At what cost?

For example, if you run your business well and don’t have it in debt (no loans) BOA (one of the banks chosen to administer the program says, “sorry, you don’t qualify”. Stagecoach? Nobody knows what they’re doing except probably cooking up another fraud scheme.
BoARubio.JPG
 
sigh.
And when the businesses taking out the loans but can't pay them back - BoA calls it a loss and has to declare bankruptcy, right?
But, yet again, they're too big to fail.
So the government has to bail them out with OUR money...
The execs will get their hundreds of millions of dollars in parachutes, and we'll all be footing the tax bill for decades.
 
sigh.
And when the businesses taking out the loans but can't pay them back - BoA calls it a loss and has to declare bankruptcy, right?
But, yet again, they're too big to fail.
So the government has to bail them out with OUR money...
The execs will get their hundreds of millions of dollars in parachutes, and we'll all be footing the tax bill for decades.

No. These are SBA 7(a) loans, made by BoA and guaranteed by the SBA. This is a special program called Payroll Protection created by the new bill. If done correctly by BoA they will have no liability for the loans made. If made based on the correct assumptions and calculations, the loan amounts will be forgivable after a period of time.
 
No. These are SBA 7(a) loans, made by BoA and guaranteed by the SBA. This is a special program called Payroll Protection created by the new bill. If done correctly by BoA they will have no liability for the loans made. If made based on the correct assumptions and calculations, the loan amounts will be forgivable after a period of time.
I don't know much about government financial systems.
Isn't that just basically the same thing I just said but without the need for payback or the intermediary bankruptcy?
This is better?
 
as a side note, some of the younger employees at work were talking about the suspension of student loan payments for now, trying to find ways to get loan forgiveness, etc.
All i said was "yeah, that's cool and all... but I took out a loan as an adult and I'll pay it back like an adult."
Which reminds me... student loan payment WOULD be due tomorrow if student loans weren't in forbearance. I think I'll just make a payment anyway (with a little extra), even though I'm already a month ahead...
I had to request an extension once. I didn't like it.
 
I don't know much about government financial systems.
Isn't that just basically the same thing I just said but without the need for payback or the intermediary bankruptcy?
This is better?

No, it's not the same. The Small Business Administration (SBA) has a program to guarantee portions of bank loans to help small businesses with credit. The program has been in existence for quite a while. The normal program has the SBA guarantee a portion of the loan to a small business. Without the program small businesses without good credit and collateral would have a hard time obtaining business credit. But, the normal existing program requires owners of a small business to guarantee the loan personally and to pledge personal collateral, such as home equity.

This new program just has the SBA guarantee the loan, and then the loan is forgivable if certain terms are met. The loan limits are 2.5 times the average monthly gross payroll costs, including some other taxes like unemployment taxes and limited employee benefits. If the loan is spent on payroll costs, utilities, rent or mortgage interest, and employee benefits then 8 weeks of those costs are forgivable.

The loans are not funded based on need. The needs analysis would take too long and the Congress decided it was better to get the money into the hands of small businesses based on calculations instead of needs.
 
I don't know much about government financial systems.
Isn't that just basically the same thing I just said but without the need for payback or the intermediary bankruptcy?
This is better?

No. We are just magically printing wealth out of thin air. Relax, what could possibly go wrong?
 
What sba 7a loans are is government owns the small businesses who take money from the government.
What is the definition of socialism?
What is the definition of communism?

That's not true either, based on my understanding of SBA 7(a) loans. The SBA nor the underlying bank making the loans will be in the business of whatever business received the loans. Foreclosure would involve collecting and selling off collateral of the business, and it's owners/guarantors, and the proceeds applied to the deficit.
 
No, it's not the same. The Small Business Administration (SBA) has a program to guarantee portions of bank loans to help small businesses with credit. The program has been in existence for quite a while. The normal program has the SBA guarantee a portion of the loan to a small business. Without the program small businesses without good credit and collateral would have a hard time obtaining business credit. But, the normal existing program requires owners of a small business to guarantee the loan personally and to pledge personal collateral, such as home equity.

