Rory Bellina (00:15):
Hello everyone, and welcome to Health Law Talk presented by Chehardy Sherman Williams. Before we get started, please be sure to subscribe to our podcast and follow us on Facebook, Twitter, LinkedIn, and YouTube – links in the description below. We hope you enjoy this episode.

Conrad Meyer (00:35):
And good afternoon everyone. Welcome to another edition of Health Law Talk with Chehardy Sherman William. you have Conrad Meyer here in the studio, Roy Bellina.

Rory Bellina (00:43):
Good afternoon everyone.

Conrad Meyer (00:45):
And today we have a very special guest with us today. one of our partners here at the firm, Adam Stumpf. He is one of our partners involved with a lot of the covid and business interactions with companies in the area. And he is going to talk to us about the economic injury disaster loan, and specifically how it’s related to Covid. And so, Adam, welcome to the show.

Adam Stumpf (01:06):
Thank you so much for having me, Rory and Conrad, y’all are doing a great job with the show. I’m so happy to be on it.

Conrad Meyer (01:12):
That’s great. We’re happy to have you here. So I, I learned something interesting this morning when we were talking about this the E I D L. I had no idea that you said it was for Covid, and then I forgot it was for just about anything. But talk to us, what does E I D L, what does it mean, what’s going on in, in Covid land for this?

Adam Stumpf (01:29):
Sure. And to give you kind of a history, you know, right. When Covid came on the scene, obviously worldwide pandemic businesses shutting down, they needed resources. And Congress stepped in on the, on the federal level and said, Well, we’re gonna run a bunch of different programs. One being the Paycheck Protection Pro program, which is now closed. that was very popular. then at the state level, you had like Main Street Recovery, you had the restaurant, and at the federal level you had the Restaurant Revitalization fund. And the most popular one that’s still sticking around is the E I D L, the Economic Injury Disaster Loan. And that is a loan through the SBA for exactly what it is, an economic injury because of a disaster. Right. And it’s for businesses to take out a loan that must be repaid. Mm-hmm. over a long term mm-hmm. and a low interest rate through the sba, the small Business Administration.

Rory Bellina (02:23):
And when you mentioned disaster, you mentioned obviously the pandemic, but here in Louisiana we just experienced Hurricane ida. It’s available for that as well.

Adam Stumpf (02:31):
It is. you know, these E I D LS have been around for a long time, and it’s really just coming into the spotlight because of covid and because everybody is experiencing this national disaster. Right. so they’ve been around, SBA has been lending money basically since their inception. that’s kind of one of their missions. and now you have an E I D L L available nationwide mm-hmm. . And then if you’re in Louisiana, there’s E I D L money available as a result of Hurricane ida. Now, like to be clear if you have if you have an e I d if you have an E I D L re existing for covid, right. and then you go try to take one out for your business mm-hmm. as a result of Hurricane Ida, there may be an issue there. Okay. In the sense that the sba will likely offset any amount. Sure. You can’t have two existing IDLs for the same, the same thing. That’s, that’s the advice that I’ve been getting from sba. they’ve published different advices, but in practice I’m seeing that those second E I D L hurricane IT loans. If you, for a business, if you have a covid E I D L loan, they’re canceling it other about.

Rory Bellina (03:47):
Sure. A couple questions that I, I was just thinking of when you started talking about this, but I think it’d be beneficial to our listeners if you could kind of explain to us, well, you know, what’s the starting process for this? Who qualifies, who doesn’t, you know, kind of some of the basic, and then we definitely want to get into some of the more, the details of it, but kind of, you know, go back in time for someone that reaches out to you and wants to know, what is this? Do I even qualify or,

Adam Stumpf (04:10):
Exactly. So that’s a very important question because not everybody necessarily qualifies, but a lot of people do. If you were in business before January 30th, 2020, you are basically eligible yet.

Rory Bellina (04:23):
So

Adam Stumpf (04:23):
Pre covid, Right. Okay. Right. So you had to be in business pre covid mm-hmm. you had to have under 500 employees. Okay. and that’s basically it in, in the general scheme of things. Sure. obviously you can’t be, you know, a foreign country or a foreign entity or anything like that, but basically you’re going to, you’re going to likely qualify.

