SCL Equipment Finance. Before I turn it over to Barbara, I'd like to let those of you know who are live with us that you may submit questions during the webinar via the chat box in the lower left side of your screen. The slide deck from today's presentation is available as a PDF in the handouts tab of the webinar homepage. This webinar will also be recorded so that you may watch or re-watch on demand at your convenience. And with that, I will turn it over to Barbara. Thank you, Liz. Many of you I met at the AED Conference in Chicago. We became a member of your organization a little less than a year ago. We are an equipment finance company and we've placed ourselves as a secondary source to your already in-house financing. Many, many of our clients have called throughout the last couple of weeks or now it's been a month or so asking about the different relief programs. And so I want to talk about those today and give you some more insight to those programs. So what businesses need to know? What SBA programs are available for small businesses? Well, we know that there's the SBA Disaster Relief Loan. We know that there's the Debt Relief Loan. And what is the Disaster Relief Loan all about? Well, number one is that it's a loan between $10,000 to $2 million. It's for companies with less than 500 employees. The loan is at 3.75 and it is amortized over 30 years and there's no payment for 12 months. So you have to make a decision why you're going to use that loan. A little later we'll go over some of the usages of that loan. Questions that I've had from our dealers were do equipment sellers qualify? Well, if we take a look at 2019, there was $9.7 billion worth of equipment sold in 2019. So we had a client who sold a piece of machinery and over the last eight weeks he has had no income because he gets his equipment from Spain. So he qualified for the Disaster Relief. Alright? So keep in mind that equipment sellers do qualify. I know for the AED client you have customers and so what you learned today you can share with your customers. My biggest fear is that the small guy doesn't really know what programs or how to utilize these programs and what the rules are to the programs. So share as much information as you can. About two weeks ago this Friday, the CARE Act came out, the Payment Protection Program. In that portfolio there's $340 billion. I would probably say most of it is gone. Will the government put more money into that? Not sure. You know, we're looking at a recovery right now. The feds want to see what we're doing with the disaster loan programs, what we're doing with the Paycheck Protection Program, what we're doing with the unemployment incentives. So kind of want to rest. I don't know how much more money we're going to put in there. I think they're thinking more about bailing out the larger courts now. Okay? We want to talk a little bit about vendor payments and equipment and working capital. As a vendor you may have or as a dealer you may have a client that still owes you money. That client may not want to pay you the money right now because they're either waiting for the SBA disaster relief, they don't want to use their working capital. And I want you to remember that you can always turn those clients, those accounts receivables into an equipment finance program. So just contact your equipment finance company and start moving your accounts receivables out so that you can get those clients financed. All right? So we're going to talk a little bit about the Paycheck Protection Program and how to apply and where to apply. Many of you have already applied. Many of you have not. Many of our clients can't even find a bank that will take the application. So any FDIC insured bank can take the application. You will need to find a bank that can take the application. What banks are saying now is if you're not our customer, we don't really want to take the application. And let me give you the mindset of that. So the rules when both of these programs came out, the Feds just sort of threw it out there. The SBA is handling the disaster relief program. The Paycheck Protection Program is now being managed by FDIC insured banks and credit unions. And so they're going to make the credit decision whether or not you qualify. Right? Because the Feds haven't really given a lot of information to the banks on what this credit criteria looks like. So the banks don't really want to be held with a portfolio that may not pass the SBA guidelines. And so for that reason, they will not get repaid back. Right? Also, fraud. What if you are a fraud application and you take that application and you fund that application and then you send it to SBA to get repaid back and it's really an erroneous application? There's a problem there. They're not guaranteeing that part of the portfolio. So banks feel really comfortable working with their own clients because they know that client is not an erroneous client. Right? What do you do if you're banking with someone that can't take the application? Like Wells Fargo, some of these big banks. They're just inundated. They can't take any more applications. I think it's a good time to start looking for a new bank. I think you just walk out the doors of your office and look to your right, look to your left and find a community bank. Walk in or call them on the phone. I guess we're not walking in. Wear your mask and walk in and, you know, have a conversation. And if you haven't already applied for the PPP program, see if they will. This is an excellent, excellent time to