EntreLeadership - Don't Take the PPP Loan!

Episode Date: May 22, 2020

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It's an entree leadership theme hour. We're talking with small businesses. Ken Coleman, Ramsey Personality, is one of my co-host, the other on the panel. The co-host would be Daniel Tarty, Executive Vice President of Entree Leadership. We talk with small businesses all the time. Kirk is with us in Florida. Hey, Kirk, how are you? Excellent.

How about you? Better than I deserve. What's up? I'm a small business owner. Thank you, Joe, a large part to you. I've been debt-free for north of 10 years now. Good. And part of the problem with being debt-free is I also have the credit report to show for it,

meaning I have no credit. Wonderful. I haven't had a credit card. It's, yeah. That's an advantage of honor, man. Thank you. Me neither. So anyhow, I'm a small business owner, and my bank, I bank with a small regional bank,

and they ran out of the paycheck protection program money like in about five minutes. They ran out before I had a chance to apply. So I... Is your revenue down? Yes. How much? You know, right now I'm probably down for the three months, about 40%, for the two months, about 40%. What kind of business?

What type of business do you guys have? I have a jewelry in loan. Okay. A pawn shop that specializes in jewelry. Gotcha. Okay. Okay. So I thought of.

other alternatives to get to paycheck protection because everybody stayed on payroll, even though our revenues and everything are down, we've continued to pay our staff. Are you actually losing money yet? Or are your revenues just down? I mean, loss of profit. Negative profit. Yeah, probably not quite negative, but not far from it. So you're around break-even. Okay. Have you all, and you're in Florida, so you start reopening, right? Yeah, they never closed pawn shops in Florida. They deem us of financial services.

Oh, okay. So you're essential. Okay. Okay. So that's why your revenue's off, but it's not gone. Okay, that makes sense. But as Florida has begun to reopen, has your customer base started to come back?

Slowly, yes. Okay. Right now, you know, the... So you think you're on the upswing, not the bottom? No, I don't... Probably in the middle. you know, at least from a retail standpoint. Lots of loan redemptions

because the government's spraying around so much free money. Yeah, yeah. So, yeah, my loan balance is way, way down. Yeah, but that helps your cash position, yeah. I'd like to know a little bit about your war chest. I mean, what do you have in terms of retained earnings in the business or personally and your ability to not pay yourself for a while? I mean, can you make it a few more weeks?

Yeah. easily. Okay. So don't take the loan. You don't need the loan? No. I don't need it. Right.

Okay. But I mean, from what I understand, if you're continuing to pay your employees, whether you need it or not, it's still forgivable. If they don't screw around with it. It's a 2,300-page document. And last time I checked, they promised to forgive student loans in certain scenarios, too, but they haven't. And if you haven't dealt with the SBA, they're the DMV of the federal government.

They are a screwed up, delayed, incompetent bunch of characters. And the last thing I want is a loan. I've been advising people not to take these loans under any circumstances. In your situation, it doesn't even hurt you to not take it. You're going to be just fine. You got smacked in the face, but it's not going to cause you to close if you miss out on this loan. I wouldn't do it. I wouldn't step in the bear trap, man.

The way you said it, Kirk, you said, I don't need it in the rest of that sense. But you want it. Well, he wants the free money if it's forgiven. But he doesn't need it, and that's what we've got to make her decisions. It's not free money. I mean, everybody's saying. There is no such thing as free money. That's exactly.

But down the road, you know, my taxes are going to go off. My everything's going to go off, even if I don't need it now, you know, in the future, and his revenues continue to go down. Your taxes are going to go down because you've got some ride-offs under the Care Act that you haven't even found yet because you haven't gone to your tax preparer. I spent two and a half hours looking at the increased write-offs we've got this morning. It's incredible how much my tax bill went down this year because of the Care Act. There's stuff in there I didn't even know was in there.

