Roy: Good afternoon. This is Roy Oppenheim at “Zoom at Noon”. I can’t believe it but this is the fifth week that we are holding these sessions. For those of you who haven’t participated before, and I know there are some of you who haven’t, the purpose of this is to give you information, strength and knowledge so you can get through the present, understand how we got here and more importantly, where we’re going in the future. This is kind of an interactive process so we’re asking you to ask questions. We will take your questions either through or towards the end and it’s supposed to be somewhat educational but at the same time, provocative in terms of helping you get through this in a way that we can figure out where we’re going because we are gonna get through this and the question is who are gonna be the winners, who are gonna be the losers and how to make sure we get out of this safely and in such a way that we can prosper long-term as a society and as a family and as individuals.
So today’s topic is waiting for SBA funding, PPP, practical, pertinent, proactive legal tips for you and your business. As it relates to legal tips, throughout the process we’ll be talking about how lawyers and the legal system come into play, how they are participating in the process and how in some ways we have to do workarounds. You know, for example, how do you have a jury trial right now during this pandemic? And the answer is that you don’t and there are constitutional issues associated with that. How do people have a trial, even a civil trial among their peers when you can’t have a group of people sitting in the jury box right now? These are the kinds of issues that we are all going to have to address as a society.
So for purposes of the table of contents, we’re gonna go over weekly unemployment and the first signs of impact. Second, the update of a federal aid, PPP loans and the individual benefits and then PPP community level. PPP here is being of course used not in terms of loans but in terms of practical, pertinent, and proactive legal tips. Again, commercial large scale, small businesses, individuals and of course, creativity and ingenuity and how we get out of this in the future.
For those of you who are not familiar with our firm, we were founded in 1989. Ellen Pilelsky, my partner, and I founded the firm. Geoff Sherman is a partner. We have two other associates. Mia Singh and Paola…Paola, last name is…okay. I’m having…okay. Vergara, Paola Vergara. And Paola today was responsible for helping put this presentation together and so with my…our son, Lance Oppenheim, who we’re very helpful for having done that. Wayne Patton is also of council of the firm and he’s working with us on trust in the state matters.
The firm historically had been involved with representing people in foreclosure during the last economic crisis. And we are as shocked as is everyone else that we are back in the same position where we’ll be helping people try to stay in their homes and fend off their issues that they’re going to have. For the time being however, those problems are gonna come later and so we need to talk about what the issues are at hand. Last time around, our last discussion was about the consequences of the COVID-19 and the pandemic on the economic sectors. This week we’re discussing how to rapidly adapt and survive in the months to come.
I wanna talk a little bit about what black swan events are because we’re dealing here with a historical event that really is not something that any of us have ever dealt with before. Some people said like 9/11, some people are saying it’s like the economic crisis that we had just 12 years ago. But it really is something much, much greater than that and a lot of analysts are suggesting that we look all the way back to the Black Plague or that we look to the Great Depression. And in terms of the Black Plague, a lot of things changed after the plague. Obviously, lots of people died but what also happened was that major political and economic structures changed in such a way that society changed on a going forward basis.
One of the big differences that occurred is that the feudal system fell apart. Many people were able to start getting types of jobs that paid higher wages and more interestingly, lots of prices on certain commodities and products dropped precipitously. And we’re gonna see that happen here. For example, the price of oil is dropping and it’s unclear when that will improve. During the Great Depression, people started to save a ton more money after the depression. And we expect to see savings rates also continue to increase. Of course, social security was created and we had the kinds of systems put in place that are now being doubled and tripled down during this economic crisis.
I wanna talk a little bit about the weekly unemployment data because this kinda tells you exactly where we are and it suggest graphically how different things are this time than they have been in the past. For example, we have probably over 17 million people that have now applied for unemployment. We see the three orange sticks at the end that are showing what the weekly unemployment claims have been. We compare that to ’08 and ’09 and it’s something that you can’t even comprehend. It’s not something that you can even suggest as something similar in nature. And it’s because of that that we have to talk about this as an existential threat to our community, our small businesses, and to the kind of life that we’ve previously been accustomed to.