establish a new relationship with a community bank. You need your banks in order to run your companies. One of the things that you need when you are applying for the PPP program is the NAICS code. And a lot of our clients say, where do I find that? Well, you find that on your taxes. Okay? So you look on your taxes. You're going to see your NAICS code number and you're going to need that. What is the program all about? Well, it's going to take your average payroll. They're going to ask you for 12 months, March 2019 through February 2020. You're going to times that by 2 1⁄2 and that's going to be the amount of money that they will give you for the Paycheck Protection Program. The use of proceeds. Very, very important. There's a few takeaways that I want you to hear today and this is one of them. In order to have the loan forgiven, you have to use the use of proceeds appropriately. So 75% of that must go to your payroll. And 25% of that can go to rent and utilities. Now, this is where we're suggesting that you open up a separate checking account because when it comes time for forgiveness, you don't want to have the money that you got from the Paycheck Protection Program with your business checking account. That will make it too difficult for the underwriters at your banks to see how you spent that money. So, rule of thumb for all of the disaster loan programs, open up a separate checking account. Now, if you're really happy with your bank, stick with them and open up a separate checking account. If you're not so happy, again, look for a new community bank. Open up a separate checking account for the Payroll Protection Program and also open up a separate checking account if you're going to get the disaster relief. This is going to make it really easy for the logistics of proving that you want this loan forgiven. If they do not forgive the loan, it's a two-year loan at 1%. I mean, it's very inexpensive, but it is for you to retain your employees, right? That is what the loan is all about, to retain your employees. Let me give you a little picture here. You're a restaurant. You have 50 employees. You had to close. You sent all your employees to unemployment. July 1st, you can open. You don't have any employees. You have to start new. The odds are that business will fail, right? Simply because they don't have skilled employees that know the business. So, the government, and I thought it was a great thing that they did with this PPP program, wants you to retain your employees. Some of them are not working as hard. Some of them are just furloughed, but they want you to retain it. They don't want to see those employees at unemployment. Now, some companies have sent their employees to unemployment, so when they get the Paycheck Protection Program, they're going to bring those employees back. I want you to have a conversation with the bank that approves your loan. They are going to help you the best to find out how you can get this forgiven, because your main objective is to get it forgiven. So, separate checking account, and make sure that the use of proceeds are within the guidelines of the Forgiveness Program. Oh, I wanted to also mention, do you know that your banks, they're not doing these Paycheck Protection Programs because they're just trying to give back, by the way. They actually make money. They make 5% of the loan amount that they fund you, okay? And I'm sure there's some other benefits there. I think there's an application fee and some other fees. You are not paying for that. SBA is paying for that. So, yes, your bank is making money, so don't feel like it's charity. They are making money. Now, some other banks are also gaining access to new clients, which is great. Now, let's talk about the Economic Injury Disaster SBA, if eligible. So, when you apply for this loan, it takes about 15 minutes. About six weeks ago, when you applied for the loan, it took you about two hours, because they wanted you to upload all the information and two years tax returns and so forth and so on. But they streamline that now. So, they – you apply. It takes 15 minutes. You're going to get a number. Keep that number. It's very, very important. And then you're going to just wait. There is a box, though, there that says, do you want $10,000? And that $10,000 is going to be for – go to the next one – it's going to be a grant, okay? And that grant is going to be $1,000 per employee. So, if you have six employees, that's $6,000. If you have 15 employees, you're going to get max of $10,000. And you don't have to pay that grant back, okay? When you get approved for the Economic Disaster Loan Program, you're going to have a decision. Do you want to take this program? So, are you going to use the funds for something that you were – are you going to use the funds for something that you're going to use because – well, here's how it is. You have to meet the financial obligations and expenses that you could have met before COVID-19 that you now are going to have to meet, okay? So, do you follow what I'm saying? This is a program. There's going to be rules on how you spend it. And it's going to be up to $2 million if you have 500 or less employees. And the idea behind it is it is 3.75 for 30 years. And it's supposed to meet the expenses that you might have had the money for if the economy was staying exactly the way it is today without any COVID-19, right? So, when you get approved, they're going to come back to you and tell you how much you're approved for and whether or not you're going to apply for – get