Category: Financial Planning

SBA EIDL Updates

THE SBA HAS RELEASED THE FOLLOWING UPDATES (PLEASE NOTE ALL THAT FOLLOWS IS FROM THE SBA).

On March 29, 2020, following the passage of the CARES Act, the SBA provided small business owners and non-profits impacted by COVID-19 with the opportunity to obtain up to a $10,000 Advance on their Economic Injury Disaster Loan (EIDL). The Advance is available as part of the full EIDL application and will be transferred into the account you provide shortly after your application is submitted. To ensure that the greatest number of applicants can receive assistance during this challenging time, the amount of your Advance will be determined by the number of your pre-disaster (i.e., as of January 31, 2020) employees. The Advance will provide $1,000 per employee up to a maximum of $10,000.

You may be eligible for another loan program, the Paycheck Protection Program, which is available through participating lenders. Below is a comparison of the two loan programs:

Paycheck Protection Program Full EIDL Loan

PURPOSE	Forgivable if used for payroll (minimum of 75% of the funds received) and the remaining for certain operating expenses (amount of any EIDL advance is not forgivable)	To meet financial obligations and operating expenses that could have been met had the disaster not occurred (amount of any EIDL advance is forgiven)
TERMS	Up to $10 million1% interest rate	Up to $2 million3.75% for businesses2.75% for non-profits
FORGIVABLE	YES	NO – EIDL LoanYES – EIDL Advance
MATURITY	2 years	30 years
FIRST PAYMENT DUE	Deferred 6 months	Deferred 1 year

To locate a Paycheck Protection Program Lender, please visit: www.SBA.gov/PaycheckProtection.

Information on available resources may be found at www.sba.gov/coronavirus. For more information on these services, please go to www.sba.gov/local-assistance to locate the email address and phone number for the nearest SBA district office and/or SBA’s resource partners.

Small Business Help – EIDL and PPP

There are two programs for small business owners, the EIDL loan/grant and the PPP (payment protection plan) loan. Both offer assistance for small businesses. Information is coming out rapidly and the details do seem to be changing slightly as it comes out.

EIDL – Economic Injury Disaster Loan

This loan is taken out directly from the SBA and this is one of the better summaries I have found:

https://www.investopedia.com/how-to-apply-for-an-economic-injury-disaster-loan-eidl-and-loan-advance-4802134

You can also apply for it here:

https://covid19relief.sba.gov/#/

EIDL mainly required businesses to have less than 500 employee and the corona virus has qualified the location for all 50 states. In addition to employer (corporations) it also includes:

Sole Proprietors
Independent Contractors
and Self Employed people

Approval conditions:

Borrow up to $200k without personal guarantee
1st year tax return not required, can borrow based on credit score
Do not have to prove you cannot get loans elsewhere
$25k or less loans require no collateral
Must allow SBA to review tax records

The biggest benefit was the $10k advance that would be a grant and should arrive within days of filling out application. Unfortunately, at this time, it appears that the SBA has been overwhelmed and they are running slow getting them out.

Further, I have found there appears to be some changes coming about based on this story of limiting the 10k to 1k per employee with 10k as the max.
https://www.inc.com/kevin-j-ryan/small-business-loans-eidl-advance-limitations.html

PPP Loans – Paycheck Protection Program

Here is the Fact Sheet from the US Treasury covering the PPP Loans

https://home.treasury.gov/system/files/136/PPP–Fact-Sheet.pdf

Highlights, 1% fixed rate loans for small businesses. All Loan terms are the same for everyone.

Loan amounts can be forgiven for:

The loan proceeds are used to cover payroll costs, and most mortgage interest, rent, and utility costs over the 8 week period after the loan is made; and
Employee and compensation levels are maintained.
Payroll capped at $100k for each employee.

The funds are run through SBA Lenders (your typical banks and credit unions usually). The tricky part is that it appears the banks are only helping their current customers.

If you think either program may apply or help you. Please contact me and we can review your situation.

** The information on this website is intended only for informational purposes. Reh Wealth Advisor clients should discuss with their advisor if any action is appropriate.

Mortgage Rates Likely to Drop

10 Year Treasury Approaching 1% could result in lower 30 year mortgage rates in history

The 10 year Treasury Impacts the 30 Year Mortgage

The rates on the 10 year treasury bond is linked closely to 30 year mortgage rates. The simple reason is that mortgage bonds (bonds issued by quasi government entities Fannie and Freddie) compete with the 10 year treasury bond with investors. If the 10 year rate drops, the mortgage bond rate is not far behind and then mortgage rates to consumers are not far behind.

Why have rates not dropped already

Simply, its too soon. The 10 year dropped extremely quickly and mortgage bonds take time to issue and until there is stability in rates (meaning its expected to remain relatively stable), then lenders issuing the bonds will feel more comfortable locking in home refinances at lower rates. Current mortgage rates are around 3.5% but a 1% 10 year, implies that we could see rates approach 3% for 30 year loans.

What should I do?

I am of the belief that any time you can enough of a rate advantage to be worth your time in filling out the paperwork than your should refinance. If rates are better today than your current rate than refinance today. I would not wait for rates to get better. While the 10 year dropped dramatically in a week, it can just as easily reverse course.

One quick item to note. I generally believe in zero cost refinances. You will take a slightly higher rate but the costs to close on the loan will cost you nothing. It makes the math MUCH easier to compare with your current loan (is the rate less?). It also removed the “how long do I have to keep the loan to make the refinance worthwhile” because you immediately benefit from the lower rate. I have also found that those people that pay points to get a lower rate or even who have to pay out of pocket to refinance, are reluctant to refinance their mortgage again even when there is clear advantages.