Next slide, please. Actually, we have a question, I guess. Our first question is going to be a poll question that we all like you to ask. How many of you have filed for unemployment? And then the question…is the first question. And if you can answer that, that would be great. And if you haven’t filed for…and if you have filed for unemployment, how many of you have actually received unemployment?
So on this call there are really very only a few percentages, only about 7% who’ve applied for unemployment and then now the question is how many of you have actually received the unemployment? And the answer is probably not gonna be very high on that question. Can we go to the second part? Okay. If you have filed for unemployment, have you received it? Almost no one has received it and that’s part of the problem here is that the safety net could be working and could infuse cash into the economy if the money was getting to people. And the answer is right now unfortunately, it currently still is not getting to people.
The other thing is that we had thought that this could be a comparable event to something that we could look to from post 9/11 or the Great Recession. But it’s an exogenous event that has caused the economy to collapse, very similar to Katrina in 2005 which actually in some ways triggered the recession. But it was only a recession and we all got out of it and it didn’t affect everyone equally. And this one seems to be affecting everyone regardless of who you are or where you might be. Next slide. Weekly…okay. I wanted to go over the next slide here if we can. The virus has shown a world vulnerable to fear of illness. We have yet to experience its vulnerability to the economic consequences of that fear. And I want to talk a little bit about that.
For example, in China where part of the world is starting to reopen, you have Shanghai Disney. And it’s a place that people are supposed to go and bring your children and have lots of fun. While it has technically opened, there are restrictions on how many people can come. Everyone has to wear a face mask. Everyone’s temperature has to be taken and you also have to show a QR code on your phone to show that you do have the antibodies in order to be admitted. You have to wear a face mask the entire time and the only time you get to take your face mask off is when you are having a meal. I’m not sure how much fun that’s going to be but I guess we will redefine our definition of fun. And of course what’s going to happen as we get back into opening our society, it’s going to be somewhat dystopian and somewhat different because those kinds of restrictions are gonna be imposed on us and we’re all not gonna be accustomed to that because it is a change in the nature of the way we respond to government and the community and it’s gonna change effectively our civil liberties.
Next question. Once the shelter in place ends, how long do you think social distancing will impact our way of life and the economy? Okay. I’m not sure if everyone gets to see these results but everyone is suggesting that that social distancing is going to last anywhere between…a quarter are saying three to six months. Six to 12 months is about what half of the folks are saying. One to two years, 21% and some people, 10% are suggesting over two years. It’s of course going to be a question of whether or not we’re all gonna get the antibodies one way or the other or whether there’s going to be a vaccine, as we talked about last week, or are there gonna be palliative medicines that could be used to treat the disease in such a way that we can go on with our life and that it won’t be as destructive. Either way, these are all going to take time and until that happens, while the economy may roll open in part, it will not be business as we were once accustomed to in the past. Thank you.
I wanna talk a little bit about what kinds of businesses and sectors are doing…and how they’re doing and how that will impact what’s going to go on in the future for us. As we can see in this particular slide, groceries are…people are spending obviously more on groceries, they are spending a lot less on health and beauty but of course they’re spending the least on travel and shopping has dropped off although online shopping has done okay. Let me catch up here. Thank you. I wanna talk about the next question and that is what sectors you all think will come back first and how. And we have a choice here and that is based upon your current trends, which part of the economy do you think will come back first? And the answers are gyms, home improvements, hotels, or food or delivery.
And what we’re seeing here is that food delivery obviously is coming…it looks like it’s gonna come back faster than anything. Hotels is clearly the lowest. Home improvements is third last and then gyms in the middle. So hotels are the worst and food delivery is…and I wanna mention one thing about hotels. We’re seeing a number of vulture funds that are being created right now to pick up distressed hotel properties. And the anticipation is that those properties will come on the market probably in 9 to 12 months when there…people are able to go back but you don’t have the large conventions. You have restrictions on how many people can be in one place at one time and then subsequently the hotels are gonna suffer because there will also be less people who are traveling for large conferences. And so you’re gonna see some re-positioning of these kinds of properties but that’s an example of one sector that may not come back the way it once was.