This new program just has the SBA guarantee the loan, and then the loan is forgivable if certain terms are met. The loan limits are 2.5 times the average monthly gross payroll costs, including some other taxes like unemployment taxes and limited employee benefits. If the loan is spent on payroll costs, utilities, rent or mortgage interest, and employee benefits then 8 weeks of those costs are forgivable.

The loans are not funded based on need. The needs analysis would take too long and the Congress decided it was better to get the money into the hands of small businesses based on calculations instead of needs.

If they don’t have good credit or collateral should they be receiving a loan?

And where does the money to run these programs come from?
 
No. We are just magically printing wealth out of thin air. Relax, what could possibly go wrong?

Please understand I am trying to explain what I know about the SBA and the Payroll Protection Program loans. I can't say that I am for or against the program.

But yes we are printing money out of thin air. We as a country are $23 trillion or so in debt (not counting unfunded liabilities), and we just printed another $2.5 trillion or so to fund the new bill.
 
Please understand I am trying to explain what I know about the SBA and the Payroll Protection Program loans. I can't say that I am for or against the program.

But yes we are printing money out of thin air. We as a country are $23 trillion or so in debt (not counting unfunded liabilities), and we just printed another $2.5 trillion or so to fund the new bill.

Thanks for all the detail. That’s why this is a great forum. Lots of knowledge out there.
 
I have no confidence in Congress or government. They conspire with the media to take away our freedoms. Congress is asleep at the wheel and none can wake them up and the majority of the american people are asleep as well.

I mostly agree, but differ in saying congress is asleep. They know damn well what they are doing. It’s a big club, and we ain’t in it.
 
If they don’t have good credit or collateral should they be receiving a loan?

And where does the money to run these programs come from?

The Payroll Protection Program does not require credit or collateral. It is based on calculated need at 2.5 times the allowed payroll.

Here is my take on a very simplified, and optimistic, example of how the PPP program is supposed to work. Let's say you own a successful restaurant with 50 seats, 12 tables, lunch and dinner. Based on some research you would have 8 wait staff, 4 kitchen staff, and 2 support staff. You are the owner and are also on the payroll (payroll is limited to $100,000 for each worker, so no undue owner perks). Just for sake of argument let's say your total payroll costs are $150,000.

Because of the stay-at-home orders, your business which is now limited to take out and delivery, is down 50% or more. You might be faced with laying off half or more of your staff. Restaurant waitstaff, for those who don't know, depend to a large extent on tips for their income. These layoffs would force workers into the unemployment system, and also cause them to risk default on rent, mortgage, car, credit card, health insurance and other payments.

If you receive the PPP loan, which should be $31,250 (150,000 divided by 12 times 2.5), you can use it to pay for eligible expenses and POSSIBLY keep all your employees.

The way I understand the program, and believe me it is evolving as we write these posts, the money can be spent on payroll, rent, mortgage interest, utilities and certain employee benefits. However, if you don't keep your employee count the same as before you got the loan, some of the loan will not be forgiven and will be converted to a two-year loan. So it is supposed to be an incentive for business owners to use the money to retain employees.

Note: edited for math above.
 
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Also, before any of you get the idea I believe in government hocus pocus: The government, by it's shutting down the US economy, and not the actual Coronavirus epidemic, created this problem. We just printed $2.5 trillion to throw at *it*. If this drags on into the early summer, we will need to print another $5-$10 trillion. The US Gross Domestic Product is $19 trillion, and about half of it will disappear in the short term if we don't allow the economy to reopen. And I believe it might already be too late.
 
Where does all money for all loans come from?

Banks can lend percentages or multiples of its reserves, and the reserves are affected by bank deposits and reserves borrowed from other banks and the Federal Reserve. Some banker might want to weigh in here.
 
This was fake news, BoA always told me that they were going to be able to process loans for existing lenders first because they have more of info that they need, building the process for existing customers that will be new borrowers is more complicated. Best I can tell they never said that they wouldn’t serve their existing commercial customers.