the $10,000 grant. And at that point, you can take the grant, but you don't have to take the EIDL program, okay? So, some businesses don't really need the funding from the disaster loan program because that money may just sit in their bank at 3.75 and what really are you going to do with that? Not such a great fit sometimes. So, really understand if you're going to need that money. Now, if you take a step back to the PPP program, which is the payroll, that is a necessity, right? So, apply for both and have the money and have a game plan how you're going to use the money. One of the things that I do want to cover before we move forward is fraud for you, not just for the banks. There are a lot of spoofing going on right now. So, you may get an email. The only way that the SBA is working with you is through email in most cases, right? And you might get an email because you're waiting for a response. And it may say SBA.SmallBusiness. Well, that's not the email address for the SBA. So, be very, very careful what you open when you have emails coming in that might look and appear like it's coming from your bank or it's coming from your SBA loan program. Okay? That is why I also like a secondary bank for fraud reasons of ACH fraud, wire fraud. There's so much information being put on the Internet right now that if you, in your operating system, have any type of bugs, it could, you know, react that. So, be very careful with your operating systems and know that when you look at an email that it might appear to be an SBA program, be careful. When you're applying for the different programs, be careful you're on the right site. When you look for the, when you apply for the PPP program, you're going to have an application and you're going to have this Paycheck Protection Program Worksheet. And this is where you're going to need to put your code in there that you find on your taxes. And I'm kind of just showing that because a few weeks ago, a lot of our clients could not apply anywhere. They didn't know where to go to apply because their bank was not taking any more applications. If that is the case, by the way, for anyone on this call today, just give me a call and I will give you a bank to go to. Okay? A reliable source to go to. But I was suggesting, you know, it's only been a couple of weeks when I was hearing that our clients were not being able to submit loans. They either had a Wells Fargo account or I just gave them the information and I helped them through the application and then I sent them on their way to their community banks with paper in hand so that they could get that loan in because remember there's only $349 billion of it. Alright? So for those who have not already applied because they're waiting in line for their bank to accept applications, do not wait. Either go to your community bank, give me a call, I'll give you a reference on a bank. So we want to talk about additional sources of financing that has come. Companies right now are looking for funding inside their own operations while they're waiting for these different programs. How fast will SBA be able to perform? Eighty percent of our country is applying for something, so it's going to take a while. You're going to have to sit and wait. There are going to be some casualties. Not everybody's going to make it. Maybe some of your customers, right? Which is why I want you to have the information that we're talking about today so that you can help your customers. We all have to help each other now and it's basically information. There's a lot of information on the internet. It's really hard to kind of look at it all, especially when the government changes the rules almost on a daily basis, right? So we're always adapting to a new way of submitting an application or what's approved or what's not approved. So we have to look within our companies. We have to look within our companies to find the money so that we can run these companies because the programs are going to kick in for sure. They just win. And how long can you last? So accounts receivable financing, if you're owed money, you can sell that. You can find working capital within your own maybe refinance debt, which is pretty easy to do right now. This is aside from the SBA disaster loan programs. And equipment loans, of course, if you're buying equipment or your clients are buying equipment, they're going to want to put that on some type of an equipment finance program. And if they don't, you know, work with the lender that you have, credit is tightening. I'm going to tell you right now, credit is tightening. The banks are scared. If they make a loan to someone, can they have the ability to pay back? There's now a questionnaire that we have to have every one of our clients sign. How did COVID-19 affect your business? Oh, and then how do you see yourself in six months? So it's not about COVID-19. We know it affected most businesses. But how are you going to pull out of it? So these are questions that banks are asking now in order to get a loan. Let me just go back to the economic disaster loan. What are the uses of funds? Now, Liz is going to send you a really nice link to a download. The download is for West Virginia District Office. I happen to like it. It's kind of like Ghost for Everybody. It tells you exactly what you need to use these funds for. So keep in mind, on the payroll protection, we covered that, right? On the SBA disaster loan, you cannot use it to pay off certain debt. So that's why you want the two checking accounts so that you can, if you're