Stress is abundant during the COVID-19 pandemic. But two federal programs, the Paycheck Protection Program and the Economic Injury Disaster Loan, aim to take a fraction of that stress off the minds of small business owners. That is if those programs get infused with more cash soon (as of this writing, both programs are out of money).
The third in our Planner-to-Planner conversation series, held April 16 and hosted by speaker, author and mentor and former FPA President, Elizabeth Jetton, M.Ed., CFP®, explored these two programs and whether planners should take advantage of them and how they should advise their clients on taking advantage of them.
Here are the key takeaways from the conversation. The end of this post includes information on how to join the next few calls and links to available resources.
Develop a Relationship with a Local Bank
Business owners who have applied for these programs through smaller community banks had more success than those who applied at banks like Chase or Key Bank.
Stacy Francis, CFP®, CDFA, CES, who runs a non-profit in addition to her firm Francis Financial, applied for the programs at Key Bank and has yet to be approved. She noted that Key Bank has not approved one non-profit’s application.
“Using local banks, I’ve had three business clients who were able to be approved,” said Danielle Harrison, CFP®.
“We got a nice local community bank,” said Michael Haubrich, CFP®, CSA®. “We were the first in line and we were approved.”
The Ethical Question of Taking the Money
Both of Rick Kahler’s, MSFP, CFP®, CFT-I™, CCIM, accountants encouraged him to apply. He invested 18 hours in applying for both loans and was approved. But he came across an editorial that promised retribution for businesses with “deep pockets” who took the money. He sent it out to his study groups.
“In those study groups, almost everybody had applied for the loan,” Kahler said. “Six of my peers who were approved for the loan decided not to take the money because they feared retribution.”
His accountant assured him his is the type of business that should be taking the loan, “but if you take it, keep it mum.”
FPA Chair Evelyn Zohlen, CFP®, noted that in talking to her financial planner (because all good planners should have a financial planner), she found that her firm had done a good job of building up capital reserves and had no need to lay off employees.
Her planner told her, “If you accept this, you’ll be taking it away from other small businesses that need it.”
Despite being approved for the programs, Haubrich didn’t take the money either. He made the decision based on the 10, 10, 10 rule: how you’re going to feel about a decision in 10 minutes, 10 months and 10 years.
“My gut told me we shouldn’t take the money,” Haubrich said.
But maybe you are that small business that needs it. Mike Alves, CFP®, CLU®, CRPC®, applied for both programs and received his advance a few days before the April 16 call. Matt Barber, CFP®, CFA, is getting funding that will help him keep his six full-time employees on the payroll.
Ultimately, only you can decide if you need that money to continue to operate.
Overcommunicate With Your Employees and Clients
When Chris Pollard, CFP®, EA, recently purchased a new home, he made the choice not to splurge on fancy upgrades and instead padded his businesses’ emergency fund.
With record unemployment being reported in this pandemic, your employees are naturally anxious. Pollard said it’s imperative to tell employees what’s going on.
“My firm is well established for a start-up,” Pollard said. “I let my employees know, I’ve got emergency funds. I’m not going to fire or lay you off. You have to overcommunicate to employees.”
Haubrich said that kind of communication should extend to your clients.
“Communication both internally and with clients is important at these scary times,” Haubrich said. “We share our sustainability plan for our firm with team and clients. Clients are concerned about our sustainability.”
Look at How You Build Your Own Finances
Pollard’s story brings up an important point: examine how you’re building up your firm’s finances.
“We do financial planning for our clients, but does your business have its own financial philosophy about how it builds emergency reserves and manages revenues?” Elizabeth Jetton posted.
Neal Solomon, CFP®, has seen numerous crises in his career.
“I know when this happens, my workload goes up, my income goes down and my stress is all over the place,” Solomon said. So building a cushion that allows him to operate for a long period of time without income has been essential to focusing on work, “so you’re not worried about how you’re going to pay the bills.”
The Financial Planner’s Role
What’s been most distressing to Solomon is the amount of people who don’t even have one month of reserves and the unemployment system being overwhelmed.
“Our community needs to be doing more to reach out to real people affected,” Solomon said.
In response to all the recent events, Solomon started reaching out to the businesses he frequents—the diner where he gets breakfast, the company that paints his house, the local electrician, the florist and the mechanic.
“I started making sure that they knew about these programs,” Solomon said. Then he started in on the local non-profits—even helping a food bank put together their application.
Barber has started a weekly newsletter for more fortunate clients who might want to give back to their community during this time.
If you want to give back, join your peers volunteering to offer advice to underserved populations during these tough times.
Upcoming Calls and Past Recordings
Register for two upcoming calls:
Find the recordings for past calls and discussion board on FPA Connect:
- All the recordings and related resources can be accessed in the Navigating Market Turbulence Related to Coronavirus community which you can access here. Join the ongoing conversations here as well.
Ana Trujillo Limón is senior editor of FPA’s publications, including the Journal of Financial Planning, the FPA Next Generation Planner and the FPA Practice Management Blog. Email her at alimon@onefpa.org, or connect with her on LinkedIn.
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