Lori Walsh: The past two weeks have been tumultuous for small business owners as they weigh decisions about laying off staff, innovate their business models, and reevaluate their finances. Michelle Kane is Executive Director of the South Dakota CEO and Women's Business Center, and Jamie Wood is a Small Business Association State Director. They're going to join us here in just a moment with an update.
Last week we talked to them and the lot has changed since then, to say the least. So, we're going to get an update from them here. Meanwhile, for those of you who are trying to figure out how to educate your kids during this time with schools closed due to the coronavirus outbreak, teachers and parents are adapting with modified educational instruction. SDPB has free educational resources for learners from preschool age through high school to help with at home learning. You just visit sdpb.org/learnersconnection and sign up for our daily email leaders.
And news about COVID-19 is of course constantly breaking and updating. We know you're busy trying to figure out how to live in this unusual time. It can be hard to process everything. You can find all of our news, interviews, and feature stories about coronavirus. We've collected them all online at sdpb.org/covid.
So, for example with this business conversation we're about to have, the transcript is going to be up for that. You'll be able to listen to the audio but also be able to read through all the details and we'll post links up. So, for small business owners who are trying to find those resources, you're going to be able to find them all in one place. So, we are going to bring Michelle Kane on the phone now.
Lori Walsh: Michelle, welcome. Thanks for being here.
Michelle Kane: Thanks for having me, Lori.
Lori Walsh: Jamie Wood, thanks for being here as well.
Jamie Wood: Good morning, or good afternoon now, I guess. Thank you. Good morning in some places [inaudible 00:02:13].
Lori Walsh: Good morning in some and afternoon in others, yes. All right, so last week we had you on. It was a fairly short period of time and we set the stage and now so much has changed in the past week that is relevant for small business owners. But I want to start with this one sort of ethical dilemma before we get into some of the help.
And Michelle and Jamie, I'm not sure which one of you wants to address this, but business owners are facing some difficult decisions about laying off employees and keeping their doors open and some are choosing to just stay full throttle open and not obey CDC guidelines at all. Speak to those business owners a little bit about the choices that you're making right now and how this can be just a very difficult time. But you need to think carefully about what you're asking of your employees and what you're encouraging people to do, if it's contrary to the CDC guidelines and to the executive order from Governor Kristi Noem.
Jamie Wood: Yeah, this is Jamie. I can actually take the first crack at that. What the SBA disaster assistance loans are put in place for right now are actually to help businesses keep their employees employed. And the caveat on that is, even if the employees are not able to be at work right now, this is meant to give the businesses the revenue that they needed without bringing revenue in, basically, the capital rather, to be able to pay for these employees so that the employees do not have to go on unemployment.
So, we're really hoping that small businesses are going to be able to leverage these loans. There's three different types that are available right now that we'll get into in a few minutes. But really that's what this is meant to do. When you're in that position of your decision cycle of whether to lay people off, whether it's because you can't afford to keep them on, if they're not really providing work and bringing revenue in, or because you're worried about the health concerns for COVID-19. So, there's a lot of businesses that are in this. But what these loans are meant to do is actually be able to provide that capital needed by the small businesses to pay for employees whether they're on the job or not, right now, for the next eight weeks.
Lori Walsh: All right, let's start unpacking some of those options. Three options. Let's start with economic injury, disaster loans. Jamie, go ahead and explain who should apply for these. We're trying to help people make decisions about what's available and what they should choose.
Jamie Wood: Well, right now there's three different types of resources that are available. There is the economic injury disaster loan, we call it IDL for short, and that one is offered by the US government. So, you apply for that straight through SBA, through our disaster assistance website, and you can find it by going to sba.gov/disaster. And there's a very intuitive application. There's a banner there and there's an application process that's really easy to follow. We've streamlined it a lot.
As you mentioned earlier, things are changing by the day and by the minute, but we've really been pumping a lot of assets and resources into that site and even with our customer service team, I think we have now around 10,000 customer service reps for disaster assistance alone across the United States, to cut down on that time, to shorten that response time for getting the customers what they need right now for disaster assistance.
