Today, I offer you a message of hope.
Last night the Senate passed a $2 Trillion Stimulus Bill to kick-start our economy which has been so hard it by The Coronavirus Pandemic. The Bill now goes to The House of Representatives, which is expected to take up the measure today or tomorrow. The President has already signaled that he will sign it into law.
This bill includes several measures providing direct payments to Americans, a boost to unemployment benefits, and aid packages to States that are hard hit by the outbreak. But, most importantly it includes
– $350 Billion in Small Business Loans and
– $500 Billion in Loans to Distressed Businesses
On the $500 Billion Lending Program,
– $25 Billion is earmarked for Passenger Air Carriers
– $4 Billion is for Cargo Air Carriers
– And $17 Billion is for businesses that work on National Security
The rest of the funds, some $454 Billion, is to provide loans to businesses, states, and municipalities. There are, of course, restrictions. Businesses cannot issue a dividend for up to a year after the loan is still outstanding, and must retain 90% of employment levels as of March 24th, “To the extent practicable”, through September 30th. Also the loans cannot last for more than 5 years.
Let’s all take a moment to let that soak in. That’s a total of $824 Billion, with a B, in Federal Loans, Loan Guarantees, and Investments in the future of our Small Businesses.
Yesterday, I mentioned that our government was going to need to do something about traditional lending in order to get the economy started again. I have written extensively on the concept that a crisis can be an opportunity, and how an opportunity can be a crisis. We’ve all talked about how this epidemic is a crisis.
Well here’s the opportunity.
I spoke to one of my physician clients. He wanted to replace some of his older, outmoded equipment with newer, more modern apparatus. Who hasn’t walked into a Doctor’s Office, seen a piece of equipment that looked like it was from The Stone Age, and wanted to leave immediately?
Very Smart. Why? In doing so he would be able to increase his long term income potential.
I also spoke to one of my equipment rental dealers. He wanted to add a new line of equipment. Doing so would cost him a minimum of $400K. Looking at the numbers, after depreciating the new equipment and adding the new rental equipment income, his return on investment would be substantial.
Very smart. Why? This would make him much more profitable and give him access to a new set of customers.
I spoke yesterday to one of my clients who is a General Contractor. When times are tough, his business dries up. People generally postpone their projects, or try to handle them personally. He spoke to me about buying another rental property that he would fix up and rent out.
Very smart. Why? Because he would be using debt to increase his long term profits. Also because this is the definition of good debt. He would be purchasing something using debt that would increase in value over time.
How would he be able to get past the five year limitation on the new government backed debt? Once the property was fixed up and rented, he would easily qualify for a conventional refinance.
What could you do with a piece of that stimulus money? How could you expand the long term prospects of your business? How could you use it to increase long term equity in a performing asset?
How can you turn this crisis into an opportunity?
One thing is certain. If you do plan on getting in on this you are going to need solid tax returns and up to date financial statements. I’m talking about numbers that are beyond reproach. Numbers that are absolutely solid. The bankers are going to try to come up with reasons to say no. You will need to eliminate every reason that they can possibly think of for a turn down. Everyone is going to be coming to them for a loan. You are going to want to get and stay at the front of the line.
Be the Entrepreneur that you were born to be. Use this bonanza to your favor. Keep a positive mental attitude. Turn this crisis into an opportunity.
Accounting Solutions Ltd. stands ready to fulfill its mission of serving you, your family, and your business. As always, if there is anything that you need, or even if you just want to talk, we are here. I remain,
Accounting Solutions Ltd.
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Today, I offer you a message of hope.