Conrad Meyer (04:44):
So what, let me ask you this. When is, when, when you think of E E I D L for covid, is it for businesses who have like lost income or have had like a, like a from a mandate or a shutdown? Is that what it is? Or is it just in general businesses who have been affected in some monetary fashion from covid?

Adam Stumpf (05:04):
it’s more, it’s more general. It’s

Conrad Meyer (05:06):
More general. Okay. So, so that even helped, that’s more helpful for businesses than if they, if it’s even more broad.

Adam Stumpf (05:11):
Yeah. And exactly. I mean, considering we’re dealing with a worldwide pandemic, it’s almost inherent that you’re gonna have some type of a loss or expense associate with it mm-hmm. . So I’ve been seeing loans being approved on a wide range basis.

Rory Bellina (05:26):
Okay. And when you say loans being approved in different expenses, we’re talking about lost revenue lost, lost income, loss of sales. It’s very broad on what this loan can be applied to.

Adam Stumpf (05:38):
Right. So it it, and it’s very, that’s a very important question because we wanna make sure we’re using these loan funds correctly. Right.

Rory Bellina (05:44):
That’s my question, is that okay, if you, let’s say you qualify for this, you submit the proper, you know, paperwork and everything, what can you use the money for?

Adam Stumpf (05:51):
Right. So what, what you can’t, Right. So the money gets automatically deposited to your account, you say, Okay. you can’t, you cannot go out and you cannot use the money frivolously. Sure. Okay.

Conrad Meyer (06:05):
So you can’t add like an addition onto your building and say, Hey, by the way, I wanna do some capital spending, Let me go ahead and use the money for

Adam Stumpf (06:10):
That. Right. Unless you’re in the, in the business of adding on additions to, Well, that’s different, right? Sure. Right. So, so we wanna look at, you know, bef very recently, as of like a month ago, you could only use it basically for working capital. Okay. Okay. We can’t go make capital expenditures and things like that. They’re outside of the ordinary working capital. Mm-hmm. of our company. they, the SBA just relaxed those rules though, which Oh, wow. It, it, it made a huge difference in pe in businesses’ lives. So now what you can do is you can pay using E I D L funds business debt.

Rory Bellina (06:47):
Okay. And that includes salaries, wages as

Adam Stumpf (06:49):
Well. Oh, I mean, that’s so separate. So let’s say you have a business,

Conrad Meyer (06:52):
I mean, long term debt.

Adam Stumpf (06:53):
Long term debt, Wow. You can go pay off, pay off that, prepay it with E I D L funds. So now you basically can refinance some of your business debt. Now it can’t be other

Conrad Meyer (07:05):
Down to that lower

Adam Stumpf (07:06):
Interest rate, down to a lower interest rate. Wow. So it can’t be other SBA loans or any other federal government loans, but it can be just, you know, a loan from Chase. Right. Okay. You get in there, get your ID out fund, you pay that off. Now you’ve just replaced potentially, you know, 7% interest with 3.75%, which is the interest rate for these loans.

Conrad Meyer (07:27):
So this is currently still open. You can still do

Adam Stumpf (07:29):
This. Absolutely. You, they’re gonna, the program shuts down December 31st. Okay.

Conrad Meyer (07:35):
Oh, so there is a trigger. Okay.

Adam Stumpf (07:36):
There is a trigger. we wanna make sure like my clients are getting their applications in now. Sure. So the SBA has, has time to process

Rory Bellina (07:45):
’em. So walk through you, you apply online for this, Correct? Yes. And then what happens? Can you give us a little timeframe or, or timeline of what will happen after you apply? I assume you have to submit documentation and, and that kind of stuff to some sort of portal?

Adam Stumpf (07:58):
Yes. So you go apply online, you know, it’s a, it’s a three kind of online page process. after that, what’s gonna happen is you’ll get an email confirmed in your application, then you have a portal and you have a login for a portal where you continually check. And I wish I had you know, the magic crystal ball for all my clients Sure. To say, you know, this is how long it takes. But, you know, quite honestly, it’s been kind of a rollercoaster ride. and it just really depends. It could be as short as two weeks. It could be as long as a month. Okay.