So, that IDL loan, actually it can be used for many different operational expenses that a business has right now. It can be used for payroll, it can be used for associated payroll costs like insurance and other things, it can be used for supply chain. Paying for some of the contracts that you have in place to keep you in business right now. Or maybe you had some supplies that came in a couple months ago, since January and the wolf is out the door asking for money for these contracts. You can use that for that.
You can also use it to pay for your mortgage or your lease and some of the other modifications that you might need to do right now to keep your business operational. And so there are many industries, including restaurants and other types of industries, that are modifying the way that they're doing business. And for some of them, there's an expense on being able to modify the way that they do business and that can be paid for by the IDL loans.
Wanted to move into that IDL advance. So, one thing that we know is that because of the national response for this, those IDL approvals are out, they're projecting around three weeks for businesses to be able to get the approval and get the money that they need. Now these are those government loans. They come through the SBA, but they come from the US Department of Treasury. So for the IDL advance, we put that in place starting this week so that small businesses can get quick access to up to $10,000 within three to five days to get them at least some capital, get them started on some capital so they can be able to pay their employees or use it for other operational expenses.
The third one that just is coming into play right now, we actually got our guidance fresh off the press last night, is the Payment Protection Plan. The P3 loan. Now that is going to be offered directly from SBA lenders and that is going to be starting this Friday. So lenders, we're working hard right right now with lenders to get them ready across South Dakota to be able to respond to this onslaught of applications that are going to be coming in.
And the PPP, Paycheck Protection Program, is actually meant to be used to pay for employee associated costs. So, it can be used for payroll costs including benefits like HR, the health insurance and other sorts of benefits, interest on mortgage obligations that were incurred before February 15th this year. It can be paid for rent under lease agreements enforced, again, before February 15th, and it can be used for utilities for which service began before February 15th. So, it can be used for those sorts of operational costs.
That's what the PPP is designed for. It's really meant to be used for an eight week period and the beauty of this is that that loan is forgivable 100% for that eight week period. And for any residual that you might have, any residual amount of the loan, it can be paid for over a two year period at 0.5 interest.
So, it is just so small business friendly that we really hope that people will take advantage of it. A question we're getting is how many of these loans can I apply for, and which ones should I apply for? The answer to that is it's going to depend on what the business needs. However, we're recommending that you apply for all of them because they're so business friendly.
For the IDL loan, it goes out for 30 years. It is at a fixed rate of 3.75 for businesses, 2.75 for nonprofits, and you have 30 years to pay it back, but there's no prepayment penalty. So, if you get it in place, that's really smart to do right now. But if you don't use it, you can pay it back in one lump sum and there's no prepayment penalty. So, it's really good to have that operational buffer. For the PPP, there's a deadline to apply. That deadline is June 30th of this year.
So, we're recommending that people jump on that and get their applications in early so that they can pay their employees for the next two months, even if they're not at work right now. And this is really meant to keep them off of unemployment and that way they get it in place. It can be forgiven if it's used for payroll associated costs, leases and mortgages and yeah, it's really consumer and small business friendly right now.
Lori Walsh: Jamie, people are asking, and I've heard these questions a few times: My business is impacted but not much yet, but it could be in the future because the future is really unclear. Go ahead and apply at this point? Or do you have to prove that you've already been damaged?
Jamie Wood: Absolutely. Get it in place right now. There's no penalty here for the small business, so it's better really just to take the time, get the lending in place right now, and if you need to use it, it's there. For the PPP, the Payment Protection Program loan, it's really a no brainer frankly. Because for small businesses and nonprofits that need to play pay employees right now, they can save their operational funds, they can get this loan in place, and eight weeks of it is going to be forgiven as long as they use it to pay their employees. So, it's a win-win for the small businesses to really get this in place now. Our lenders are getting ready and they're going to be able to start taking these applications starting as early as this Friday.
