Thank you

Rather than trying to do this individually, I just wanted to say a huge thank you for the outpouring of support we’ve received from my post about bringing the firm through the coronavirus pandemic so far. We heard from many clients, whose words I can’t reprint here because of the “testimonial rule” but it meant a lot to get their notes and calls. I also heard from business leaders around the country, from all different industries, and it felt amazing. Lastly, while the post was not intended for this reason, we ended up having half a dozen people reach out and ask how they could become clients. Reading all the notes and texts and stuff made me feel really good, for the first time in a long time.

One of the things I hate the most about the stock market is seeing a public company announce thousands of layoffs, only to see its stock price rally on the news. I know that’s what turns off lots of non-market participants. The SBA’s backing of small business loans – combined with the Treasury and Fed’s backing of mid-size and large business loans – have hopefully led to many mass layoff announcements not happening at all. Furloughs are better than layoffs but the less, the better.

I did want to clear something up that a few people seem to have misunderstood. There have been misunderstandings related to the way the Payroll Protection Program works since the beginning, so I get it. When we borrowed money in late March and received it in early April, that money became debt that we have to repay back to JP Morgan Chase. It’s not a government loan or a bailout. The way the program works is that the only way that debt can be forgiven is if you apply for forgiveness eight weeks after accepting the loan. So, for our firm, that would be early June.

Obviously, the world looks very different today than it did in Late March, so our hope is that there is no need to apply for forgiveness. Which means the loan that we took is just a loan from our bank right now. The benefit of having taken it as a “payroll protection” loan is the lower interest rate, the six month grace period before repayments start (October), and the potential to apply for forgiveness later if necessary.

As I mentioned, 4.4 million businesses have borrowed over $500 billion from their banks or lending institutions in 50 states, all industries, under the program. We don’t know how many of them are going to apply for forgiveness and how many will simply owe the money back to their banks, with no government assistance needed.

As of today, May 27th, not a single small business has a forgiven loan. All 4.4 million businesses that have borrowed money under the program currently owe that money back to the lending institution they borrowed it from. There is still $138 billion sitting in the program that can be borrowed right now, for employers who are willing to take on the risk of that debt to keep their workforce. But it will be their debt, not the government’s and not the taxpayer’s, until such time that they apply for forgiveness, if they apply at all. The rest of these millions of companies will simply pay it back with the interest. You can read more about this directly from the SBA.

I think absent an economy-shuttering resurgence of the virus this fall, it is likely that many PPP loans will end up remaining what they are today – low-interest rate bank loans for companies, but we won’t know for a few months.

In the meantime, I want to thank everyone who reached out with support, empathy or to share their own company’s story. Taking on debt is scary (at least to me), but doing so to reassure your coworkers and customers is as good a reason as any.