Conrad Meyer (08:32):
So what does SBA do to, to tell you how much you’ve received? I mean, is there some sort of, I guess, calculation or formula they use to say one business might get 50,000, where another one might get 500,000? Or what’s the, the quantum, how do they

Adam Stumpf (08:47):
Do that? Yeah, so it’s kind of been all over the place. In the beginning it was 2019 revenues minus cost to good sold types too. Okay. Okay. I, I’ve seen numbers as of just this past week and the week before that do not add up to that. So it’s a little bit of a mystery, but it’s one of those things where I’m encouraging people to go apply, get that figure. Sure. If you’re not happy with the figure, then we can go from there.

Rory Bellina (09:17):
And then once you get that figure, what happens there? Do you guys go a bank for closing or does it come directly from, How does that work?

Adam Stumpf (09:24):
Right, so it’s go, it’s coming direct. The, a bank is not involved. Okay. The s the SBA is the bank. Okay. In this scenario. And the money literally gets deposited into whatever account that you tell ’em where to deposit.

Rory Bellina (09:37):
Okay. And you have to assume DocuSign a ton of documents saying that you’ll, you know, you’ll provide collateral and you won’t default on it and that kind of thing. Well,

Conrad Meyer (09:44):
I don’t know about collateral. That’s one thing I was gonna ask. I mean, is there personal guarantees or do we have collateral? What’s, what’s the story behind that?

Adam Stumpf (09:51):
Right. So it, it varies depending upon the level of your loan. So, you know, $0 to $200,000, you’re not going to have a personal guarantee. Wow.

Rory Bellina (10:03):
Wow.

Adam Stumpf (10:03):
Okay. Okay. which is a huge deal for these business owners. Sure. Cause people are very afraid of personal guarantees and I don’t necessarily blame ’em. so that is certainly a highlight of the loan.

Conrad Meyer (10:13):
Okay. Interesting. Interesting. So, and what about in terms of collateral? if there’s no personal guarantees, is there anything like collateral on the property, say you own the property, have you seen anything like that?

Adam Stumpf (10:24):
Yeah, absolutely. And they have it structured to where if you’re under $25,000, if that’s your loan amount, you’re under that mm-hmm. you’re going to not have any collateral attached to. And just for the listener’s sake, collateral is something that basically you give security for you repaying the loan. So, Sure. Let’s take for instance, a loan from $25,000, $25,001 to 500,000. The SBA is requiring collateral on your business assets. So let’s say you have a whole storage room full of, of inventory. The SCC is gonna take, I mean, sorry, if the SBA is gonna take a UCC on that, which is Right. you know, a security device that says if you don’t pay back to Sloan, we get to go in and take your inventory. Okay. Okay. So that’s zero to 500,000 for 500,000 to 2 million. they’re gonna look to any other assets besides your movable property. Okay. They’re gonna look to your business, you know actual land and, and buildings and things like that.

Rory Bellina (11:28):
Interesting. And I know we talked about it a little bit, but I’d like to go back cause I think this is the, probably the biggest question you get is, you know, let’s talk a little bit more about what can you use this for and what can’t you use it for. I mean, talking about business expenses, are there certain things that the government precludes you from using it from? Or is it just anything that you deem relevant and necessary that you could back up to keep your business in operation?

Adam Stumpf (11:51):
Right. So I I, I tell everybody, if it fits under the definition of working capital, you’re a hundred percent safe. Okay. Right. We don’t want to go outside of that definition. Sure. And then, as I said previously, now we can go pay off business debt. Right. Which is a big deal. Just make sure that debt is not SBA or government debt. Okay. Because we’re not gonna replace an SBA loan with another SBA loan. They will not allow that. so, you know, the general advice is without going through every specific instance, is working capital and business debt that existed, you know when you got the loan.

