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Businesses Struggle for Federal Loan Help: ‘We’re Going to Run Out of Payroll Money’




Businesses struggle for federal loan help: 'We're going to run out of payroll money'

Apr. 27–Amid one of the greatest American health crises in a century, most of Prime Care Transportation Inc.’s 15 medical transport vans sit idle, just like most of its 23 employees. Business at the Buffalo company dropped 80% as people put off nonessential health care amid the Covid-19 shutdown.

So far, the loan programs Congress created to help small businesses like Prime Care usually haven’t done so. According to a national survey released last week, only one in five of the businesses that applied under the larger of the two loan programs had gotten any money yet.

Without a government-backed loan, Prime Care is down to seven employees. And a company that had been thriving and growing faces an uncertain future.

“Everything has been put on hold,” said Christine Uwimbabazi, who founded the company with her husband two years ago.

Much of life in America has been put on hold amid the coronavirus pandemic — including the Paycheck Protection Program aimed at keeping small businesses afloat. Congress set aside $349 billion for the “PPP” in late March. The forgivable loan program, which aimed to cover payrolls through June 30, ran out of money on April 16. Lawmakers last week set aside another $310 billion to the program.

“Clearly there were not even remotely enough funds to fund that program,” said Buffalo business attorney Matthew K. Pelkey, who has been helping clients through the loan process.

But according to Buffalo small business people and nonprofit leaders, the PPP and a smaller Economic Injury Disaster Loan program face problems that go far beyond money.

Many businesses, like Prime Care, face long waits in getting their loans approved. Others haven’t navigated the system well enough to even apply. In most cases, according to small business experts, companies need a strong banking relationship to get money.

It all leaves entrepreneurs like Uwimbabazi frustrated. She received documents last week indicating her PPP loan might finally come through, but she hasn’t heard a word about her disaster loan application.

“I applied a long time ago, and there is no follow-up,” she said. “There is nothing. You just have to wait.”

The waiting game

Corina Stammworthy always saw the business she started in 2013, the Laundromutt pet grooming salon in Kenmore, as “the little engine that could.” Business was so good that Stammworthy was considering opening another location.

But then New York State closed nonessential businesses, including Laundromutt, on March 23. Stammworthy quickly got an Economic Injury Disaster Loan, which allowed her to pay her 16 employees for a few weeks. But with her longer-term PPP loan pending, she had to lay off her employees April 13.

“I was pretty confident that our bank would process our loan quickly, and they didn’t process it in time and the money ran out,” Stammworthy said. “It took 17 days to get it done. It was supposed to have a 72-hour turnaround time.”

Businesses across the country are having similar experiences, said the National Association of Independent Businesses, which published that survey showing that 80% of small businesses hadn’t gotten their money.

“Small businesses were prepared and ready to apply for these programs, the only financial support options for most, and it is very frustrating that the majority of these true small businesses haven’t received their loan yet,” said Holly Wade, the business group’s director of research and policy analysis.

To hear the Trump administration tell it, the Small Business Administration and the private lenders who participate in the PPP programs did all they could as fast as they could once the program opened.

“Following its launch, the SBA processed more than 14 years’ worth of loans in less than 14 days, which will protect a vast number of American jobs,” Treasury Secretary Steven T. Mnuchin and SBA Administrator Jovita Carranza said in a statement.

But several people who deal with the program said the money isn’t arriving in business bank accounts fast enough, often because some banks are overwhelmed by the number of applications.

“Certain banks seem to be more on their game than other banks,” said Anthony J. Ogorek, a Williamsville financial planner with clients that have applied for PPP loans.

That’s certainly what Stammworthy thinks. Once the crisis passes, she said she’s planning to leave Bank of America — which said online that it had received hundreds of thousands of loan applications — for a local lender.

“I’m completely disillusioned with the process,” she said. “When the (PPP) money ran out, no one had even processed my application yet.”