What sba 7a loans are is government owns the small businesses who take money from the government.
These particular loans involve no equity, it’s really more of a grant program implemented as a loan so that the funding banks will do the work on validation and control. If it was implemented as a straight government grant program the fraud risk would have been unbelievable. Consider that without these loans, and the related obligation to retain staff, more folks would be hitting unemployment in April and the taxpayer would be on the hook for it anyway. This approach, which I’ve called controlled economic destruction, is bad, but the alternative is probably worse.
 
I don't know much about government financial systems.
Isn't that just basically the same thing I just said but without the need for payback or the intermediary bankruptcy?
This is better?

My layman's take on it is that it's more like Unemployment in what they are trying to do. Gov covers payroll. You keep employees on the payroll. When we get the economy re started the business does not have to rehire and retrain. Employees don't have to fight for a job. In theory, everything gets back up and running faster with companies not going BK and employees not actual being unemployed.

On the face, once you realize we are paying these folks as employees or as filing for unemployment, it might be the lesser of 2 evils. It increase the chance that the rebound is V shaped instead of U shaped. I am actually warming to the idea. But I think folks will still take advantage of it and the Gov will still likely screw it up. But that's kind of a given isn't it?
 
This was fake news, BoA always told me that they were going to be able to process loans for existing lenders first because they have more of info that they need, building the process for existing customers that will be new borrowers is more complicated. Best I can tell they never said that they wouldn’t serve their existing commercial customers.

If someone from BoA said that, then they didn't know what they were talking about regarding existing information. The loans are based on payroll for 2019, and 1st quarter 2020 if available. Each applicant is required to supply Forms 941 for quarterly IRS employment taxes, Form W-3 showing reconciliation of total wages, and forms for unemployment taxes paid. Unless BoA does the payroll for its clients, they have no more information needed for them than for the general public. That statement from a BoA banker just shows the ignorance that abounds about this program.

Having said that, I really couldn't blame BoA for processing its clients' applications first.
 
If someone from BoA said that, then they didn't know what they were talking about regarding existing information. The loans are based on payroll for 2019, and 1st quarter 2020 if available. Each applicant is required to supply Forms 941 for quarterly IRS employment taxes, Form W-3 showing reconciliation of total wages, and forms for unemployment taxes paid. Unless BoA does the payroll for its clients, they have no more information needed for them than for the general public. That statement from a BoA banker just shows the ignorance that abounds about this program.

Having said that, I really couldn't blame BoA for processing its clients' applications first.
You misunderstand, they said that they would be processing first for current borrowers and then for current commercial banking customers. The tweet from Rubio implied that they were only going to process applications from current borrowers, that was never correct.

As far as I know, no bank has said publicly that they will process for new clients.

As for what documentation is required, I’ve worked on 9 applications with 3 different banks and your understanding of what is required doesn’t align with my experience. I think this is partly why they want to work with existing clients, they aren’t entirely sure how to validate the application or how to measure their risk.
 
It was aLeo my understanding they needed to qualify in other ways such as offering at least two weeks paid dick time to their employees.

One reason I can see for making them loans that turn into grants if the money is used for certain things related to keeping the business afloat has to do with the bailouts given to big businesses in 2008 that turned around and used the money to buy their stock back, triggering executive compensation bonuses based on stock price targets.
 
It was aLeo my understanding they needed to qualify in other ways such as offering at least two weeks paid dick time to their employees.

One reason I can see for making them loans that turn into grants if the money is used for certain things related to keeping the business afloat has to do with the bailouts given to big businesses in 2008 that turned around and used the money to buy their stock back, triggering executive compensation bonuses based on stock price targets.
They limited this to businesses with fewer than 500 employees, including affiliates, so probably a different universe that the guys engaged in stock buybacks. What they really want is lower unemployment and more cash in the system, which is hard to do when so many places are closed.
 
You misunderstand, they said that they would be processing first for current borrowers and then for current commercial banking customers. The tweet from Rubio implied that they were only going to process applications from current borrowers, that was never correct.

I was going off information posted that included a BoA web page that indicated an applicant was not qualified for BoA processing because they didn't have current debt with the bank.