Conrad Meyer (12:26):
Okay. Interesting. So let me ask you this. I know a lot of people over the last year and a half did the first round of ppp, sometimes the second, some of ’em did the second round of ppp. So what do you tell folks and businesses Okay. Who have already done a first, maybe a second round of PPP when it comes to E I

Rory Bellina (12:42):
D L? Because I’m very, Yeah, and I’d like to echo Conrad’s question because you’re much more knowledgeable on this than I think Conrad and I both are together. I would

Conrad Meyer (12:50):
Agree with that, but I

Rory Bellina (12:51):
Heard you, you know, and everyone hears different things. Aren’t there some sort of like set offs where you can’t have both or you there’s, you know, they subtract one from the other with PPP and E I

Adam Stumpf (13:01):
D L. Right. And, and in the very beginning of all this, I mean, all of this being C businesses were getting E I D L funds and p PPP funds potentially at the same time. And they did not know what to do. And what you couldn’t do was use those funds for the same purpose. So, you know, going back to the ppp, that’s the paycheck protection program, which is now closed. you could only use that for payroll and certain very limited, limited scope of, of expenses. And that that was forgiven. Okay. So then you couldn’t use e i DL funds for the same purpose. Okay. And that was explicitly stated in the CARES Act, which Congress passed, which set all this stuff into motion. Sure. so we nowadays though, PPPs kind of not in the picture anymore. Right, Sure. On the accounting side, certainly speak with your CPA about how you’re going to you know list out all those expenses on, on your financials. But now we’re looking at E I D L’s still sticking around PPS are usually, you know, no longer there kind of factor. So you kind of have wide breath in what you can use your E I D L funds for.

Rory Bellina (14:10):
Okay. And what are some things that people are denied for where they don’t get this E I D L or if they, you know, they’re, they’re having trouble with the application. What are some common things that you’re hearing from clients when they reach out to you and say, I don’t know what’s going on. I’m not getting this

Adam Stumpf (14:24):
Right. So this is what I’m hearing. we got denied. They said we weren’t in existence Okay. At the time that we needed to be in existence. Like the business wasn’t formed at that time. And it’s usually some type of error on the part of the SBA not being diligent in the sense that they’re not looking at the information that was provided. Right. Okay. Sure. Or it’s the flip side to that, and it’s the client or the borrower in this case, not providing the correct documentation. Okay.

(15:00):
You know, we, we need to provide the SBA with articles of organization tax returns, things like that. And sometimes businesses, especially small businesses that never really thought about this, don’t have their affairs really in order. Sure. Sure. So when I get it, I go through a whole laundry list of things and you normally they need it anyway, regardless of the loans. So we’re going through the operating agreement with them, we’re going through the articles, making sure everybody’s accounted for all the members. Sure. So it’s basically those types of things like Sure. You know the other reasons are, I guess, more technical and on the SBA side, and whenever I get those, in all those denials, there’s an email address. I have my certain contacts at the SBA who, cuz I’ve just done this for so long. Sure. I can email them and then get it cleared up pretty quickly. but I’ve, I’ve seen things from not being incorporated, not having a certain board resolution. Right. That, that they need. Oh wow. Those things are really easy to clear up as long as you know what you need to provide to ’em.

Rory Bellina (16:06):
Now what about, you know, a lot of businesses have, excuse me, unfortunately closed during this covid time. What happens to a business that closes that is sold off or simply can’t remake these payments if and when they start? I mean, what’s the guidance for

Adam Stumpf (16:23):
That? Yeah, so let’s take one step back because the payments don’t start until 24 months from when the loan was dispersed. Oh, okay.

Rory Bellina (16:30):
So

Conrad Meyer (16:31):
You a two year grace period,

Adam Stumpf (16:32):
Two year grace period.

Rory Bellina (16:33):
Yeah, that’s really good interest, interest free during that

Adam Stumpf (16:35):
Period. Interest is accruing. Okay. But you gotta think about it, it’s only accruing, you know, it’s 3.75.

Conrad Meyer (16:40):
It’s simple interest.

Adam Stumpf (16:41):
Well, yeah. I mean,

Conrad Meyer (16:42):
Is it simple interest or are they, do we know if it’s compound interest?

Adam Stumpf (16:46):
It is actually, I don’t know the answer to that

Conrad Meyer (16:48):
Question. Well, neither why, I guess we’ll get to figure that out.