Shut out

Save the Michaels of the World has been trying to save Buffalo-area addicts for years now, but the job grew harder when the local nonprofit had to close its offices, but not its operations, amid the pandemic. Transportation costs skyrocketed as social distancing dictated that only two people ride in vehicles that transport patients to treatment. Founder Avi Israel said the organization had to spend $10,000 for laptops so employees could work from home.

With those thoughts in mind, Israel sat down at his computer Thursday night to try for a second time to apply for a PPP loan through M&T Bank’s website. For a second time, he got nowhere.

“The website just kept getting slower and slower,” Israel said. “And by the time it got to like eight o’clock, it kicked us out. It wasn’t taking applications anymore.”

That points to a second problem that has plagued the PPP, but not the smaller emergency loan program. Some eligible small businesses and nonprofits haven’t even managed to apply — while some far larger companies have gotten loans they didn’t deserve.

Asked about Israel’s experience, M&T Bank spokeswoman Julia Berchou said the bank temporarily reopened its PPP application process Thursday night because Congress had agreed to extend the program’s funding. But the bank quickly shut the application process down again.

“We’ve stopped taking applications at this time based on the demand and our commitment to assist as many M&T customers as possible and ensure that those who apply have the greatest opportunity to receive the limited SBA funds,” the bank said on its website.

Berchou accented the positive, saying that in Buffalo, M&T has approved 3,945 loans with a total value of $811 million and an average loan size of $205,603. These loans supported 84,101 local jobs, she said.

Nationally, however, a loophole in the law that created the PPP left an image problem. It allowed restaurant chains including Shake Shack and Ruth’s Chris Steak House to apply for loans.

Those big operations are now saying they will give their loan money back, but the PPP program still allows companies with up to 500 employees to apply. That limit is too high, said Susan A. McCartney, director of the Small Business Development Center at SUNY Buffalo State.

“That is very different than the small businesses struggling in Western New York,” she said.

Israel agreed. He groused that some local operations far larger than his got PPP loans while he hasn’t even been able to apply.

“Here we are, a small organization that does everything for free,” he said. “We have not laid off people off — but we’re going to run out of payroll money by May.”

Well connected

Of course, the federal loan programs haven’t left all small businesses starved for funds. BIDCO Marine Group, a Buffalo industrial diving company, applied for and quickly got a PPP loan.

“I think we were prudent and diligent in the application process,” said Mark C. Judd, the company’s president. “I think that was a requirement, and having an established financial relationship was undoubtedly the key to that.”

Rather than go to a bank website like Israel did, Judd worked through his company’s banker at Bank on Buffalo and couldn’t be happier with the PPP program.

“It did exactly what they said it would for my business. It gave me security to not lay anybody off,” said Judd, whose company employs between 20 and 40 people, depending on how much work it has.

Bank on Buffalo approved 190 loans, adding $39 million to the local economy.

Marty Griffith, Bank on Buffalo’s president, said employees across the bank worked long hours to process as many applications as possible during the short time the funds were available. “We will do it again,” he added.

The question, though, is: for how long?

Even with a $310 billion infusion, the PPP program probably won’t come close to addressing the need in an economy wrecked by the shutdown, said McCartney, of the Small Business Development Center.

“In three or four days, it’ll be gone,” she said of the money added to the PPP program.

Worse yet, several people said the rush for cash is leaving behind plenty of small businesses whose owners don’t even know about the PPP and disaster loan programs.

“It kind of blows my mind a little bit, but I’ve mentioned it to some rural folks down near Ellicottville and I was looked upon with raised eyebrows,” said Judd, the BIDCO Marine Group president. “And I said, really, this is there, you need to go to your bank or go to the SBA now.”

—-Coronavirus crisis business loan programs

Here’s a look at the two primary federal programs aimed at helping businesses deal with the fallout from Covid-19.

The Paycheck Protection Program: Congress set aside $349 billion for this effort in late March, but it quickly ran out of money, so lawmakers added $310 billion last week. The program allows qualifying companies with fewer than 500 employees to get loans of up to 2.5 times their monthly payroll costs for up to eight weeks. Three quarters of the money must be devoted to payroll, but the rest can go to rent, utilities and other costs. All or part of the loan can be forgiven for companies that keep their employment and wages steady.