Lori Walsh: Excellent. And this is all part, people have to think longterm. You have to think what's happening right now. But this is part of getting that economy up and stabilized for now and then up and running in the future so that when the time comes, we're bouncing back as strongly as possible. Michelle Kane, tell me what kind of advice you're giving women owned small businesses right now.
Michelle Kane: Thanks, Lori. To go back to your first question, all decisions about businesses who are remaining open or not following some of the CDC guidelines. All decisions are really difficult right now for our small businesses. But we have to remember that the market is going to remember and we need to listen to our market. And what we're hearing is that people are going to remember which of the businesses are not protecting their employees based on what the CDC is saying. And we have to remember that, that we're all human and now we have some more tools. Jamie mentioned there are more options. We've got more tools in our toolbox and they can also call us as SBA resource partners. We can help them with some online strategies. Let us help them work through this, but they need to remember and listen to what their market is saying.
Lori Walsh: Great advice. All right, so what are you offering? What kind of advice are you giving out for women owned small businesses now as you're still doing one-on-one consulting services.
Michelle Kane: We're still doing one on one consulting, yes. They can go to our Facebook page, which is SDCO. We have lots of opportunities to schedule appointments. These are free and confidential and I'm really busy right now, but get in there and let's find some solutions for your business. My background and expertise is marketing. So let me help you and let me help you, whether it's online, whether it's some different strategies, whether it's just thinking out of the box and how do we get through this time.
Lori Walsh: Yeah. All right Michelle. So, for people who are getting ready to apply for the P3 loans, for example, how do they prepare? What sort of things do you need to be gathering until you can contact your lender and tell your lenders ready to go?
Michelle Kane: This is the time to gather your payroll. Gather all of your financial information, your mortgage payments, your utility payments. Have this ready to go and ready to speak with your lender and contact them, let them know that you're going to be coming to them and looking to their expertise. If you don't have a current loan but you still want to participate and apply, you can go to sba.gov and see where we can have lenders and you can contact anyone that you're doing personal business with today to see if they're going to be participating in this program.
Lori Walsh: All right. How has the last week been, Michelle, since we talked to you last? What are you learning from business owners who are contacting you?
Michelle Kane: You know, even in the last couple of days, I think there's just more clarity out there and people are feeling a little more confident that they have a plan, that there is relief. The how is out there. And that's where we're trying to help them. There's still so much uncertainty and things that we're not sure about either. We're learning real time too, but there is some more clarity. One of the big things that I have learned, any time I am working with a new woman who wants to launch a business, we talk about an advisory board.
These are people. It's your accountant, that's your lawyers, it's your insurance folks, it's your marketing team. It's your bench of CEOs. People who are part of your network that you pay for their expertise and maybe they help you with your expertise in different ways. Real people in situations like this matter. Real advisors. If you did your LLC on Zoom, they're not going to help you work through this. If you're doing something just online and you're setting something up and don't have an accountant, we're coming up to this point where our advisors are so critical and, wow, relationships and advisors, as far as a business owner, I mean number one. Number one on our list to be thinking about in this new world of work.
Lori Walsh: And Michelle, I predict that when we come through this a little bit further, there's going to be more people thinking about opening a small business because a lot of people are rethinking their lives right now. And some people might be saying, it's time to move forward on a dream that I've had and I didn't like having some of those decisions being made for me by other people as well. So do you anticipate maybe a surge at some point?
Michelle Kane: You bet. And that's what we're really excited about. The new normal is very different than what our business and market was just a few weeks ago. And you know what? I'm still working with people who have started, they were in the process of launching a business. Now they're already pivoting, and we're already working through that and I welcome, welcome, welcome, and let us help be a part of that solution. We're ready.
Lori Walsh: Jamie, let's talk about what's next for people who are trying to think about what they should do right now. They've made it through this first moment of chaos. They're looking at those loans. Push ahead a little bit and tell us what's ahead.