Adam Stumpf (16:50):
So we’ll figure that out, Which

Conrad Meyer (16:52):
We have to figure that out. Well, that might affect some businesses. I mean, you never know you know, in terms of their expenses, you don’t know what they want to incur. But I mean, still, I mean, that’s an interesting question. I never knew the answer

Adam Stumpf (17:01):
To that. Right. I mean, it’s meant to give these businesses somewhat of a reprieve. Sure. And then when they get back on their feet, then they can start, you know, paying this low interest long term, which is 30 year term.

Rory Bellina (17:12):
Okay. But if they decide to close or sell their business, what, what, what advice are you giving to them?

Adam Stumpf (17:17):
Right. So you do, if you’re going, if you have an E I D L, if you have a loan through the SBA and you’re going to sell your business, do you have to get approval from the SBA to sell

Rory Bellina (17:27):
To sell? Okay. Yeah.

Conrad Meyer (17:28):
For So what, what about this, Let me ask you this question. So what happens, say you’re a business and you’re looking for a million dollars, right? That’s what you’re looking for. That’s, and the number in your head, that’s the loss that’ll help make me whole. you get the return back from sba, they give you half a million. Do you have some, is there an appeal process? Is there a way that you can say, Nope, nope guys, I really, really need another half a million dollars. Is there some sort of process you can go back to the SBA to appeal for a higher number?

Adam Stumpf (17:55):
There is absolutely a process. And if you’re not Okay with the amount that they originally are willing to give you there is an, an email that it’s, it’s a reconsideration email that you send to the sba and then that starts the reconsideration process. You’ll likely be assigned SBA loan officer and then we can, you know, talk it out with that loan officer to get you where you need to be. Sure.

Rory Bellina (18:18):
And as far as just, you know, generically businesses that are, are, you know, companies that you own that are eligible for this, it’s pretty broad. Like you said, as long as you’re a business that was in existent less than 500 employees, you’re not a foreign entity. It, it seems like it’s a very broad bucket of potential business owners that are available, available to, to get this program.

Adam Stumpf (18:39):
Absolutely. Yeah. I mean, it, I’ve, I have not run across a business that has not met the eligibility requirements. Okay. you know, that, that we, that we’ve helped. Sure. So the bucket is very big located in the United States under 500 employees in business before. Sure. You know, January in business before the pandemic.

Conrad Meyer (19:05):
Let me ask you this, I mean, you mentioned that a lot of businesses qualify based on the eligibility requirements. Let me ask you this, How many businesses do you think actually know this program even exist?

Adam Stumpf (19:14):
You know, not many because here’s what happened. PPP comes out, E I D L comes out. Mm-hmm. , p you know the re restaurant advisors, all these programs are just being flooded out by Congress. And they kind of got a little bit confused and the PPP was so popular in the beginning. Mm-hmm. , E I D L was kind of like, Ooh, that’s a loan that you have to pay back the ppp. You don’t, So it’s kind of just come, it’s, it’s really becoming popular now. Okay.

Rory Bellina (19:42):
But it’s closing soon,

Adam Stumpf (19:43):
But it’s closed soon. Gotcha. Exactly. So, you know, December 31st, so they

Conrad Meyer (19:47):
Have a short fuse and so basically we need to get the word out there.

Adam Stumpf (19:50):
Yeah, absolutely. I mean, this is a great program. Yeah. Especially since they’ve increased the, you know, uses of, of these monies. because there’s, banks really aren’t lending all that much. The SBA is kind like gonna be the leading lender Sure. for businesses after this for sure. And they may have been before, but they’re gonna way outpace the banks after

Rory Bellina (20:13):
This. No. Are there any clients or businesses that you would say shouldn’t apply for this or you would advise them against getting this program as far as, you know, if they’re really debt written and they’re, you have concerns that they might not be able to pay this back or, or anything like that?