The Economic Injury Disaster Loan Program: This program existed before the Covid-19 crisis, but in late March Congress created a $10 billion supplement to it. The program is intended to give qualifying small business quick cash advances of $1,000 per employee, for up to 10 employees. Like the Paycheck Protection Program, this $10 billion fund quickly ran dry, prompting Congress to add another $60 billion to it in legislation that passed last week.


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5 Little-Known Ways To Lower Your Taxes




5 Little-Known Ways To Lower Your Taxes

Everyone loves to pay lower taxes, but very few people understand or take advantage of all the tax breaks that are available to them. Here’s a list of 5 little-known tax breaks that you can use to help lower your tax bill.

1. Pay No Capital Gains Tax

If you sell an asset you’ve owned for more than a year, you pay long-term capital gains tax of either 0%, 15% or 20%. This is a favorable tax treatment when compared to selling assets you’ve owned for less than a year, which are taxed at the same rate as your ordinary income.

But, it’s possible to pay no capital gains tax when selling your long-held assets like stocks and bonds or mutual funds. In order to pay no capital gains tax, your taxable income needs to be less than $39,375 if you are single or $78,750 if you are married when filing your 2019 taxes. For the 2020 tax year, those numbers jump slightly to $40,000 and $80,000.

2. Earned Income Tax Credit

This program directly benefits those with low-to-moderate incomes, and particularly those with children. A single filer would need an adjusted gross income of $15,570 or less to benefit, but for a married individual with three children, the adjusted gross income limit is as high as $55,952. In certain situations where your EITC benefit exceeds the amount of taxes you owe, you would receive a tax refund.

3. Deduct Your Retirement Account Contributions

If you are putting money aside in a traditional IRA as part of your retirement plan, you can contribute up to $6000 per year. If you aren’t part of a retirement plan through work – like a 401(k) – you can deduct all of your contributions no matter what tax bracket you are in. Non-working spouses (or spouses making very little income) can contribute up to $6,000 ($7,000 if 50 or older) into their own IRA account as long as the working spouse has enough earned income to cover both contributions. There are limits to the deductions as income increases, so check with a tax adviser.

4. Saver’s Tax Credit

If you are a single filer with adjusted gross income less than $32,000 (or $64,000 if married) you claim a tax credit (a credit, not deduction – more on this in a moment) of 10%, 20% or 50% of the first $2,000 you put into a retirement account ($4,000 for married filers). The lower your income, the higher the credit amount. Unlike a deduction that lowers your taxable income, a credit reduces the amount of taxes you owe on a dollar-for-dollar ratio. So a $2,000 tax credit reduces your taxes by $2,000.

5. Lifetime Learning Credit

If you are interested in continuing your education, you can utilize the Lifetime Learning Credit. This allows you to go back and study nearly any topic, at any school, you can get back 20% of up to $10,000 in expenses per year. The income limits are $68,000 for single filers and $136,000 for married filers. Now go back and enroll in that art class you always wished you had taken!

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Trump Says Economy ‘Roaring Back’ in June As 4.8 Million Jobs Added




Trump Says Economy ‘Roaring Back’ in June As 4.8 Million Jobs Added

The economy added back 4.8 million jobs last month, according to the government’s June jobs report released yesterday. That handily beat the 3.7 million jobs forecasted by economists and dropped the unemployment rate down to 11.1%.

After the report was released, President Trump said the economy was “extremely strong” and “roaring back” after the country has regained more than 7.5 million jobs in the last two months. Trump added that the economy will keep growing unless voters elected Democrat Joe Biden in November. He said Biden would raise taxes and hurt the economy and the stock market would “drop down to nothing.”

Jobs Added

Of the jobs added back in June, bars and restaurants hired – or rehired – 1.48 million workers. This comes as many reopened for outdoor dining in the early phases of the reopening. They brought back a similar number of workers in May. It happened after shedding more than 6 million jobs due to the pandemic.