Next slide, please. Eleven. This is a slide of showing what areas and what sectors are currently doing okay and which ones are doing terribly and it’s an indication of what will do better and worse in the future. Obviously, we’re seeing at the far right that online grocers and gaming are doing great. Video streaming of course, meal kits, food delivery, everything that we all anticipate. Alcohol seems to be doing okay. It always does well, rain or shine. And on the worst side, we see airlines, movie theaters, lodging and cruises and fitness are all not doing particularly well. And that maybe the case when social distancing continues. Grocery sales are way up as people cook at home. Warehouse clubs doing okay but alcohol again, meal kits and online groceries doing the best.
Spending on travel has slumped. Airline’s down, lodging down, cruise line’s down, online travel agencies, rental cars are all down. Restaurant sales, terrible. Fine dining, we weren’t sure about this but we were speculating that fine dining would do worse than fast food. In fact that’s the case because we need…in fine dining, there typically is not the social spacing which you have with fast food which is usually takeout in the first place. Fast casual and between casual dining. Similar issues to fine dining but fast food will probably not be as bad as the other sectors in the restaurant business but delivery services clearly will be the best and restaurants will have to recalibrate how they have a back kitchen for delivery services and how they’re gonna space people out if they’re going to actually eat in.
Spending on media and entertainment is mixed. Main losers, few winners. We look at the winners at the bottom. eBooks, I thought people would be reading more but certainly it looks like music streaming’s doing okay. Video streaming of course and gaming takes the top, top dog. And the reason for that by the way is because you probably get the biggest bang for your buck on a game and that a game isn’t just like one movie that you may rent. But of course with video streaming you have these massive libraries. I guess gaming’s interactive as opposed to the passive of just video streaming. But in terms of what’s not doing particularly well, movie theaters are all closed. Events and attractions, we talked about last week. The likelihood is that that’s going to change. Toys you would think would be doing well. I’m not sure why they’re not and that’s kind of interesting but you can study this later.
Next slide. Shopping is down overall. Particularly for brick and mortar stores. We see here that discount stores, department stores are doing the worst. Electronics at the bottom doing the least worst. Activewear, people are working out at home. Luxury department stores are probably doing okay online. People still wanna buy stuff. And footwear, people really aren’t going very far so they’re not buying as much shoes as they were in the past. But all this is suggesting that even when the economy comes back, certain things are going to be in and some things are gonna be out.
Transportation, scooter shares are nonexistent. Taxis are virtually nonexistent. Mass transit, very low. Parking not doing too well. Auto part, auto sales, I guess people are deciding they might as well get a new car. Auto parts, a lot of people are probably redoing their own cars on their own. Health paradoxically has fallen. Spending on health has fallen. A lot of people are not going to the doctor. They’re using telehealth which we’ll talk about a little bit more. But also fitness and beauty and all those sectors are not doing well because of the close proximity and the inability to do these things without the proper social distancing.
Let me catch up. Okay, let’s talk about some government programs here. You know, last time around, I had told people 12 years ago that they shouldn’t wait for the cavalry and that the government was gonna come and it took months and months before government programs really started to roll out. This time the government seemed to want to do the right thing and they announced this EIDL program, the economic injury disaster loan, and during our first seminar we had told people that if they had a business, they ought to apply for it and you could get a minimum of $10,000 of which the first 10,000 was going to be a grant and you could get up to a $2 million loan. Well, as luck would have it or as the situation has it, the program now has just been stuck. And the biggest grant you can get is 15,000 and the $10,000 grants have dried up. I don’t know almost anyone who has received them. The $2 million promise cap is gone. The government said that they should not have suggested that. It was a mistake and that’s not happening. Very few people have gotten this loan or grant and anyone who’s expecting it I’m afraid should not count on it. You probably should not hold your breath.
