With thousands of businesses vying to receive financial aid during this pandemic, it can be very easy for small business owners to feel like they’ve gotten lost in the shuffle. However, all that is about to change because the government will be releasing another round of PPP (Paycheck Protection Program) that specifically targets smaller struggling businesses. In this episode, Jon Aidukonis and Gene Marks along with Lendio CEO, Brock Blake, discuss the details of the upcoming PPP as well as several new grants and loans that are exclusively reserved for small business owners.
0:49—Today’s Topic: Which Financial Aid Resources Specifically Target Smaller Businesses?
2:11—Under the original PPP, businesses could apply for loans that were two and a half times their monthly payroll. If your business is in a particularly hard hit industry, you could qualify for up to three times your monthly payroll.
2:58—Unlike the earlier rounds of PPP that prioritized larger businesses, this second round will specifically target businesses with less than 300 employees and only offer loans of up to $2 million.
4:54—A significant amount of federal funding has been set aside for small businesses that are located in low to moderate income areas.
6:58—You have to be proactive when it comes to finding the right financing options for your small business’s needs.
7:45—The advantage of using the lending marketplace is that you can find the most suitable lenders for your small business, using only one application process.
10:48—According to the provisions of the new PPP, individuals who have an existing loan may be eligible for even more money.
12:59—Marketplace lending serves as another alternative for newer small businesses that don’t meet the requirements for PPP.
14:47—If you have an existing section 7a or 504 SBA loan, you can qualify for up to eight months of forgiveness, with a maximum forgiveness of $9,000 per month.
16:26—The government is offering additional incentives to lenders who help assist smaller businesses. These incentives include a guarantee rate of 90% on all SBA loans and a maximum limit of $1 million on SBA express loans.
17:21—Individuals who are involved in the arts can apply to the Shuttered Venue Operator Grant Program, which could provide them with up to $15 million for payroll expenses once they qualify.
19:34—Some of the documents that you will need to provide for your loan application are as follows: photo ID’s from all the business owners, payroll documentation, and quarterly financials.
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Jon: Good afternoon, everybody. And welcome back to another episode of Small Biz Ahead, the small business podcast presented by The Hartford. This is Jon Aidukonis, one of your co-hosts joined here by Gene Marks and a very special guest today, Brock Blake, who is the president and CEO of Lendio. Two people who are really smart about financial programs, specifically the Paycheck Protection Program. And this guy here, who’s going to ask them a lot of questions to help get everyone up to speed. So Gene, Brock, welcome and thanks for joining me.
Brock: Yeah, my pleasure, Johnny and Gene. Thanks for having me on. I’m looking forward to the conversation.
Gene: Me too, Jon. Let’s get into it.
Jon: Awesome. All right. So maybe just for the viewers at home or listeners at home, PPP, the Paycheck Protection Program, it’s a word, an acronym that we’ve heard a lot over the past year. But Brock maybe you can just kind of level set us a little bit in what is that and when, and why did it start?
Brock: I think most businesses know what the Paycheck Protection Program is but we’re grateful that after months and months and months of back and forth with Congress on politics they finally passed the stimulus package to help main street, small businesses across America get access to much needed capital. They keep their doors open and their lights on, and especially with all the restrictions and lockdowns that are in place that are hurting them from generating revenue to our ability to be able to get access to two and a half times a loan that is two and a half times your average monthly payroll. And as long as that capital is used to cover payroll costs and other expenses that you are required to keep your business open, like rent and utilities and software that’s required to run your business and other things like that, that loan will be a 100% forgiven at some point down the road. So it’s a great option for businesses to be able to keep their doors open and keep their team members employed.
Gene: And Jon, if I can even just add something to what Brock is saying as well, it’s absolutely right. It’s two and a half times times your average monthly payroll. And because the PPP program is more targeted this time around if you’re in a specific industry like accommodation and food service, or even if you own an RV park or a casino hotel, certain people beginning with the industry code seven two, they are entitled to three and a half times of your average monthly payroll. So it’s a little extra money available for those industries that have been hardest hit.
