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The Paycheck Protection Program: What is it and what does it do for small businesses?

Congress recently approved an additional $310 billion in funding for the Paycheck Protection Program as part of the CARES Act, the stimulus bill created in light of the economic downturn due to COVID-19. We’ve broken down the basics of the Paycheck Protection Program for small business owners, so you can understand how to navigate the program and receive funds as quickly as possible.

What is the Paycheck Protection Program? 

The Paycheck Protection Program, otherwise known as the PPP, is the driving factor in the small business portion of the coronavirus stimulus package. The PPP is a forgivable loan that allows small businesses to continue paying their employees, mortgage interest, rent, and utilities, over eight weeks. It’s intended to help businesses keep their workforce employed during the COVID-19 pandemic. Businesses can receive up to $10 million, or 2.5 times their monthly payroll.

Who is eligible for PPP? 

Small businesses—companies with fewer than 500 employees—can apply for PPP loans. Businesses must demonstrate that they have been negatively affected by the coronavirus. Qualified businesses include any business categorized under “accommodation or food service,” such as restaurants or hotels, with 500 or fewer employees, tribal businesses, independently owned franchises, self-employed workers, independent contractors, sole proprietors, or gig workers.

Where can you apply? 

PPP loans are managed by certified Small Business Administration (SBA) lenders. You can apply for a PPP loan through approved SBA lenders or any federally insured depository institution, federally insured credit unions, and Farm Credit System institutions. Talk with your preferred lender to see if they’re participating. The SBA also has a lender search tool on their website. If you have already applied, check with your lender to verify your application status. The deadline to apply is June 30th, 2020, when the program ends, but you should apply as soon as possible. You should only apply through approved SBA lenders—many scammers are using this time of desperation as an opportunity to take advantage of people. Legitimate lenders will not ask for your Social Security number, bank account, or credit card numbers upfront.

As the SBA accepts loan applications, Georgia’s Own will process member requests in the same manner in the order they are received: please submit your contact information to [email protected] In your email, please include the business name, type of industry and if you are business or retail type, number of employees, and contact information, such as an email address and/or telephone number.

How does PPP loan forgiveness work? 

If you use the loan for anything other than payroll costs, mortgage interest, rent, and utilities throughout the loan, your loan will not be forgiven. Also, it’s only forgivable if you keep all your workers. So, if you previously laid off employees, you’ll need to rehire them. You can submit a request for loan forgiveness through your lender. The number of full-time employees and pay rates, as well as payments on the eligible mortgage, lease, and utilities will need to be verified. However, the loan carries a 1% interest rate that must be paid back within two years—payments can be deferred for six months.

For more information on loan resources for small businesses, visit sba.gov. And, to see how Georgia’s Own is helping members, small businesses, and the community during this time of need, visit our website.

How deferred payments can help you through a financial crisis

Right now, many people have been unwillingly thrust into difficult financial situations. It leaves some wondering how they’ll continue making payments on their cars, credit cards, or other loans they may have. As a way to relieve some financial burden, you could apply to temporarily defer your payments. We’ve broken down the ins and outs of suspending a payment to help you weigh your options.

What is a deferred payment?

Deferred payments, sometimes called payment holidays, allow you to temporarily delay or suspend payments on a loan—generally a consumer loan. If you’re experiencing financial hardship, deferring a payment could be beneficial, as it temporarily halts the burden of making repayments. It could impact you in the long run—you may end up with higher monthly payments, and your loan’s term will increase. But, it’s better than accumulating multiple missed payments and late fees.

How does a deferred payment work?

To start, you’ll need to fill out an application with your lender. Once your application is approved, you can suspend your qualifying payment, without worrying about late fees. You must continue making payments until you have verification of your application’s approval. When your deferred payment period ends, you’ll resume your regular payments.

Does a deferred payment affect your credit?