going to have any of it forgiven, you can show proof of how you spent the funds. I have heard that there may be some forgiveness on the disaster loan. So you just want to be able to make sure that your company is prepared to spend the money appropriately. And in this download, you can download the use of funds. You can use it for fixed debt. You can use it for accounts payables. You can use it for some bills that had to be paid because of the disaster loan. Okay, so you definitely want to know what you should be using those funds for. Your banker is going to be an important player. Your CPA is going to be an important player. CPAs have certainly come to the game and they've helped their clients apply for these programs. They're going to understand the programs. So lean on your CPA. Here are some additional resources. If you are a veteran-owned company or maybe one of your clients are veteran-owned, they can go to the VA resource link or just Google VA resource. They are there to help you and they are doing a phenomenal job. SBA deferment. If you currently have an SBA program, you can ask for deferment. If you have a leased loans, credit card debt, mortgages, you can ask for a deferment. One of the important things when you ask for a deferred payment is the reason why. The reason why must be that you were hit by COVID-19. You can't say to a lender of any type, hey, I want a deferment because we weren't doing well in December. We're not going to do well in April. No, that doesn't work. We need to have a deferred payment because COVID-19 has affected our business. That is the answer. That is what the loans are for. That is what the deferments are for. So if you have an SBA program, ask for deferment. If you have leases and loans that you need to pay, ask for a deferment. Remember, your customers, a lot of you have a large book of business with independent contractors. They need to know that it's okay to ask for a deferment. I know that we've called every one of our clients and let them know that if they need a deferment, let us know and we'll help you through it. Those customers need to go back to their finance company and say we need a deferment on our leases. Okay? And it's not going to affect your business and your credit score either. Small business emergency loan checklist. I like this. It gives you a lot of information about what you should be doing. And of course, the paycheck protection link that we just talked about. So my goodness gracious, you get on the Internet and you start going where am I going to apply? Well, SBA, I've tried it myself. There is a link, a link to find the nearest SBA office. You put your zip code in and up pops the nearest SBA office near you. So that could help you to help somebody from SBA help you fill out these forms. All right? There is also a phone number that you can call. A few weeks ago I called, somebody answered. The other day I called, it took 48 minutes. So really online is the best way to get a hold of the SBA disaster relief. And you need that number when you apply. But there is resources there to help you. We don't want to be too much of a Debbie Downer because what is the business outlook? Well, you hear it on the news right now. We're talking about recovery, right? I was this particular, you know, COVID-19 situation that we're in right now really woke up America. I think all of you would agree, right? I did not know that 100% of our aspirin was made in China. I did not know that 100% of our pilicillin was made in China. I did not know that our vitamin C was made in China. I did not know that 18 years ago, the GDP with China was 10%. 18 years later, it's now 92%. I did not know that. So what does that tell us? Americans are strong. And we now know. We know what you didn't think we knew and we didn't know. But now we know it's all over the news. I mean, we can't get, you know, we were told that we're not going to get our prescriptions. You know, we're like, what? So manufacturing is coming back to this country. That is a for sure. When we look at manufacturing, we see today, for example, in our client base, we have a client who made hand lotion, who is now making hand sanitizer. We have a client that made oil for manufacture oils for race cars, a very, very large company. And now they're making large amounts of hand sanitizer, which they bought a new building. The owner of the company is going to be on Good Morning America next week. So there's a lot of things happening where we have a client who makes costumes for like bands at school, plays, any type of costume. They're now making face masks, right? So with leftover fabric, by the way, they didn't have to go out and buy a whole bunch of fabric. They had all this leftover fabric from all these costumes they had made, and they got right in there and they started making face masks. So it's really great to see how our American businesses are looking at this as an advantage and that they can bring back our manufacturing and that we can start making goods here, right? So when we talk about advanced manufacturing, what will be the key? The key is going to be speed. Obviously, right? 18 years ago, we didn't have the robotics that we have today. So we ship things to China. 