The Insurance Doctor

Category: Paycheck Protection Program

  • 5 Reasons Why the PPP Frightens Banks

    5 Reasons Why the PPP Frightens Banks

    I have invested over 120 hours of research, participated & spoken in Zoom panels, and engaged with client strategy conversations on the PPP since Friday, March 27th- that is the same day the Payment Protection Program (PPP) was signed by President Trump.  The Triple P is a sweet deal for many struggling business owners; however, not so good for banks, here’s why:

    1. The loan rate is too low:  PPP loans will stay on the bank’s books at 1%, which is much less than their conventional loans.
    2. Astronomical default risk: So many people are already tapped out or about to be on empty so banks know many of these loans will default.
    3. Unfit system technology: Most banks are not set up system-wise for this technology, so there’s a mad scramble to set up systems/websites, whereas other institutions have the same platform already in daily use.  It’s expensive to build out an internet platform in 4 days.
    4. Margins are too low: Currently, the Federal Funds rate is 0.25% This is the rate banks lend to each other overnight.  The PPP is only 75 basis points higher, which leads to poor profit margins.
    5. Beholden to the Government: Banks are complaining about mixed messages from the Government and are dragging their feet until they receive more information and direction.

         If you are in desperate need of money now, I suggest going to the smallest local community bank, where you have an account (or open up a new account) in your area, as they have been the most aggressive.  Be Safe!

  • 5 Tips to get “Free Money” from the $2-Trillion Stimulus Package

    5 Tips to get “Free Money” from the $2-Trillion Stimulus Package

    On March 27th, President Trump signed the $2Trillion stimulus package for small business owners (sole proprietors or firms with fewer than 500 employees) to get two and a half months’ expenses in a lump-sum payout. The loan could possibly be forgiven depending on how you spend it.  I’ve never seen a loan program option as good as the PPP!

    1. The PPP package is better: PPP stands for the Paycheck Protection Program.  The PPP is better than the SBA (Small Business Administration) loans because there’s no creditworthiness, no 3-years of tax returns are required and interest is forgiven if you spend it on “qualified expenses”.
    2. Call your bank: All banks must participate however some will do a better job than others.  Once approved you should have the money in 1-5 business days.  The 4-page PPP application was just released by the IRS.  Online applications are expected to kick off on Friday, April 3rd!
    3. The formula: is based on your business’ average expenses over the last 12 months including payroll (salaries up to $100k), health insurance premiums paid and 401(k) match.  The monthly average is then multiplied by 2.5 = your lump-sum loan.
    4. Qualified additional expenses: You can spend it on utilities, internet, payroll, interest, rent, cash tips, tax on employee compensation, sick leave and sole prop salary up to a $100,000 cap per person.
    5. Numbers and exclusions: The maximum loan amount is $10 million.  Interest rates may range between 0.5% to 4% on any non-qualified expenditures made with loan monies. The beauty of this program is if you spend the loan proceeds on qualified expenses the loan may be forgiven, hence ‘free’ money if no more than 25% of the forgiven amount is spent for non-payroll costs.  You will also owe money if you do not maintain your staff and payroll. Keep in mind, you must spend all of the funds received in 8-weeks!                                    

         Folks this is an opportunity to keep businesses afloat and people employed; take advantage of it and be Safe! 

    Feel free to reach out to me for the PPP loan application!