The short answer—no, a deferred payment generally does not affect your credit score. When your application is approved, your lender reports to the credit bureau that your payments are deferred. But, if you stop making payments or miss a payment due date before you’re approved, those missed payments could damage your credit. If you missed payments before you applied for a payment holiday, those won’t be removed from your credit history, either.

Are you still charged interest on deferred payments?

You may be responsible for interest that accrues while your payment is postponed. You could potentially receive a break if your interest rate only applies to your principal balance—which means you won’t be charged interest on the interest that accrues. However, once you restart payments, the interest that accrued during your payment holiday could be added to your principal balance, and your interest rate would then be applied to the new, larger principal balance—meaning even more interest could accumulate once you resume your regular payments. This all depends on your loan type and lender, so it’s best to confirm with them.

What alternatives are there?

If you ultimately decide you don’t want to defer your payments, there are other options available if you need financial support. Depending on the loan type, you could consider refinancing. Your new loan could potentially have a longer term or lower interest rates, leading to lower monthly payments. You may also consider a debt consolidation loan. Check with your lender to discuss potential alternatives.

If you require financial assistance because of COVID-19, click here to see how Georgia’s Own is helping members during this time of need.

Buying vs. renting: What’s the best move?

Many people make the decision daily on whether they want to buy or rent a home—however, it’s a choice that is not to be taken lightly. Like everything, there are various advantages and disadvantages to buying or renting a home. We’re here to break down those pros and cons to help make your decision process a little simpler.

Buying a home

Pros

Acquiring a home has numerous advantages that aren’t provided when it comes to renting. First, the financial benefits: when you purchase a home, you build equity. If the value of your home increases, then you have the opportunity to cash in on that value if you eventually sell. Also, there are potential tax benefits—if you choose to itemize deductions, you can itemize your mortgage interest when you file your tax return and thus cut your tax bill. Not only that, if you have a fixed-rate mortgage, you won’t need to worry about the rising cost of rent.

In addition to the financial perks, there are other substantial benefits. When you purchase a home, it’s truly yours. You don’t have a landlord to answer to, which means you don’t need to worry about seeking permission for home upgrades—you’re free to make all the renovations you desire. You also eliminate the possibility of your landlord selling the home and having to quickly scour for a new place.

Lastly, there are some intangible benefits. When you buy a home, you feel a sense of pride and accomplishment—you’ve finally achieved your lifelong goal of buying a home. While there is a sense of pride in being able to pay your rent and bills, finally reaching your goal of purchasing a home is an entirely different feeling. There is also a sense of belonging and stability. You now have a place you can truly call home for years to come.

Cons

Despite some of the amazing pros of purchasing a home, there are a few downsides to ponder. The most glaring drawback: it’s expensive. Let’s face it—buying a home costs a ton of money. Between closing costs, home inspections, and possible repairs, it can become egregious. It’s also a considerable amount of money upfront—a typical down payment is around 20% of the home’s cost. For example, if you are attempting to secure a home that costs $200,000, that would require a $40,000 down payment.

Another downside—when you own a home, repairs are solely your responsibility. From a new roof to broken air conditioning, there is an exorbitant number of things to be taken care of. Some things like fire, wind, or hail are covered by homeowner’s insurance. On a case by case basis, water damage is sometimes covered. However, the cost of home repairs can add up quickly and rapidly deplete your bank account.

Lastly, there is always potential to lose money if your home value declines. The environment, amenities, seasons, and maintenance are determinants of your home’s value. Bad schools, poor roads, or neighbors who neglect their property’s appearance are all factors that could drastically decrease the value of your home.

Renting 

Pros

There are copious benefits when it comes to renting, like extreme flexibility. If you needed to quit your job, pack up, and move across the country, it’s more manageable to get out of a lease agreement than sell your home. Even if you wanted to move across the city, you have the freedom to do so, practically hassle-free.

Renting can also be significantly more affordable. It requires fewer upfront costs, aside from a security deposit, which is a fraction of what you’d spend on a down payment for a home. You also forego property taxes, which saves a notable chunk of money. You’re also not responsible for maintenance or repairs. All of those combined make your monthly payments more predictable—you’re not scrambling at the last minute for unforeseen costs.