Jamie Wood: Absolutely. Like Michelle said, also, even though we're in the disaster response, and our new normal right now is really responding to the needs of the businesses right now that are being challenged by COVID-19, but we are all always thinking ahead and we ask the small businesses to keep doing this too. Think about how you might modify your business to meet that changing market space.
What's your virtual presence like? Try to stay relevant. Do you have a great website? If you don't, now is the time to start dusting it off or creating it. Do you have an online retail store? If you have a brick and mortar store, get those goods out there on the line because there's still a marketplace. I know my family and I, even though we're not doing our regular in house shopping where we go to maybe a clothing store or something, we're still shopping online and so there is a market still out there for that.
What's your social media access like? I've talked to so many businesses this past week who are not on Facebook, are not on LinkedIn, are not on Twitter. And so they're not communicating with the market space, with their clients. So, we really recommend to leverage the resource partners like a South Dakota CEO, our Women's Business Center, our Small Business Development Center, Score, or our Veterans Business Outreach Center to try to get the resources that you need to guide you through this.
And for small businesses, this is another place too. Not only are small businesses going to be starting up, there's a lot that are going to be transitioning, just because of normal steady state succession of businesses. And in South Dakota, we're projecting probably in the next 10 years, around 70% of small businesses are going to be ready to turn over.
Well, for some small businesses that are going through COVID-19 right now, that's going to be what kicks them off the cliff for deciding, "Hey, you know what? I think I'm ready now. I think I'm ready to hand this business over." And they're looking for compassionate, dedicated next owners, all generations, of next owners. When we say the next generation, we're not just talking about somebody who might be in their twenties coming up. There are many encore entrepreneurs who are 55 or older that are at retirement age and they want to start doing something different and own their own business.
So, we see an uptick in that as well. So we're here to help businesses get ready. This is a perfect time to start thinking about your succession plan. If you are wanting to get out of the business in the next 10 years, it's never too early to start leaning on the SBA resource partners to help you get ready.
And for the small businesses coming in, we're here for you too. But the main thing right now for any business who is currently under distress because of COVID-19 or anticipating that you might be, coming up in the next few months, get those loans in place right now. They're very friendly for small businesses. They're being forgiven. There's a long repayment time with low interest for anybody who uses it for other operational expenses besides employee personnel payments.
And so, just really excited and we're here to help you. We're working very closely with the lenders to make sure that they're ready to take on these applications and, hey, just reach out to us. We're here for you and nobody is in this alone. Thank you so much for having us on today and talking about this.
Lori Walsh: We will keep having you back, Jamie, as long as this story is unfolding and into the future. Michelle, any final thoughts for people across the state to get ready for the days ahead and take action? Because taking action is a huge stress reliever. Controlling the things that you can control makes a big difference in this time.
Jamie Wood: Exactly. And just knowing and keeping in mind that we will get there. This new world, this is going to evolve and we will get to a point. This is also just a reminder to over communicate to your current customers and the market. Let them know what you're doing. We're still all online, we're still on our phones. We want to hear from you. Stay strong, use your networks, and know that there are people to help you and we're one of them. So, we're ready to help you through this process and we're ready to help you evolve into whatever it is you're going to be after all of this is over.
Lori Walsh: So, there was a lot of information that we covered. The transcript for this interview and the audio for this interview is going to be available on our website at sdpb.org/covid. So, you can send it to small business owners that you know, you can refer back to what they said. We'll also put links up and find them at their websites and their Facebook pages as well.
Lori Walsh: So, we'll pick through all this information and put it into action together. Michelle Kane, executive director of South Dakota CEO and The Women's Business Center. Jamie Wood, Small Business Association Director for the State of South Dakota. Michelle, thank you so much for being here again. Really appreciate your time.
Michelle Kane: Thank you so much for having us, Lori.
Lori Walsh: Jamie Wood, thank you as well.
Jamie Wood: Thanks so much.