Its the old “sunk cost” aversion. What that means, is that I paid $3k for my last refinance, I don’t want to lose that money by refinancing. The reality is that 3k is gone and part of the last mortgage. In finance and accounting we call it a sunk cost. It called a sunk cost because it should not affect a future decision to refinance because that cost affect your previous loan and not your current loan.

By taking a slightly higher rate and receiving “negative points” (cash back from lender), the refinance costs you nothing and you can continue to refinance as rates drop without the costs of the loan hurting you.

Any clients should call me whenever thinking about a refinance and I can help advice you on the best loan for you and your goals. I do not sell loans but help you sort through and decide on the best course of action with whomever you use for your refinance.

Secure Act Summary

In the closing months of 2019 Congress Passed the Secure Act and it has some relatively large impacts on retirement savings and retirement plans going forward. I have read several articles digesting the impact of the act but I think Fidelity has put together the best article that details the impacts fairly well.

Secure Act – Fidelity’s Article here

https://www.fidelity.com/learning-center/personal-finance/retirement/understanding-the-secure-act-and-retirement

Secure Act – High Level points:

Require Minimum Distribution Age has been changed to 72 from 70.5
- This only impacts those that have not started RMDs. Those who started RMD’s in 2019 will need to continue to do so even if they are younger than 72
- As a reminder this is the age you MUST start taking distributions from your retirement accounts that are tax deferred (Roth’s are post tax and are not subject to RMD’s as of the time of this article).
Removed the age limit on Traditional IRA contributions (still required earned income)
If you worked part time > 1000 hours in one year or > 500 hours over 3 years, you are now eligible for your employers 401k.
Parents can withdraw Penalty free up to $5k from retirement accounts the year of a child’s birth or adoption
- NOTE – This will still be subject to income taxes
Basically killed the “stretch” IRA. If someone inherits an IRA that is a non-spouse, funds must be distributed and pay tax with 10 years
Added a tax credit for small businesses starting a retirement plan
Allows up to 10k to be distributed from a 529 plan to pay down student debt.

If you have any questions on how this may apply to you, please do not hesitate contact me. Please note that the information from this post is meant to be educational and should not be considered advice. Clients should contact me to receive specific advice on your situation.

Guest Post by Michael J. Garry, CFP®, JD/MBA – Taking the Road Less Traveled

Taking the Road Less Traveled

As a continuation of the Fee-Only Financial Advisor blog sharing group, this month’s post comes to us from Michael Garry, a Financial Advisor in Newtown, PA.

“Two roads diverged in a wood, and I—

I took the one less traveled by,

And that has made all the difference.”

–Robert Frost, excerpt from the Road Not Taken

Whether you think this poem is about individualism or rationalization, you surely know the poem and how it is commonly construed.

An article was recently published in Financial Advisor Magazine examining the various regrets that people commonly have and one of them was avoiding risks. A quote from the article summarizes this common regret well: “Among the top regrets were: not following their dreams, not taking risks with their careers, not taking risks with their lives in general, and not being gutsy enough in the choices they made.”[i]

Although this could sound depressing, many people that were consumed by these feelings of regret were determined to fix this by taking more risks with the time they have left. It’s a good attitude to have.

The article showed:[ii]

Ninety-three percent of Americans have a favorable view of an extended life with the feeling it could open new and interesting possibilities
Nearly half feel a longer life can enable a totally different view of how and when major life choices are made
A longer life is going to require some different approaches to financial planning.

As a financial advisor one of my main goals is to empower people to take risks in their lives, and lead the lives they imagine, by giving them peace-of-mind with their finances.

It is common for people to feel overwhelmed and uncertain in terms of their financial future and unfortunately, this paralyzes them in other parts of life. People have certain goals/dreams, or simply things they need that they view as unattainable because they feel limited by lack of resources or organization.

Financial plans and investment strategies allow you to determine achievable goals and establish a detailed plan for reaching them. Further, with a clear idea of what resources are available to you and how you can use those resources, you can shift your current financial situation to one that is aligned with your goals and future.

Everyone is unique – simply because one person handled their financial situation one way does not mean that you must do the same. Everyone should accept the challenge of discovering their individuality and embrace it in a way that will aid them in reaching their goals for the future.

Taking the road less traveled, taking risks, living life to the fullest and making your goals a reality may sound like lofty naiveté, but it’s not.

Michael J. Garry, CFP(R), JD/MBA, is the owner of Yardley Wealth Management, LLC, and an independent Financial Advisor who provides Fee-Only financial planning services and investment management in Newtown, PA, and the author of Independent Financial Planning: Your Ultimate Guide to Finding and Choosing the Right Financial Planner

[i] http://www.fa-mag.com/news/regrets-for-the-road-not-traveled-27069.html?section=43&utm_source=FA+Subscribers&utm_campaign=398e4fcd64-FAN_Retirement_Income_Nuveen_CEF_052416&utm_medium=email&utm_term=0_6bebc79291-398e4fcd64-222555985

[ii] http://www.fa-mag.com/news/regrets-for-the-road-not-traveled-27069.html?section=43&utm_source=FA+Subscribers&utm_campaign=398e4fcd64-FAN_Retirement_Income_Nuveen_CEF_052416&utm_medium=email&utm_term=0_6bebc79291-398e4fcd64-222555985

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