The lesson here is of course that the cash is still king and you need to be very cautious about your cash and how you spend it and which creditors you pay at this time. next. We have a question four here? Thank you. Okay. Question four, the EIDL. If you’ve applied for the economy injury disaster loan, which is called the EIDL, and if so, have you received funding? So have you applied for it and if so, have you received funding? Okay. So we have a lot of people who applied for it. Close to half of the folks here today have applied for it. Over half.
Yes, I’ve applied. Okay. There’s 2% who have applied and received funding. Congratulations to you. You should win a prize of some sort. Everyone else has applied or half…a third have applied and a third have applied and have not received it. So 66% applied and have not receive it. Two percent applied and received it and 34% have not applied. So it’s just not a successful program. The problem of course is that the government hasn’t set up the infrastructure that’s necessary with the banks to process the documentation.
Things are a little different as it relates to the PPP, the payment protection plan, but they’re not that much better actually. Many banks have suspended applications. They’re overloaded. The Bank of America took 315,000 applications in the first week. There have been already 580,000 loan requests made. Apparently over half, a $151 billion has already been committed to the loans. Many banks are just overwhelmed. I know Wells Fargo is having a huge problem with getting their applications through. And I suspect that by the end of the week the full $350 million that has been committed by the government to this program will be exhausted. And I know there’s a $250 billion request to expand the program and that is currently stuck in committee.
I do wanna reiterate, I mentioned this last week, that 1099s will not be covered in the repayment of forgiveness. So these loans can be turned into grants and you don’t have to repay the loan. But unfortunately if you only hire 1099s, like you’re a general contractor and you have a bunch of subs, the loans that you use to pay your subs would have to be repaid. And then the question is are you still planning to apply for the PPP? The question is how many of you are still planning because if you are, I would ask you that when you get off of this call that you treat this as the most important thing you do today. Because by the end of the week, the program will effectively be shut until it is refunded. So we have 57% that say they still plan on applying, 44%, they do not. So those of you who think they’re going to apply ought to do so as soon as possible.
Now the problem is that the loans were first prioritized to those people who were with banks that previously had an SBA loan out there. That was the first group. The second group was folks who had a banking relationship meaning that they had both a bank account and maybe an outstanding mortgage or some other kind of line of credit that the bank knew who you were. The banks are not eager to be making loans to third parties who they don’t have a previously strong relationship with because they’re afraid that if there is fraud, that at the end of the day, the SBA who has guaranteed the loans will look back to the banks and say that the banks did not do their due diligence or their homework.
So they wanted to go first with the customers that they had strong relationships with, who they knew, who they understood, who they already had documentation with, and all they really had to do was get updated documentation. There are ways to go to new banks but it’s going to be tough and I think you really almost have to go through the SBA. And by the time you do that, I’m afraid that we’ll probably be out of time. Next page. Oh, page 20 here.
The other thing is individual benefits and updates. Supposedly the check’s in the mail. We’ve heard that before. The $1,200 check for individuals and $500 per child. For those of you who haven’t filed tax returns because you don’t have to, there is a way to file a free barebones tax return that will then make you eligible for the stimulus. This is important for retired workers and veterans who do not receive benefits from the federal government as well as for low income families. So it’s very important that you all understand how these procedures work so we can get you that money as soon as possible. Rock Creek Group Investments said that our economy’s very strong, our social fabric was not. That is why the economic impact of the pandemic is unevenly distributed. It may be unevenly distributed but it’s still affecting everyone in different ways just like the Great Depression did and just like the Black Plague did.
Let’s talk a little bit about what’s going on in Asia again because there is a glimpse of what is going on in terms of a rolling out of the economy. Monthly sales are coming back but they’re only at 50%. In most companies, if their sales were only 50%, they probably would not be able to meet payroll, pay their rent, and pay their taxes. But at least they have some modicum of a business that could flourish over the next few months or years. People are venturing out in masks. They’re going out with precaution, with restrictions and the amount of people that can congregate in terms of any particular place whether it’s an event or a conference is very limited. And so large numbers of people are not permitted to gather.