18 years later, we have some great robotic equipment that can help automate your companies. Now, when you look at the Japan and China, you say, okay, long term, they always think long term. What is long term to them 20, 30 years? Here in the United States, we think long term, well, we like everything today. You know, we have the freedom to think so we act quickly. Personally, I think long term to us will be about 10 years. I think we're going to see a different country between now and 10 years and how we bring back our manufacturing. How we bring back additional opportunities, how the supply chain is increasing, right? I mean, our supply chain right now is increasing. We are starting to make things. We're going to start making our own prescriptions and you're going to watch our country really evolve itself and open up some new jobs and become out of, you know, robotic and automation. Let's put it this way. What if you had a company and I always use this because it's kind of funny, but let's say we made toilet paper, right? Something you couldn't find. And we had 150 employees and every day they had to come to work and they produce this toilet paper. Probably not in business right now, correct? Those 150 people, for one reason or another, couldn't really come to work every day. Now, let's take that same company and think about that same company making toilet paper, but 80% of their operations is robotic and 20% of their operation is people. Now we can compete. So, where does that lead me to automation and technology to run your companies, connect with and what I'm suggesting our clients to do? I'm suggesting our clients to talk to their equipment sellers. Open up a conversation now. The equipment sellers are not that busy. They have time to talk. Take a look at your company today and what is it going to look like in three months, six months, 12 months, a year from now. Have a plan and we know what plans happen, you know, things change, but have a plan. So, we're recommending that talk to your equipment seller about if you were to automate or you were to grow your company, what type of equipment would you need for that? When we start opening up our economy, which we are now or we're talking about it, you hear more about it on the news today than you ever did before, right? Two weeks ago, we were in a dark hole. Today, the light is starting to shine a little bit. So, we're going to have a lot of pent-up demand and the seller of the equipment, the dealers and the manufacturers are going to be busy with orders. So, they're not going to be able to spend the time that they need with you. So, we really are recommending mostly to your clients that they need to open a conversation up. Maybe they need to get pre-approved for some financing. Get through that hurdle now. They don't have to exactly buy the equipment today, but as we continue to need new equipment, have some type of pre-approval. Send them to your finance companies to have them take a look at it to see where they stand in getting capital into their company. Because when people start taking down the disaster loan programs and taking down the PPP programs, I can tell you they're not going to use it for equipment purchases. So, they're going to use that money for other reasons, right? So, we want to recommend having a plan. We need to keep our credit in good standing while we recover. So, stay conservative. Economists say that by June 30th, we're going to see the country back. What does that look like? There's a lot of information what that looks like. Maybe restaurants are running at 50%. Maybe we know that the airlines now will not seat anyone in the middle seat. We know that the airlines are finally, by the way, cleaning their airlines, right? Every night, they bring them in and they shut them down with disinfectant, which they should have been doing a long time ago. But now they're doing that. So, we're going to have to figure out how we can get our business back into our small companies. But we do need to stay conservative. We need to manage cash flow. And you should ask for a deferred payment if you need it, all right? One of the things I read today hot off the press was, the question was, given all the current income sources, how do you anticipate that you'll be able to recover from this issue? 62% of the U.S. economy said they will be able to recover. 38% said they were not sure. I like the word, they were not sure, because that gives us hope and promise that they will with all the different relief programs out there. They should. There are going to be some casualties and those will also be learning lessons, right? They asked, how will you spend the stimulus check? A lot of people said they're going to save it. A lot of people said they're going to use it on shopping and entertainment. And about 80, more like about 30% did mention that they would be buying new equipment, but not using the stimulus program. So those are just some facts that were on the Internet today. So with that said, our priority right now is keeping our customers, which is you, and we are a member of AED. And so we want to do whatever we can for the association to be a part of education right now. It's not really so much about business. It's really just about helping everyone involved so that we can all get through this together. And I'm Barbara, the President of Southern California Leasing SEL Equipment Finance. Liz, I'll give it back to you. All right. Well, if there are no questions, Barbara, thank you for taking the time this morning. And if anybody has any questions, like she said, the contact information is right there on the screen, or you can reach out to us here at AED. Barbara, thank you again. Thank you. Bye-bye.

SBA Disaster Relief Loan

Debt Relief Loan

small businesses

Paycheck Protection Program

CARE Act

community bank

financing