Tuesday, March 31, 2020

3. Which is better for a Roaster - Economic Injury Loan or the new PPP?

The big news in the past few days has been the Paycheck Protection Program (PPP) coming out of the CARES Aid package. See yesterday's post to get an overview of that program. It is a loan that can be partially or totally forgiven (i.e. turned into a grant) at the end of the 8 week span, if (among other criteria) you document how all the proceeds were used and the bank verifies that all the expenses qualify.
Seth Chapman at Water Street Coffee Joint in Kalamazoo, MI

Roasters ask: "is the PPP better for me than an Economic Injury Disaster Loan (EIDL)?" Answer: Probably YES, because it can become a grant. But you need to make sure you understand how much of your loan will be forgiven at the end of the 8 weeks. If you are not able to hire all your employees back (your employees prefer the new beefed up unemployment insurance benefits), then you may be better off without the PPP.

Roasters also ask: "CAN I apply for both the EIDL and the PPP, or are they mutually exclusive?" Answer: Yes. In fact, I would now encourage you to do both, if you need that much money. As long as you do not apply the proceeds to the same expenses, you are allowed to apply for both. In other words, if PPP covers all of your payroll expenses for April and May, you cannot also tell the banker that you need the EIDL loan to cover payroll for April and May. Same for utilities, rent, etc.

  • Bottom line: Apply for both if you can show that business expenses match the total amount for which you are applying.

Roasters also ask: "Is the EIDL a grant or a loan?" A: There is a new part of the EIDL loan program that is a grant. So it is both! The grant part is called an "Advance" or the "EIDL Advance." You fill out the application for the EIDL loan (using access on the SBA.gov website) and at the end there is a checkbox question asking if you want to be considered for the EIDL $10,000 grant. There's a chance that you qualify for the grant, but not the loan, and vice versa.

  • Note: If you apply for EIDL and PPP and qualify for the EIDL grant portion ($10,000), this may just be given to you as part of the PPP. Bottom line, "go ahead and check the box for the EIDL grant" which is at the end of the EIDL loan application.

Today's Note for Michigan Businesses: Some Economic Development Organizations (EDOs) have closed applications for the Michigan Economic Development Emergency Relief Grants - which are $10,000 grants. Bars and restaurants were the target beneficiaries for these.

The main Q today: Which is better for a Roaster - Economic Injury Loan or the new PPP?
Probably the PPP (as stated above), but lets look at a comparison. The EIDL, as I understand it, is more of a traditional loan. Your banker (who is an SBA contracted bank) will require a guarantor (the PPP does not), there is not a "forgiveness option" (like the PPP is offering). The interest rate is low, one lender told me 3.75%, and it can be used for business growth investments. That is a key difference to the PPP. With PPP you will be forced to only use the proceeds for on-going business expenses: payroll, health benefits, rent, utilities, interest on pre-existing loans, etc. With the EIDL, you can use the funds for other parts of the business. See Table 1 for a summary.

TABLE 1: Comparison of PPP, EIDL Loans and EIDL Grants

Funded by
Old or New?
Grant or Loan?
Where to apply?
Funds - proceeds
Max. Amount
Paycheck Protection Program (PPP)
SBA National
First a loan, can be forgiven on a sliding scale up to 100%
Applications will soon be available at banks that are SBA lenders.
MUST be used for qualified operating expenses, including payroll.
2.5 x the average monthly payroll
Economic Injury Disaster Loan (EIDL)
SBA National
Access application on-line at SBA.gov. (Or ask Artisan) Submit to an SBA lending bank.
May be used for a variety of operating expenses. Less restrictive.
Up to $2 million
Economic Injury Disaster Grant (“EIDL – Grant”
SBA National
Application is the same as an EIDL loan (see above).
Targeting immediate operating expenses for businesses forced to close.

Great new resources have come on line! We love what Michigan's SBA office is putting out there.

Click here for a 1 pager summarizing three possibly relevant SBA loan programs for you:

  • PPP
  • Entrepreneurial Development Programs
  • Emergency Economic Injury Disaster Loans (EIDL)

Click here for a 2 page document summarizing only the PPP.

REMEMBER to contact us for assistance! Click here for our contact page or use the comment section below. We had one brave roaster on today's webinar. He left with a raft of tips and more confidence that he knows which directions and questions he needs to explore quickly, talking to his banker, his partners and his employees.

Next webinar is Thursday, Apr. 2, at 11am EST.  Sign up today!

Monday, March 30, 2020

2. CARES Act for Roasters - Paycheck Protection Program

Today we're learning more details and it seems the Paycheck Protection Program (PPP) will truly be a boost for many small business roasters. 
Purpose of the Program: To keep good employees connected with their employers to create a speedy economic recovery once the COVID crisis ends. I.E. Don't loose your best baristas and staff to a sea of other choices or a forced move to another state!

Benefits include: 
  • Receive up to 250% of your average monthly payroll initially as a loan. Once you have the loan, you have to bring your staff back onto your payroll, even if there is no work for them. 
  • The loan can be converted into a grant (i.e. the loan is forgiven) if criteria is met for the number of employees you have on payroll is still the same at the end of an 8 week period and you can show that the funds were used for qualifying expenses. This is an amazing, never-seen-before possibility! Look for a SBA in Michigan (SBAM) to share their recorded webinar on CARES Act details on Tuesday, Mar. 31, or join the webinar directly (click here to register).
  • Your business can defer payroll tax until the end of 2020. 
How to Apply: Go to your nearest SBA lender! In Michigan, you find the SBA Michigan District Office Resource Guide and the long list of lenders starts on page 27. The lenders do not have the applications yet, but it is still good to contact yours today. "GET IN LINE" is the advice, as these loans will go fast. $350 billion seems like a lot, but it will be used up quickly.

  • Average monthly payroll is determined by the four months between these two key dates: Feb. 15, 2019 – June 15, 2019. The employer can include not only pay-check pay, but ALL the expenses that go into payroll. For example, retirement contributions and health insurance benefits are included.
  • Excellent 2-page info sheet from SBAM.org - click here to download!

Friday, March 27, 2020

1. SBA Gives Early Overview of CARES Relief Package

This session with SBA officials from Michigan's SBA office gives a great early overview of the package and what it might do for coffee roasters -- in Michigan and beyond!  CLICK HERE. Worth a listen!

FYI - SBA in Michigan (SBAM) is offering daily video updates. The next one is Saturday (wow!) at 3pm, and 3pm every day next week. www.sbam.org for more info!