Restaurants, theaters, and other personal types of live entertainment service providers will have to block space between people to maintain their social distancing. So it’s gonna be interesting to see how we’re going to be able to continue to have movie theaters as well as venues for live performances or if we’re just going to allow less people in and make sure that they’re spacing out much further. The remote work experiment has show that the companies probably do not need as much office space as they’ve previously had and that’s something that…that is not going to change as we bounce back from this crisis.
In terms of the post coronavirus communities, communities will have to grapple with the relationship between government, private entities, and the market in connections with public goods such as education, healthcare, and access to technology. As I also said, this is also gonna affect our legal system and how our legal system relates to its constituents, the public, the judges, as well as of course lawyers and more importantly, the jurors. And that’s a problem that we’re gonna just have to continue to work with. The idea of remote hearings which is what lawyers are going through right now is probably something that’s going to be more common than having to wait hours for a hearing in a courtroom and drive down there and spend a lot of time, wasted time arguably, for the 5 or 10 minutes or half hour that you’re going to appear before the court. So this may require courts and judges and the legal system to become a lot more efficient in dispensing with judicial resources.
In terms of health coverage, the pandemic has showed that our healthcare system is as strong as its weakest link on the chain. And our weakest link obviously is not having enough protective gear for the folks who are on the front lines, the doctors and the nurses and the paramedics. And that becomes our weakest link and of course not having the proper equipment and also not being adequately prepared as a nation for a disaster of this kind.
Natural disaster preparedness budgets are not disposable. Resources need to be in working condition when all is good. The time of the emergency is not the moment to scramble for a solution which is what we’re obviously doing. But as a country, we are good at that and we’re good at playing catch-up and I’m confident that we’re gonna get through this. Financial literacy. People are gonna have to understand financial management better and get a stronger handle on their own finances, on their businesses. And of course access to technology. Those folks who haven’t stayed up with technology are clearly not going to be a winner in this crisis.
PPP for small businesses, to be prepared and what’s pertinent here. I think the first thing is as a business, we have to recognize that as much as all were first a brick and mortar business, we are now going to be first an online business and that the brick and mortar aspect of our business may in fact be secondary to our business, in that businesses are going to by their very nature be more virtual. And those that are more virtual will ultimately be more successful. The ability for a business to be able to continue to work in some way with people at home or any new location is going to make them nimble and make them be a winner in this crisis. Those businesses that are hunkered down to a particular location at any point in time are those businesses that are going to have to figure out how to reinvent themselves.
In terms of what to do immediately, the first thing that you need to do is obviously you have to contact your creditors. If there are folks that you owe money to whether it’s a landlord, a lender, whether it’s a car payment, whether it’s even a utility, whether it’s a credit card, all those creditors are working with their borrowers and their clients because they know that without you they don’t exist. And they’re all being at this point in time, for the most part, working out solutions so that when you get back in business, you can make up your payments and you can get back on your feet. Now there are always gonna be outliers. There are gonna be some landlords and some lenders that aren’t gonna be helpful and that’s where your lawyers come in, that’s where bankruptcy lawyers come in. That’s where Zach Shulmans who’s on the phone with us who works with us very closely is with us, those are the types of situations we’re gonna have to look at. But for the time being, do not be afraid to pick up that phone. Do not be afraid to call us and have us assist you with this process. It is very important that you don’t just let these bills pile up.
And again, you should rethink your small business and make sure that your small business is not like the average American who is living week to week, month to month. The business to be successful must have a rainy-day fund for any kind of crisis. Hopefully not a crisis that’s a 100- or 500-year crisis but any crisis that could pop up from year to year. We have some questions that I think we’re gonna go to. Okay. Hi, Roy. We received an email from the SBA this morning. Guess the SBA has decided to give applicants a $1,000 per employee instead of $10,000 grant we were told. So far, we have not received anything but an email. Here’s the quote, “On March 29th the following…” Okay, I’m not gonna read this whole thing but it does sound like the SBA is working on the fly and they’re changing their programs as they go to try and make this thing fly. That is very good information and I appreciate it.