Jon: That’s awesome. And yeah, no, that’s a good point. And I think there’s a couple other things that are different about this round too. So maybe as we think through that, to your point, like some of those different limits, Gene, Brock, are there things we might want to think about compared to when this was first launched last spring that are different in the chapter that we’re hearing coming out of the holidays?
Brock: I think one of the pain points of last time that we saw, I know Gene, you talked about it a lot. It was an area we focused on at Lendio for sure was that lenders were prioritizing loans to the largest businesses. And you had large publicly traded companies taking $10 million loans and the smallest to small businesses were being deprioritized and banks, they were underserved and they were really at a disadvantage. And so, so much of the talk and our advocating between last round and this round was, you need to prioritize the smaller businesses.
Brock: And you know what? I had to give them credit. I feel like they’ve done a few things that have really helped to make that happen. So number one, the maximum loan size is $2 million. And last time it was 10 million. Number two, the maximum employee size is 300 employees versus last time it was 500 employees. Number three, they are allowing one of the things that last time is loans under $50,000 they cost the same amount for a lender to underwrite as a large loan but the lenders were not able to process those smaller loans profitably. And I love that this time around the Congress put in an incentive for lenders to target these loans less than $50,000 inside. So, they prioritize a few things around these small business customers as far as giving them the first of the line instead of the back of line and I love those changes that I think they really will help the smallest to small businesses during their time of need.
Gene: I’m going to add a few things to what Brock said. Again, everything he said right on the money is usual, but what Congress has also doing is really trying to get money out to businesses that are located in low to moderate income areas. And at first I was making the mistake of saying, “Well, this is minority owned businesses,” but no, that’s not the case. It’s any business that’s located in an area where 50% to 80% of the earnings that’s made the medium family income, if the medium family income is less than 50% to 80% of like the metropolitan area, it’s considered to be a low to moderate income area. And if your business is located in that area, there’s been these special set aside, they’ve put aside $15 billion for initial PPP loans and another 25 billion for a second round of loans.
Gene: They’re trying to get money out to small businesses, those with less than 10 employees can get money right away for up to $250,000. And then the stimulus bill also is targeting money like 15, almost $30 billion actually to community banks, small credit unions, to mission-based community lenders and minority depository institutions. So, I don’t know, Brock, if Lendio can assist those businesses that are located in those areas, but there’s definitely a huge emphasis now on getting money out to businesses that are in these more hard struck areas that weren’t really participating as much as was hoped in the first two rounds of PPP.
Brock: Yeah. Great point, Gene. Lendio, let me just make it clear, we’re a marketplace, we’re not a lender ourselves. So we have 300 lenders on our platform and a dozen or so of those are CDFIs that are able to help with that underserved, minority, women-owned in those target areas. And so, yeah, we’re already processing our applications to those lenders today and trying to help them be at the front of the line instead of the back of the line.
Gene: Yeah. I’ve just got to say, if you’re listening to this in Europe, you’re located in that area or a minority owned business or whatever, I mean, listen, Lendio is there. The platform is there for you to go, but Brock is not going to be knocking on your door or calling you at home. I mean, you got to step up and do the research yourself because the government is doing everything it can to target money to companies in these areas. But the business owners in these areas have also got to take responsibility for themselves and investigate what’s right for them and reach out. And you’ll find if you do reach out, there are a lot of potential resources for you to make it through this pandemic in this unprecedented downturn. So back to you, Jon.
Jon: Yeah. It’s a good conversation and it’s interesting. Because I think we heard a lot, at least in the news, right? Was that the first round, it wasn’t only that maybe the funds weren’t designed in order to benefit the smallest to small businesses or those who might be in underserved markets, but there was also kind of an access issue. So, Brock, I think what’s really interesting to your point is like, you guys are a marketplace not a lender. So for someone who might not have an existing relationship with a lender, or maybe that they went through one before and they’re trying to think about a second drive if they’re looking, do they need to go through one of the original lenders? Can they switch and go through someone like Lendio or marketplace to connect with someone new who might be able to better understand their unique needs?