Cons

While there are advantages when it comes to renting, like anything, there are also downfalls. One downside: your landlord can raise the rent, which could potentially cost you more in the long-run, compared to a fixed-rate mortgage. Factoring in the spiraling cost of rent is a tremendous thing to consider—according to CNBC, rents are rising at the fastest pace in two years. There are also no tax benefits, and there is no ability to establish equity. Various restrictions also apply when it comes to upgrades—most landlords won’t permit you to paint walls, install new appliances, or remodel. There is limited freedom on what you can change.

Deciding to purchase or rent a home is an enormous decision, and it’s not cut and dry either. There are various factors to think about when you’re questioning if you should continue renting or choose to make the big leap and acquire your own home. It’s critical to think about how long you want to stay in your home, how much money you have for unforeseen expenses, as well as if you’re carrying any debt. At the end of the day, it’s about you, your needs, and what works best for your lifestyle.

6 tips for stronger savings

If you’re wondering when you need to start saving money for the future, that time is now. Whether you’re saving for a trip, a house, a car, retirement, or something else, setting aside money now for future benefit is an action that has to be repeated until it becomes a habit. Here are several helpful suggestions—perhaps you’re already doing some of them. The more steps you take, the faster your savings will grow!

Tip 1: Avoid instant gratification

Some call it the 30-day rule. Before you make a significant purchase, wait a month. More often than not, your urge to buy the item has waned or passed completely. Now, you’re enjoying the effects of your patience instead of suffering from buyer’s remorse. A short wait can save you a lot of money.

Tip 2: Set up an emergency fund

One of the fastest ways to get in debt is to be financially unprepared for an emergency. This can include everything from a medical emergency or sudden job loss to unexpected car repairs. As a rule of thumb, you should have at least 3–9 months’ worth of living expenses saved up for these situations.

Tip 3: Record your expenses

When you document your purchases, you avoid the familiar “where did all my money go” scenario. This includes even small purchases, such as that fancy cup of coffee. If you want, you can cross-reference your list with your bank statements to ensure accuracy. Now that you’ve collected your data, break it out into categories (gas, groceries, rent, etc.). Where can you trim? Are you going out to eat too much? Maybe it’d be better to brew that java at home.

Tip 4: Automate your savings

Virtually all banks and credit unions offer automated transfers between your checking and savings accounts. Determine an amount that can be automatically transferred and saved without straining your budget. You’ll be surprised how fast your savings account grows. Just set it up and forget it.

Tip 5: Renegotiate your terms

Whether it’s your cell phone or cable bill, the closer you are to the end of your contract, the more leverage you have to get a better deal. Call and ask to speak to the retention department. Let them know that you are considering a new provider and see what they offer to keep you as a customer. You’ll be surprised at how much you can save. Also, keep an eye on aggressive offers from its competitors. It may be time for a switch. The same goes for your home and auto insurance. Get a quote to make sure you’re getting the best price.

Tip 6: Install a programmable thermostat

Why pay to keep your house or apartment comfortable while you’re away? Programmable thermostats can be set to reduce your heat or air conditioning use during certain times to boost energy savings. According to Energy Star, you can save approximately $180 a year with a programmable thermostat. Now that’s a
good investment.

This is just a small sample of what you can do to maximize your budget and savings. The important thing is to get started!

Thumbs Up, Bucks Up 2019

Credit Card Late Fees: What You Need to Know

Our very own Principal Experience Officer, Adam Marlowe, was recently featured in a Yahoo! Finance piece on credit card late fees. Read the whole article here.

“For one, late fees can cost you even more in added interest charges and contribute to an ongoing cycle of debt if you aren’t careful. “Most credit card companies will add the late fee to your balance on the card. The downfall is that if you don’t pay the late fee, the credit card company will earn interest on your late fee,” says Adam Marlowe, principal experience officer for Georgia’s Own Credit Union.”

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