As far as I know, no bank has said publicly that they will process for new clients.

My hope is that all current 7(a) lenders have to accept applications. I don't believe it was Congress' intent for those with no debt and/or banking relationship with a 7(a) lender be locked out of the program.

As for what documentation is required, I’ve worked on 9 applications with 3 different banks and your understanding of what is required doesn’t align with my experience. I think this is partly why they want to work with existing clients, they aren’t entirely sure how to validate the application or how to measure their risk.

https://home.treasury.gov/system/files/136/PPP Borrower Information Fact Sheet.pdf

I'd be interested to see what information your banks are requiring. The PPP is based on payroll, and the calculation is fairly simple. Payroll filings, and proof of employee benefits, are all that are actually required. The EIDL requirements are different. You've worked with 9 PPP applications since the program went live this past Friday?
 
I was going off information posted that included a BoA web page that indicated an applicant was not qualified for BoA processing because they didn't have current debt with the bank.



My hope is that all current 7(a) lenders have to accept applications. I don't believe it was Congress' intent for those with no debt and/or banking relationship with a 7(a) lender be locked out of the program.



https://home.treasury.gov/system/files/136/PPP Borrower Information Fact Sheet.pdf

I'd be interested to see what information your banks are requiring. The PPP is based on payroll, and the calculation is fairly simple. Payroll filings, and proof of employee benefits, are all that are actually required. The EIDL requirements are different. You've worked with 9 PPP applications since the program went live this past Friday?
I think that webpage was a bit misleading. Their portal was only allowing current borrowers at that time, so the statement was correct but not indicative of the bank’s plans. By the way, I don’t work for a bank.

My understanding is that SBA and Treasury have not satisfied the bank’s requests for full protection from fraud. I don’t expect this to change because things are moving too fast and the program is going to be fully subscribed anyway. We’ll see what happens, but there are sba qualified lenders that have opted not to participate and I don’t think sba will do anything about that either. Why do you think sba should mandate a change, just to be fair?

Yes, 10 if you count one that I just talked a buddy through, it’s been crazy the past week getting ready. 3 have been successfully filed, 1 has decided not to proceed, and 6 are waiting for the companies local banks to accept applications, if their banks don’t start soon I have an option that might get around the existing customer limitations.

FWIW, I agree that the documentation should be straightforward, but each bank has it’s own additional requirements based on how their legal team interprets that anti money laundering rules and fair credit act. It’s all complicated by not being able to shake hands with the applicant. In my opinion one bank didn’t ask for everything they should have, but their risk remains small as long as they only lend to current clients.
 
FWIW, I agree that the documentation should be straightforward, but each bank has it’s own additional requirements based on how their legal team interprets that anti money laundering rules and fair credit act. It’s all complicated by not being able to shake hands with the applicant. In my opinion one bank didn’t ask for everything they should have, but their risk remains small as long as they only lend to current clients.

It will be interesting to see how the documentation requirements shake out. Based on what I understand, and it's limited, the bank cannot add additional documentation requirements to the process - lawyers be damned. These are not loans that require profitability, collateral or owner/partner/shareholder guarantees. See this link.

https://home.treasury.gov/system/files/136/PPP--IFRN FINAL.pdf
 
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It will be interesting to see how the documentation requirements shake out. Based on what I understand, and it's limited, the bank cannot add additional documentation requirements to the process - lawyers be damned. These are not loans that require profitability, collateral or owner/partner/shareholder guarantees. See this link.

https://home.treasury.gov/system/files/136/PPP--IFRN FINAL.pdf
Believe me, I’ve read it all.

Here’s the thing, the banks are faced with conflicting guidance from treasury and sba within this program and from the congress as relates to existing law. It’s a mess for sure, but exactly who is going to sue a bank claiming damages because the bank didn’t follow the rules correctly? The loans simply aren’t big enough to justify the effort to do so and the bank can always avoid and damages by saying that the claimant could have gone to another bank. Sure the AG could go after them, but do you see the Trump administration allowing, much less encouraging, that? Class action, no way the proposed class members would be too diverse to certify. Bottom line, play the game by your banks rules, or don’t play at all.

