This informational episode covers a high-level economy forecast and 3 programs from the new CARES Act stimulus package.
The goal is to take a snapshot of where things stand so business owners can see farther into the future so they can be aware of things in motion so action can be taken for your business and family.
Includes ideas how to leverage new government SBA loan programs and the Stimulus Refund for business.
SBA loan information: SBA website
Article titled: “Collecting Unemployment when you’re Self-Employed”
Hello and Welcome to the Arise2Live podcast. The podcast for business owners and freelancers running a business and a family. This is episode #93 and I am your host, Scott Weaver. I hope that you and loved ones are safe and sound. In these unusual times, I encourage you all to help each other out, especially people directly hurt by the virus pandemic. Sooner or later, we all will be touched by this.
Today’s episode is intended to bring out awareness for where the economy seems to be going and awareness about the latest Federal Stimulus package that deals with the issue. From this awareness, I will encourage you to take action in your business, even it’s only to make a plan B.
Before I go too much into the details, there’s some disclaimers I need to make. As a podcaster with an MBA degree, I want to give you leading edge information so you can get a leg up, improving your business and family. Getting ahead of the competition. However, on certain topics, even having a 5 hour podcast episode, I can’t cover some important topics well enough. Today’s topic on how the economy and the stimulus package impacts your business is like that. My goal is to make you aware of important things so you can start thinking them and research on what your next steps should. I want to help you to be aware and take action.
Today’s information is the best I know as of March 31, 2020 and this information has a shelf life. Things are moving very fast, details are changing almost daily. But I do feel strongly that if you wait till the dust settles, you will have missed on some amazing opportunities. Be aware.
I have links on the website show notes at Arise2Live.com/podcast. And, I strongly encourage you all to check things out for yourself.
Let’s dive in.
1) Reason for the stimulus…
— The gov’t has shutdown events, business, even people gathering together to protect the whole of society from the dangers of the coronavirus, or COVID-19. Whether we agree or disagree with how this came about, it no longer matters… it happened. And all we have to deal with the consequences, both the good ones and the bad ones.
The short-term economy outlook is bleak. I’m hearing the worse predictions I’ve heard and I’ve gotten through the dot-com bust, the great recession and now this. I will say this, in each of those times, I faced some pretty challenging and emotional things, but after each downturn, I was better off than in beginning. This is the time for change and opportunity, if you are aware and take action.
The predictions in the next 6-or-so months are bleak. I say this so you can be aware. The economy is being reset—a hard reboot. And it’s a big experiment, but the situation is not hopeless. There are going to be some good coming out.
Okay, some future estimate.
– High unemployment, estimates range from about 9% to 33%. Last week’s surge of 3 million new claims not good.
– Lost businesses and money transactions. I’ve been hearing lower GNP by 12-24%. A very significant reducing.
– Lost government taxes will lead to some serious budget problems, and likely program cut backs. Already, the Mayor of Nashville TN is warning about higher taxes as they deal with the virus and tornado damage they had.
– Recent report out of China is that only 60% of business has re-started, meaning 40% have not opened after 3 months of virus. This observation indicates that recovery time is measure in months, not weeks.
— Massive and abrupt society move on-line is going to have a long lasting impact. I don’t know exactly
— Oil price war between Russia and Saudi Arabia is an often overlooked landmine. Don’t forget that the U.S. has been the world’s largest oil producer for the last 5 or so years. With oil prices in the low $20/barrel, many U.S. energy companies won’t survive. Adding this to economic damage from the virus. And if we have to pay other countries large amount of money for oil…not good. We been there before and we don’t want to go back.
This list of woes is a major reason for the stock market crashes.
Well, that’s the bad news to be aware of. If I had to give an estimate, today I would say we are looking a recession worse that the great recession, but not as bad as the great depression. There’s going to be some pain.
Facing the problem is the first step on solving it. There’s a quote going around that Albert Einstein reportedly said “If I had an hour to solve a problem I’d spend 55 minutes thinking the problem and 5 minutes thinking about the solutions.” Well, some problems seem like a kick in the stomach, but we still need to face them. We will get through this.
Earlier I said that there are and will be opportunities. I’m optimistic that I’ll reach the other side better than today. Why?
For one, there’s a lot of very smart people working on the problem. They are taking experience from the past, combining with new knowledge to adapt, not copy, past solutions.
How are the big wigs stepping up to do battle? Well, the big gorilla is the Federal Gov’t $2.2T stimulus package, the CARES Act. I’ll talk more on a few programs later. It seems that the CARES Act is the only thing agreed on this year between congress and the white house. And it’s huge…and technically, I think we can’t afford that as a country. So we are all in and there’s a lot of people in high places with the attitude of ‘Failure is not an option’. They will be working hard on getting the country back from the virus and the economy. Action has been taken and more will be taken.