Brock: Yeah. So a borrower can go to any lender that they choose. They don’t have to go back to the lender that they got the first draw from. Obviously this is going to come across self interested and now let me give you a reason. So first off, what we care about is business owners get the access to the capital. So if that’s through their community bank, if that’s through a lender you work with then do it. That’s what matters most.
Brock: The reason why a marketplace is beneficial to the business owners, because we have so many lenders, what we are doing, the way we’re prioritizing who we send the borrowers to is we’re looking at the lenders that have the best system, the best process, can process the fastest. The most loans are the best customer experience. And if a lender is not able to do that, then we’re going to prioritize another lender over them. So what that gives you, instead of going to a lender and being stuck, and you can apply at multiple lenders by the way, and getting stuck and putting all your eggs in that basket, as a marketplace, we take the application and then we route you to the lender that is processing the loans the fastest.
Jon: Got it. And when we think about something like that, because the other thing is each lender would have their own application. So as a small business owner, to your point, if we’re thinking about, I want to go to my community bank and maybe someone else who I’ve had a loan with historically because they kind of know me, or there’s another center who might be facilitating some of this. You should probably be prepared to fill out a couple applications. Is that correct? Or is that one simplified application that the SBA has given out that all these lenders are individually accepting?
Brock: Yeah, that’s a great question. It is one standardized application. So you don’t actually have to fill out multiple applications. We do all that on the back end. And we’ve created technology to make it very easy. So you come in, you complete the application, you can upload your ID, you can upload any payroll documentation, any tax returns. We actually create your financial statements on your behalf and then we submit that information securely to the lender. It’s just one time and we can submit it to multiple lenders to be able to give you the best chance of getting a loan done.
Gene: There’s one other thing I also wanted to add in here, Jon, is that, and Brock, you can jump in, I’m curious your thoughts on this. But there are provisions of this new stimulus where you can, if you have an existing loan and when you got the loan some of the rules changed because the rules did change a lot from when the initial program was launched. And you feel that you actually were entitled to more money on your existing loan based on the new rules, the new calculations, you can go back to your existing loan and actually request of your lender more money under that existing loan. Brock, is that correct?
Brock: 100% correct. And I’m glad you pointed that out. So you can draw, to your point, you can draw, like if you were a seasonal business and there’s a certain 12 weeks where your revenues are up more dramatically than other times, maybe the first time around what you did is you just took every month and looked at it and made them all the same. And so you just took your average monthly payroll across the entire year. To Gene’s point, they tweak the rules and they said, you could take those 12 weeks that are your highest payroll and use those to calculate your average. And so your average loan size is, or your loan size is going to be higher because your average monthly payroll is going to be calculated during those those weeks. And you’re eligible for more capital. So that’s a great point.
Brock: I think the other point that we missed is that for those that are coming back for a second draw, it’s not eligible for everyone. You have to be able to prove that your revenue has decreased at a minimum 25% reduction from Q1 2019 to Q1 2020, or Q3 2019 to 2020. So there is that 25% reduction revenue criteria that you have to meet to be able to get access to that second draw.
Jon: When we think about that too, because I think we’ve heard a couple of things, right? Like Gene, we did a pretty in-depth conversation on some of the tax credits that are separate from the PPP. You know a lot of changes here that are really aimed at getting those smallest to small businesses, which is, I think, great. Because definitely need the help the most right now. From a lending perspective, Brock, are there other things, as you think about people who might be looking for financial help separate from PPP, do you see lenders offering their own loan programs right now that might be more for people who may be open during the pandemic and have a year over a year decrease or any new rates or people who are looking to start a business or expand maybe because they came up with an idea over the past 12 months, have you seen any of that in the marketplace trend?