We’ll have this same conversation all over again in a couple months when it’s time to apply for forgiveness. It’ll be worse actually because the administration will have gotten the economic lift from putting the cash out so will have no reason to rush to forgive the loans. The banks will be screaming bloody murder as the treasury takes it sweet time finalizing the process, forms etc and likely will require things that aren’t in the law at all. Or maybe Congress will change the law in the next few weeks, you never know what stupidity will be at work once you accept a bribe from the government.
 
There is another dimension to this program, and that is processing efficiency. As pointed out above, whether an employee stays employed or is laid off and goes on Unemployment, the Govt will be paying the employee.

One facet is scale. If the govt pays the employers, they have a lot fewer applications to process versus every single employee. Plus, by keeping people employed, even if a business does not have much incoming sales they may opt to keep their people busy doing equipment service, facility maintenance and upgrades, etc. This all will put money back into the economy.

Personally I think that we will see a national sales tax within 4 years to pay all of this back. That is still a better option than a complete breakdown of society, or the negative impact to our economy from millions of unneeded deaths.

In another thread I posted a video link of how Covid-19 deaths compare with the top 15 causes of death in the US. In about a month, it has gone from statistically insignificant to number 3 on the list. Very sobering.
 
Received in the last half hour a EM from the SLED containing the Governor's latest proclaimation. Looking down to page 6 is a list of all that must close. It would have been easier to list what is going to be open. Goes in to effect tomorrow at 5 PM. Mentions specifically sporting good stores! No more than 5 people per 1,000 sq ft in retail outlets.
An all encompassing list of closures. WOW!!! Here it comes!!!
 
My point is this will break some people that would have otherwise been fine. And my issue with that is the Gov mandates are a big part of the issue. I'm not big on one size fits all decision making. It works for some, fits poorly for most, and screws as many as it fits. We deserve better leadership than that on the state and local levels. Unfortunately, that is sorely lacking. And it's replaced by knee jerk, feel good decision making. It feels like this is based on the premise that Gov can do whatever it wants, force you to do "what's best for you", and when it's over they will make folks whole. It's never going to work like that. And some folks and families won't survive to see any help that is offered.

And I'm not saying society will be the same. There will be changes for good and bad. But as long as Gov does not hinder the recovery, we will bounce back. Like above, some folks won't make it there and some folks will get left behind on the bounce.
Ok, I misunderstood what you were saying. I'm more in agreement with that.
 
Almost 10 million ( 10,000,000) people have applied for unemployment over a virus that on the high end is expected to kill 250,000 people,( in US) most of which will have underlying health conditions that would make them more likely to succumb to any number of viruses out there.
The unemployment numbers are going to keep climbing. These are lives, families, businesses that are being devastated over something that is looking more and more like it will have a less than 1% kill rate.
Based on models currently running 4x the actual numbers
Governors are sending the NG door to door in some states looking for people with residences in other states.

In California a man was arrested for paddle boarding. Sent a boat and a beach full of cops. His charge was violating the social distancing EO.
San Diego Sheriff Deputies cite people sitting in their cars eating and brag about it: https://twitter.com/SDSheriff/status/1246336086592258049
 
Just my opinion----- I do not think we are headed for a depression or even a recession. When these restrictions are lifted, be it in three months or in six months, I think we will see a boom in production and people will be buy everything that could not get during this time. Folks will be desperate to travel and domestic travel will shy rocket. Ib fact I am not looking forward to that part, Living in Asheville we already get 10 million visitors a year, That does not include the out lying cities and towns. Car sales will jump tremendously with the incentives the dealers are already offering. I would bet the 2021 models will be lat arrivin and production of 2020 models will continue for until stockpiles are deleted. Not so sure all restaurants will bounce back that fast, but the traditionally successful ones will grow fast. Manufactures are already planning for the growth. Discounts on the surplus will be a benefit for us all and the new production may be a bit more expensive but will be plentiful. Every country in the world will be wanting to buy our goods. I think good times are ahead especially if SOMEBODY puts a muzzle on the guy in office. He did good his first week with briefings but things are getting out of hand now. Seems like every time he opens his mouth he sticks his foot in it. He is beginning to look a bit like an angry school kid that got his toy taken away. Could someone please write him a scrip to read and then take him away from the podium.
 