Regarding the stimulus package, I’m bring out a few programs to be aware of with a few potential gotchas and ideas.
Note: There are quite a few new resources that can help your business and family out. Local, State, and federal. Please go look them up. This podcast is national, so I can’t really speak to your particular state or city. Find those people who can.
Here are 3 programs to be aware In the CARES Act.
First is the “Stimulus Rebate”.
That’s the checks of $1,200 per adult, $2,400 joint filers + $500 per dependent under 17 years old, if you under the phase out amounts. However, the devil in the details: it’s actually an advance on next year’s tax return, a “2020 refundable tax credit”. Sense next year’s tax rules haven’t been written yet, I’m not sure the impact is. But be aware that this is going on next year’s taxes.
Based on my experience in the tech start-up world, here are some ideas on how to spend the money so it go far, or even allows you to grow.
- Make a plan. Be intentional about how you are spending it.
- An idea is to put 20-30% of the refund into savings or pay down debt. Remember that in a recession Cash is King, but debt kills. Be aware of your particular financial situation and move forward.
- Another idea is to take part of the money and help others who in need or support a local business by shopping or eating there. I’m thinking in the range of 10%.
New Program for Freelancers… This is exciting. Freelancers and gig workers are now eligible for unemployment, up to $600 a week. Go check out the details at your state unemployment website.
This is so new a program that gov’t agencies are still figuring out the process. I think rules are still being written and every state is different, so I’ll just say check out the rules in your area. Yes, it’s going to take some detective work, but if you are a freelancer that your clients have let go you, then apply. Be aware and take action.
SBA Loans… This is big and will be a life line to a lot of struggling business. Yesterday I had three clients ask about how to fill out the new on-line SBA loan application at sba.gov
To start with, there are three very important “features” to be aware of:
- Loans are supposed to be paid back. Yes, they are loan payroll forgiveness opportunities, but still be prepared to pay back the loan if the rules change – read the fine print.
- Second, you need to be qualified to receive the loan. It’s not automatic.
- Finally, the spirit of the law is to keep your employees on pay-roll. It can be a win-win situation…you have the financial resources and keep your team together you can emerge from the downturn as a strong business and the gov’t continues to collect payroll taxes.
A couple of things about this program to be aware of:
1) Money is coming from the Federal Gov’t, not a bank. Federal Gov’t is backstopping is the word I’ve been hearing. This is a huge difference than normal. However, the paperwork is administrated by the banks.
2) Time to receive the money. In the On-line application it says three days for an “advance” up to $10K. However, the word on the street that I’m hearing is that this program is so new that it will time 4-5 weeks to bring the banks into program complacence and another 3-4 weeks work through the applications. The means it’s 2-3 months before you’ll receive the full money from an SBA loan. Key point here: Don’t rely on this for a quick cash infusion. Your business needs to be able to stay in business, like, for another 90 days before getting this type of help.
Again, please got to SBA.gov for updated details. The rules are changing fast, but don’t wait if you need to apply. Review your current and future situation and apply now if it makes sense.
With that said, getting a SBA loan must fit into your overall strategy and you have to use the money to bring in new cash. It’s an investment, not spending money. Following on your plans is vital.
For example, a furniture maker got a $50K SBA loan in the great recession. They expanded their future manufacturing and released a new product. It flopped in the market place. Lost to cheaper imports because of a lack of marketing research. When I talked to the owner, they were trying to survive with a loan payment on their back.
Moral of the story, use the money with pin-point focus to generate new cash and carry out your plan with all diligence. Remember, cash is king, debt kills. If you use SBA cash to generate new cash things will work out. If not, you got another debt to pay. Be smart and work hard.
Well, that’s is a quick rundown of things – heavy things. But there are opportunities out there. Out there now. Be aware and take action.
I ask you to stay on top of the stimulus package news. How the cash checks are progressing, following the freelancers unemployment support rules, and how the SBA loans are implementation. Expect changes, but roll with them.
Continue to plan ahead with courage and determination. Enlist your family to help out. Use the extra gov’t help your family with a long run approach, not a short term free-for-all. Cut expenses in non-core areas at home and in the business, but don’t be afraid to spend money to accomplish goals or invest in this to bring in new cash flows.
From the past experiences of the early days of the Great Recession, the business’ and families that took early action did better than those who waited.
So, be aware and take action now…to Arise2Live