I've been with my tax guy all morning, which is a dadgum joy. But it was a joy because I was actually making money in this conversation. One of the few times I met with him that was fun. Well, here's the thing. Kirk's competitive and I'm competitive. And I respect, you know, you start the year with a goal and you want to do anything you can to continue to hit that. And it's okay if this isn't. your best year ever. You know, it's okay that you had a little disruption and you're getting back

on your feet, but don't do something stupid just to hit the goal no matter what because you want to compete and make sure that you do it. It's going to be a rough year. And then next year is going to be better and you're going to be back on the trajectory that you were pretty soon when everything bounces back. Kurt, you got out of debt and you don't have a credit score because you didn't like loans. And now you're struggling and twisting in the wind trying to figure out way to get a loan. I understand it has forgiveness provisions, but I got to tell you, it's going to be problems. And there's already been articles in the Wall Street Journal about the problems. There's already been articles in Forbes on about the problems. They're starting to pop up. I was the only one out

there saying for people not to take these loans. And now it's starting to be cool to tell people to not take these loans. But anytime it has the word loan in the sentence, you called Dave Ramsey. you're going to get the same answer, even if it has forgiveness provisions. Student loans have forgiveness provisions, but the word loan is in the sentence. And I'm just not going to go there. Life is too short for me to be screwing around with a barrel of snakes and then wonder how to not get bit. And that's the problem. You can do what you want to do, Kirk, but our advice is don't take the PPP loans to anyone.

In your case, you don't even need it. You're just looking at it as quote unquote free money. and you dispute the phrase or whatever, that doesn't matter. But it's, you know, you don't have to pay it back. You can call it whatever you want to call it if you meet the guidelines, if they don't change the guidelines, if they don't screw around with this whole thing. And there's too many ifs and the word alone is in the sentence. I'm never going back.

There's not enough money on the planet to get me to step up into that news and go, please don't drop the trap door. Please don't drop the trap door. I'm not doing that. Stephen is with us in Idaho. How can we help? Yeah, so I've got a small long-care company that, when I'm saying small business, I'm looking at maybe grossing $30,000 this year.

But, I mean, that's just a side job more so. My daughter says to me one day, Dad, I want a job. I got an idea. So anyway, I'm in a growth team position where I'm working out of a 93, three, a pickup truck, two-wheel drive, a tiny little truck, well, now I'm to the point where it's not capable of doing the job anymore. I need to upgrade a three-quarter-time truck, but I don't have money up front right now to buy it.

That means you don't need to upgrade. Well, I... You make $30,000 on the whole business. You can't afford much of a truck with a business doing that. but like I said, this is a side job. I know. I'm just more keeping my... I know, but the basis on which you would make the decision to buy a piece of equipment

is the top line and the bottom line of the business, which does not support much equipment purchases because it's not making much. Why do you need the bigger truck? Be specific. Because it's having trouble hauling the lawnmowers. It's breaking down. The truck hasn't broken down yet, but I'm bottoming out the suspension.

Because we're hauling out so much grass. What will that truck sell for? That truck. Oh, I was going to keep it for other side jobs. So that's why I'm looking for an additional truck because it gets good gas mons. It can haul light loads and take me to small side jobs. Okay, go start doing those small side jobs now.

And use that money to buy your other truck. I don't know what your truck's worth. But if it's worth, if you can sell it for $10,000 and get a truck for $12,000 and put 2,000 more into the situation, I'm okay with that if you're making 30,000. But if you want to justify this because you got a side business to go buy an $80,000 truck, just because... Did you go into that to buy a truck? That's what we're talking about earlier.

No, no, no, no. Don't do that, man. You're going to regret it. You're going to look up and go, the truck is, the tail is wagging the dog. Organically grow your cash and cash flow your equipment. Organically grow your cash means to use your profits only to grow. If this other truck will do side jobs, add those side jobs to it, bottom it out, drive it a little while. Let's get the money together and buy you another truck or sell that truck and get you another truck.

Any one of them doesn't matter. That puts an Autray Leadership theme hour in the books. This is the Dave Ramsey Show.