Just my opinion----- I do not think we are headed for a depression or even a recession. When these restrictions are lifted, be it in three months or in six months, I think we will see a boom in production and people will be buy everything that could not get during this time. Folks will be desperate to travel and domestic travel will shy rocket. Ib fact I am not looking forward to that part, Living in Asheville we already get 10 million visitors a year, That does not include the out lying cities and towns. Car sales will jump tremendously with the incentives the dealers are already offering. I would bet the 2021 models will be lat arrivin and production of 2020 models will continue for until stockpiles are deleted. Not so sure all restaurants will bounce back that fast, but the traditionally successful ones will grow fast. Manufactures are already planning for the growth. Discounts on the surplus will be a benefit for us all and the new production may be a bit more expensive but will be plentiful. Every country in the world will be wanting to buy our goods. I think good times are ahead especially if SOMEBODY puts a muzzle on the guy in office. He did good his first week with briefings but things are getting out of hand now. Seems like every time he opens his mouth he sticks his foot in it. He is beginning to look a bit like an angry school kid that got his toy taken away. Could someone please write him a scrip to read and then take him away from the podium.

If everything was rosy the Fed would not have been involved in the overnight REPO markets like they were before the virus panic. They also wouldn’t need to be holding all the assets they have been or printing money. There are fundamental issues with our economy that aren’t going to be fixed by a return to work. It will help, but we now have the realization that our supply chains and infrastructure to handle any major emergency may not be up to the task either.

Oh, and we just created at $4T in future taxes before interest.

Our government and institutions are bloated, incompetent mess’s. And now everybody with open eyes know it.
 
If everything was rosy the Fed would not have been involved in the overnight REPO markets like they were before the virus panic. They also wouldn’t need to be holding all the assets they have been or printing money.
And the little guy needs to be thinking about WHO is benefiting here. WHO is getting bailed out. WHO is getting their bad, overly leveraged, speculative bets on the equities markets covered. Then they need to consider why.
 
And the little guy needs to be thinking about WHO is benefiting here. WHO is getting bailed out. WHO is getting their bad, overly leveraged, speculative bets on the equities markets covered. Then they need to consider why.
You’re asking too much. People in general will never do this work and the only folks that will and that will try to share will be perceived as nut jobs. Not saying that they are are aren’t, but that will be the perception. Much easier to just push a message about shrinking government and shrinking social programs so we have economic capacity to deal with the next catastrophic event. Nothing extreme, nothing harmful to anyone, just start by reversing the growth trend, get the momentum on our side, then we can accelerate the ball once it’s already going the right way.
 
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You’re asking too much. People in general will never do this work and the only folks that will and that will try to share will be perceived as nut jobs. Not saying that they are are aren’t, but that will be the perception. Much easier to just push a message about shrinking government and shrinking social programs so we have economic capacity to deal with the next catastrophic event. Nothing extreme, nothing harmful to anyone, just start by reversing the growth trend, get the momentum on our side, then we can accelerate the ball once it’s already going the right way.

I hate to admit it, but you are probably correct. I remember trying to discuss things with my brother a few years ago. Nothing could penetrate his world view. He could see no alternatives. And he’s a smart, PhD scientist guy. Then about 6 months to a year ago he made the comment that he doesn’t believe anyone on the news anymore. It took him over 50 years to get to that point. Trying to force feed him other ideas or possibilities would be too much too soon. I have a friend in
Atlanta that is similar. Technically a very smart guy. His eyes are slowly opening, but he isn’t ready to go all in on Government, Deep/State, bankers or others being an organized group that isn’t running things in our interests. He’s still mostly on the Dem bs Repub thought line. If I tried to tell him they’re all in on it things and part of the same problem his head may explode.
 
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