Sunday Message From Ben: Good News & Better Planning
For the first time in a month, this seems like a week with more good news than bad. Our COVID-19 active case count continues to fall on Oahu, to now less than 80. Hopefully, with continued use of masks and social distancing we continue this progress and eliminate the virus completely from our community!
In more good news, our State is receiving a double barreled cash infusion from the US Treasury, and it’s coming just in time. These funds are in two forms: (1) extra Federal unemployment benefits of $600 a week for anyone that qualifies for State unemployment, and (2) PPP loans for employers, which began to fund this past week. Many more should be funding in the coming week as over $2.1B in loans were approved for Hawaii employers.
At ProService, we worked hard with local banks and our clients to generate clean data and help clients apply quickly. The result was over 81% of our clients received acceptances, versus 57% of applicants statewide. We stand in sadness with clients whose loans were not approved in this first round. But more PPP funds will be coming from Congress and we are working with banks to help hold your place in line for this next round.
At ProService, we judge ourselves on results—were our clients better off with our assistance and advice? With the PPP program, the answer was a resounding yes! Our team worked extremely hard and I’m proud of the results. Also a big mahalo to all the local banks. They truly worked 24/7 for this two week stretch. And a special mahalo to ASB and CPB, they were particularly collaborative and innovative and they received well over half of the total loan acceptances in the State. These are much needed funds for employers. Hawaii is by far the worst state impacted economically by shutdowns—we need the cash!
This is all good news.
Now I’m going to rain on this good news. I believe Hawaii is in for a very long and painful recession. This is why, when people ask me about spending their PPP funds, my first response is “you don’t have to spend all the money now”. Many business owners are surprised to hear this, and this is a shame. Unfortunately, there is a lot of bad advice encouraging employers to spend all the money during the eight week “measurement period” which starts just after loan funding. While it is true that the amount of loan forgiveness depends on multiple tests associated with how money is spent during this measurement period, monies not spent become a very favorable two year loan. Congress established a “sweetener” or incentive if you spend (some of) the money during the eight weeks, but any portion of it that you don’t spend becomes an attractive business loan at an opportune time.
So here is my advice: Don’t spend all the money immediately unless you have a fundamental business need. Use the money prudently. Be judicious and focus first on the fundamentals of your business. Start your planning there. After you’ve done your planning, then look at how much of the loan might be forgiven. Don’t assume there are more easy loans coming. Care for your employees too, that is critical; but there is an extra $600 per week in federal unemployment for the next few months, and this is going to be a long, tough recession, so be prepared.
To help you prepare, ProService is here to help you develop your strategic business plan. These personalized consults will begin by understanding your short and long-term business and operations needs. We can then help you translate these needs into your optimal staffing plan, and how you manage your PPP funds and cash-flow for the weeks AND months ahead. To request a consultation, please click here.
So while there is hope that we have avoided the worst case scenarios for coronavirus, the challenges ahead are many, both for health and the economy. We don’t have a path yet for opening the economy, and even if there were, it will be slow. There will be no going back to normal. I want to see employers play the long game, and survive to the other side. That’s the best thing for our community. Those that do will find ample opportunities to grow and thrive. Until then, surviving is thriving.
With gratitude and aloha,
President & CEO