Brock: Yeah. So last time around, everyone, the entire market, the rug was pulled out from under them. We had a pandemic hit. What happened was every lender in the country, paused lending and really focused on Paycheck Protection Program, or basically sat on the sideline. And since then, even though the world isn’t back to normal, the lenders have enough of the new reality to be… They have months of data now that they can underwrite a traditional loan. So if you are one of those businesses that you still need capital and you don’t meet the criteria for the Paycheck Protection Program, or you don’t meet the 25% reduction in revenue to get a second draw, lenders are now back in business, so to speak, and offering traditional working capital lines of credit, equipment loans, SBA loans. Specifically for us, last time we dedicated our entire team and our entire staff just to PPP, this time we actually have our “normal” marketplace of other lenders and other loan products still operating as well to help those customers through this dark winter, even if they can’t get the paycheck protection loan.
Gene: Jon, if I can also add to what Brock is saying, Brock, you had mentioned like SBA lenders. So as part of the new stimulus, there’s this amazing forgiveness program, not even connected to PPP for people that get SBA loans. So if you work with a lender and you can find them on Lendio that do SBA lending and you get a loan that’s either what’s called a section 7a, or a 504 loan. Those are the two major types of SBA loans. If you already have those loans already existing, you can automatically get three months of your principal and interest just immediately forgiven. And you can even get an additional five months, so that’s eight months in total, if you’re in one of those hard hit industries like restaurants and accommodations and leisure. So, it’s up to $9,000 a month forgiven, but it’s this huge benefit.
Gene: And if you go to Lendio and if say you want financing, you go to Lendio, you try to get matched with an SBA lender there for a new loan, new SBA loans through September 20th, you will get a six months of forgiveness, principal and interest up to 9,000 a month on any new section 7a or 504 loan, which is an enormous benefit. You have to have less than 500 employees, but you don’t even have to be impacted by COVID. You just have to be a business. Because the government wants to stimulate the economy. There will be a recovery and they want to make sure that businesses that even if they haven’t been affected by COVID are in a position to take advantage.
Brock: The other thing that the government is doing to really make that stimulus happen is they are creating additional incentives for lenders to offer those loans. So two things, they’re increasing the guarantee rate on the SBA product to 90% guarantee, which is very attractive for lenders to be able to offer that product. And then the other thing is they are increasing the loan size on the SBA express loan, which is the easiest loan to be able to get approved for as far as process and underwriting and so on. It used to be a max loan size on that SBA express of 350,000. They’ve increased that maximum size to a million dollars.
Gene: Oh, I didn’t know that. That’s awesome.
Brock: So a lot of really great moves that they’ve done to be able to provide incentives for borrowers to get big loans.
Gene: The shuttered venue operator program is a new grant program, and it affects any companies that are in or any individuals actually that are in the arts industry basically. It’s got a pretty wide reaching. So it is a, if you’re a theater owner, you’re an operator, if you’re a talent agent, if you’re an actor, if you’re a singer. And, Jon, that doesn’t include you singing in the shower. But if you’re an actual professional performer and you’re in the arts industry, there’s this new grant program that’s available. Now, the grant program, I don’t think Brock is something that Lendio is … Because it’s not loans. It’s not administered through banks, right? It’s going to be through the SBA, my understanding is 15 billion has been put aside and you can apply for these grants as long as you spend it on payroll and operations for up to $15 million. 10 million initially, and then another 5 million that you can also apply for.
Gene: And again, the only stipulation with that is that, of course, you have to be in the arts industry and you also can’t get a PPP loan if you’re going to participate in this grants program. But if you are in the arts industry in any way, shape or form, you should be researching with the small business, the sba.gov website and you’re getting your application in for these grants.
Brock: Yeah. Those are direct with the SBA so we’re not offering those grants at Lendio, but to your point, if any of those live events, spaces, theaters, performance venues, they should definitely be pursuing that because those are great. I mean, it’s a true grant and there’s no cap on, well up to $15 million. So I mean, that’s a really large loans or grant. So it’s a good option for businesses in that category.
