so there’s a lot of other tax elements as well. So I really encourage people to look at the loans, you know as Marla mentioned right now, you know, we don’t know will be 10 days or 12 days until it goes from house passes it, the president signs it, to full operating programs. So in that interim period you know you’re going to have to demonstrate your average monthly payroll cost for the past year, you know you’re gonna have to demonstrate your fixed costs, and those these other things. Get all that paperwork ready. So then as soon as the applications open, you’ve done everything you need to do using to get in the application. You can submit it and then get this this cash infusion.
HOST Arian Lewis, CEO of Kiln:
Are you saying that the payroll tax deferment is somehow part of the SBA loan process?
Miles Hansen, President and CEO of World Trade Center Utah
No it is part of the stimulus package.
HOST Arian Lewis, CEO of Kiln:
Okay, so how do you go about deferring your payroll tax?
Miles Hansen, President and CEO of World Trade Center Utah
So that’s a good question. I don’t know the details on that but I do know that as part of the stimulus package in addition to these loans, they made several adjustments to tax requirements for small businesses to make it incredibly favorable to keep businesses open, keep people on your payroll and then I’m sure right now as we go through this period from the law being passed to the regulations made, it’ll more define what that process is.
HOST Arian Lewis, CEO of Kiln:
It feels we’re going to need a little follow-up conversation on payroll tax and those programs that are coming out.
I’m conscious of time. I really want to thank everybody that’s joined us on the call. This is this is really important stuff and John and Marla, we are cheering you on. You guys are heroes right now. What you’re doing has a real meaningful impact on businesses here and in Utah, and on lives, and on families and on people and their lives, so thank you for what you’re doing here. You’re invaluable right now and we just we are we’re hoping and praying that you stay well and strong and that we can support in any way possible. So please reach out to us if we can be of help or support to what you’re doing.
Thank you and Dave and John. Thank you for joining Miles. Thank you for what you’re doing with the government. And I know that Dave if somebody wants to reach out ask you questions about going through the process, is there some way that they can contact you?
Dave Wilson, Partner of ProvenCFO
Yeah, just head over to our website provenCFO.com spelled out nice and pretty on my t-shirt. But yeah, we’ve been helping clients out and for some strange reason we’ve got capacity to grow in a time where most people are shrinking.
HOST Arian Lewis, CEO of Kiln:
Okay. Good. Well any support is great. So to all of those that are listening and thank you. We wish you the very best and stay tuned because we’re going to have great new information coming out each week, and it’s very likely that we’ll come back and have a conversation about some of these incentives as we move forward into the future. So, thank you. Good luck to everybody. Stay strong. Stay connected. Thank you.
Salt Lake City Department of Economic Development 