The retail sector regained 740,000 jobs, healthcare added back 358,000 workers, and manufacturing saw 356,000 jobs added.

The energy sector continues to be battered by low oil prices amidst the economic slowdown. Additionally, that industry shed an additional 10,000 jobs last month.

The return of lower-paying jobs like those found in the restaurant and hospitality industry dragged down the average hourly wages for the second straight month.

Many are cautioning against reading too much into reports like average hourly wages while the economy is in such turmoil.

Stephen Stanley, chief economist of Amherst Pierpont Securities, says, “The wage figures will be pretty much useless for a long while until the labor market gets back to some semblance of normality.”

Andrew Chamberlain, chief economist of the job site Glassdoor, also gave an explanation. He added, “Today’s positive jobs report does provide a powerful signal of how swiftly U.S. job growth can bounce back and how rapidly businesses can reopen once the nation finally brings the coronavirus under control — a reason for optimism in coming months.”

Looking Forward

Unfortunately for many of the workers recently rehired to work in bars and restaurants, the recent spike in new coronavirus cases could lead to those jobs quickly being lost for a second time. Bars in many states are being shut down again in an effort to curb the growing number of cases.

The unemployment rate fell for the second straight month. However, the Bureau of Labor Statistics is trying to fix a reporting error that, if corrected, would increase the unemployment rate by 1%.

The problem is how households respond to the monthly survey that is used to calculate the unemployment rate. The jobless rate would have been 1 point higher if not for continued problems in how respondents answer the question about their employment status.

What many consider the “real” unemployment rate, which is the U6 rate, includes workers who can only find part-time jobs. It also includes those who’ve become too discouraged to look for jobs because so few are available. Using that measurement, the unemployment rate stands at 18% in June, down from 21.2% in May.

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Trump Favors Larger Stimulus Checks, Says ‘Tremendous’ Market Crash if Biden Wins




Trump Favors Larger Stimulus Checks, Says ‘Tremendous’ Market Crash if Biden Wins

In a wide-ranging interview with Fox Business News, President Trump mentioned his support for another round of stimulus checks and says should Joe Biden win the election in November, we should expect the stock market to crash “a tremendous amount.”

On Stimulus Checks

Speaking with Blake Burman, the president says he is in favor of another round of stimulus checks, but wants to make sure that there is a financial incentive for Americans to return to work.

“I support it, but it has to be done properly. I support actually larger numbers than the Democrats, but it’s got to be done properly. We had something where it gave you a disincentive to work last time. And it was still money going to people, and helping people, so I was all for that. But we want to create a very great incentive to work.”

Trump also mentioned he wants the checks to arrive quickly and spent quickly, without the Democrats adding complications.

“I want the money getting to people to be larger so they can spend it, I want the money to get there quickly and in a non-complicated fashion. And they wanted to make it too complicated, also it was an incentive not to go to work,” said Trump.

Returning to work is what hard-working Americans are looking forward to, says Trump, and he wants there to be a financial incentive to do so.

“You’d make more money if you don’t go to work. That’s not what the country is all about. And people didn’t want that. They wanted to go to work but it didn’t make sense because they make more money if they didn’t… we want people to get out and we want to create a tremendous incentive for people to want to go back to work.”

On Biden and Taxes

When asked about Joe Biden’s recently announced plans to raise corporate taxes if he becomes President, Trump said “You’re going to crash the market. 401(k)s will be down the tubes, the wealth of the country will be down.”

He added “That will kill the market. It will kill everything we are doing, it will kill jobs, and it will be very bad. Frankly, the stock market is doing well, but it’s an overhang. If he got elected, and they say this, that’s an overhang over the market, because the market would crash. Would absolutely crash.”

When asked what he means by crash, Trump responded, “Markets would go down by tremendous amounts. He’d raise taxes, he’d raise regulations. Look, one of the biggest things I’ve done is I’ve cut regulations more than any President in history. We still have regulations, but they’re much less. His people, the people around him (Biden) are radical left. They’re going to raise taxes, they’re going to raise regulations, and they’re going to put everyone out of business. It would be a disaster.”

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