Adam Stumpf (20:27):
Yeah, I mean, if, if you, if you are a business and you’re like, Look, we’re going outta business anyway. Right. then probably not a good idea to incur more debt. Sure,

Conrad Meyer (20:37):
Yeah. Right. Before you sell

Adam Stumpf (20:38):
Whatever close out. I mean, we have to have a plan for, for this money on the, the business side of things. But, you know, in generally speaking, this is a good loan if you need funds mm-hmm. and you plan on paying it back and being in business in the next two years,

Rory Bellina (20:55):
And I assume long term once after two years, when, when you actually have to start remake payments, you’re gonna have to continually give the SBA updates or, you know, statuses or they’re gonna be checking your returns to make sure that you’re good to pay it

Adam Stumpf (21:08):
Back. Yeah. I would anticipate that. Okay. You know, there is the ability for the SBA to audit businesses as well. Mm-hmm. they really have not come out with who’s gonna be audit, who’s not gonna be audited. Like other programs. They tell you if you get X amount of dollars, you will be audited, maybe not. so anticipate I would, I would as a small business function as if I’m going to be audited. Sure. Okay. Keep, keep records. Right. you know, this, this isn’t the time cuz when you, if you do get the letter from the sba we don’t want to have to go back and try to recreate everything. Right. We want to be able to be kind of on our P’s and Q’s in the beginning,

Rory Bellina (21:47):
So really document how you spend this money, where it goes, you know?

Adam Stumpf (21:52):
Yeah. That kind of thing. I mean, you know, our original advices were keep, keep these funds in a separate account. Okay. don’t co-mingle it.

Conrad Meyer (21:59):
Actually. That’s a great

Adam Stumpf (21:59):
Idea. Yeah. I mean, don’t

Conrad Meyer (22:00):
Look at track everything.

Adam Stumpf (22:01):
Yeah. Don’t co-mingle it with another account. Mm-hmm. . now like you say, Conrad, you can go to this one bank account statement sh and you’ll be able to every check, everything is coming out of there and you know what it’s for sure. Working capital or if you wanna use it for business debt.

Conrad Meyer (22:18):
Okay. That’s interesting.

Rory Bellina (22:20):
That’s, that’s really informative and I think that’s great information.

Conrad Meyer (22:23):
Yeah, I think so. So basically, I, I, I think this is a good timely podcast to get out. I mean, it’s very, very sensitive information. I mean, Adam, Adam, you know, I know you’ve been doing this a long time. I would hope that businesses get this advice. Yes. And especially, you know, seek the advice of of Learn counsel. Yes. because I mean, having someone on your side that knows it, especially, I mean, you got some inside, you know, contacts. I mean, I think that’s, I mean, Sure. Yeah. I would, I would want that if I was a client, you know.

Rory Bellina (22:50):
And what are some things that, you know, if a client’s interested in this, you recommend them go to the SBA website and start, but then if they have more detailed questions, they could obviously reach out to you or someone here.

Adam Stumpf (23:00):
Yeah, absolutely. Like Conrad said, I was in this, you know, when the pandemic hit, I was making my way into the office when it was just me here Sure. Reading through Congress’ bills. I was there from the beginning, so I know how it started, which makes it easier to realize how it changed. Yeah, absolutely. Keeping up with it. And through that time, you know, our clients had, our clients had some struggles in the sense that the, it’s difficult dealing with a large governmental body. And now I’ve got, I’ve had to deal with them for a while now. Right. So I, I know the kind of shortcuts, I know the email addresses, the phone numbers to actually get something done for these

Rory Bellina (23:42):
Clients. Sure. Especially with such a short timeline left. Agreed.

Adam Stumpf (23:45):
Right. December 31st, you need to you know, that’s when the program closes. So we need to get our applications in soon.

Rory Bellina (23:50):
Sure. Well, great. Thank you so much for joining

Conrad Meyer (23:52):
Us, Adam, Thank you very much for coming on the show. And this wraps up another edition of Health Law Talk, Chehardy Sherman Williams. we will have more learn a guest on and the future episodes. Please make sure you subscribe to our podcast, whether it’s Apple, Spotify, Google, and we look forward to hearing from you. Everybody. Have a great day.

Rory Bellina (24:14):
Thank you for listening to Health Law Talk presented by Chehardy Sherman Williams. For more information or to contact us, please visit our website linked in the description below. Also, please be sure to subscribe to our podcast and follow us on Facebook, Twitter, LinkedIn, and YouTube – links in the description below. Thank you for listening.