Gene: Right. And for anybody here listening that’s over the age of 50, Brock said that’s a true grant, not Lou Grant. Just want to make sure that we’re clear on that.
Jon: Well, thank you guys. I think that was in great information, and I think before we close it out, all of these programs, there’s going to be some requirement of basic information from the business. So, Gene, you’re in and out of financials all day, same with you Brock. Are there a couple of things that would just be good for business owners to start having handy and at the ready? So if they’re going to consider whether it’s a grant through the SBA, go to one of their traditional lenders to get one of these PPP loans, or even think about Lendio as a way to get hooked up with a funding source, besides tax returns. Like they’re kind of a quick list of things they might want to start getting ready and have all set to go?
Brock: For those small businesses, if you’re looking to apply, a couple of things that will help make sure your application goes through quite suddenly. So first is, ID identification front and back of all the owners. So driver’s license, we strongly encourage that that be color image. And you can take a picture of that. You can upload it onto to, Lendio just part of your application. You’re going to want to provide payroll documentation. And the easiest documentation for us to validate and verify is usually a 940 or 941, 944. This can be quarterly or annual payroll documentation or a schedule C and anything around tax returns. That will be very helpful in us validating that the payroll numbers and doing the calculations off that.
Brock: Then you’re going to, if you’re looking for a second draw or you’ve already got one, you’re going to need to become prepared with financials. So quarterly financials for Q are for 2019 and for 2020. And if you can input, we have the ability for you to input that into our system and we’ll create a PDF financial statement on your behalf to just simplify it for that business owner. But you could provide a tax return, you could provide bank statements, you could provide financial statements as well, but those are the main pieces of documentation. If you have all that, then that’s going to accelerate your ability to get approved, get it processed, get it underwritten and get the capital in your hands as quickly as possible.
Gene: And I’m just going to add onto that. And I’m just speaking from the standpoint of a CPA. I know that the accounting profession and a lot of my colleagues have been working really, really hard to help small businesses and help their clients get through this. I know many CPAs, smart CPAs aren’t even charging for some of their services to help their accountants or their clients, particularly ones most in need. Because they recognize the fact that if they help them through these times and these companies then make it through and start to grow, they’ve got a friend and an accountant for life. So, reach out to your local state CPA society, try and find a good accountant that can help you through this. If you’ve got a business to run, all of this documentation and things you need to do takes time and it can be a bit of a headache. So, outsource that kind of stuff to somebody who is willing to help you, and then you focus on what you do best.
Jon: Well, thank you all for your time today. I think this is great.
Brock: We just hope that these business owners can get this capital as quickly as possible and help cover payroll and get back on their feet. And as Gene always says, this loan is helpful. The most important thing is being able to get back to revenue driving, having customers and things like that, that’s going to be most important. Hopefully this will get you by between now and the vaccine where that can happen.
Gene: Yeah. You’re reading my columns.
Brock: Yeah, that’s right.
Gene: I’m a big believer in that as well. And, look, I can just add this much that, Jon, that it’s tough times right now for a lot of people in the country, but they will get better. And I know that when the recovery happens, it’ll be strong. Navigate the best that you can let’s get through this and there will be brighter days ahead.
Jon: Yeah. I’m with you. Looking forward to that for sure. Thank you both for the wisdom and the insight. I think today’s conversation was a valuable one and appreciate both of your time. So to all of you listening out there, thanks again for joining us for an episode of SBA, The Hartford small business podcast. We appreciate when you take the time out of your day to join us, and stay posted for the next one. If in the meantime you want to learn more about some lending sources, feel free to check out Lendio, that’s lendio.com, L-E-N-D-I-O.com. As always check out the blog, a lot of good information there from Gene on how to grow and manage your business. And we’ll talk to you soon. Have a great afternoon.
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