How to protect securities from potential losses? Not sure I understand that question. If it’s suggesting that you have securities in the name of your company, they’re an asset and they’re just like any other asset that could be available to pay your creditors. What is a vulture fund? A vulture fund is a fund that’s put together to buy distressed assets. Whenever there’s a downturn in the economy, you have these kinds of funds that are put together for particular sectors. Last time around, these funds were created to buy distressed family homes that were in foreclosure. And that’s what created a new type of investment and that is residential homes that are owned by large investors that now rent them out. Before the last economic crisis, that sector of the economy did not really exist.
Not really a question but an observation on PPP. Big fintech companies like Intuit and PayPal are rolling out the PPP in the next few days. Probably doing so because of all the stories of Wells Fargo and the other banks not responding efficiently. More importantly, I doubt they get in this so late in the game if there weren’t money left available. Overheard there’s still about a 100 billion that hasn’t been allocated. Yeah, so there’s probably about a 100 billion that hasn’t been allocated. There’s probably another 250 billion that will be allocated. Excuse me. That will come fresh so that’s 350. So they’re thinking that they can jump in and I don’t think that this is the end of the game. So I think those people who have applied need to stay on line. You don’t wanna get to the back of the line. And we do have some clients that we have helped and a few of them have been paid but the vast majority still have not. But we do know that the funds are flowing. We know the banks are hiring thousands and thousands of employees or contractors who are working double shifts right now, 24 hours a day to try and process. This is a wave, a tidal wave that no one has ever experienced including the banks. And as much as we wanna make the banks the villains here, they are in this with us as much as they because…as much as us because unlike the last crisis, no one can suggest that the banks in any way are the villains here and the cause of this crisis. This is a crisis, a natural catastrophe. It is not something that is man-made.
Have you heard of anyone receiving the PPE payment? If so, what was roughly the amount and business profile? It’s probably the PPP and so far, we think that the average amount that people are receiving is around $159,000, $160,000 and there’s an average that we just saw this morning. Want me to continue? Okay, next slide.
Continuing what businesses must do besides contacting their creditors. They should be contact…they should be making sure that their supply chain is running well. They should make sure that they have inventory to be able to produce products when people start to come out. We have a number of clients that have pivoted from product A to making personal protection gear. They are importing it from other parts of the world and that’s the kind of stuff that we are good at as a country. And so you need to ask yourself what is in demand now, not what product you’re making that you’re hoping people will want in the future. The issue is that you should be anticipating what the needs are today and trying to fill those needs. And clearly there’s a remarkable need for personal protection and there are folks out there that are sourcing it from all over the world.
So you need to transform your market to remain relevant and one of the things you ought to do…and this is…I read this over the weekend, is just pick up the phone and start calling your clients, calling your vendors, seeing how they are, speaking to your referral sources and make sure that they’re okay and see how you can help them in any way. And of course, we’re doing that and with these very series of seminars, we’re doing that. Is there a question? Okay. Next.
As for individuals, similar suggestions that we have for yourself as we do for small businesses, you need to contact your creditors. You can call even your power company. You can call your phone company. You can call any of your utilities, your water company, and they have all created payment plans and allow you to skip a payment or to delay a payment until you’re back on your feet. And so you need to do that and not put your head in the sand here but to actually reach out and they will be very supportive. Of course, credit card companies are doing all kinds of things too. And so we need for you to do that and of course we talked about contacting your landlords and of course your mortgage company. Now, the biggest mistake would be to ignore your bills and not be responsive. Same thing with medical bills. If you have some medical bills, call them and tell them that you’ll take care of it when you’re back on your feet and you’ll get some sort of dispensation.
Stay healthy, safe, balanced, and relevant. Okay, these are very important tips. You should all be participating in various networking activities. There’s all kinds of things online that relate to your industry, your hobbies, your…the things that you like, your religion and you should make sure that you’re having those social contacts. You should try and keep a schedule and divide your personal time from your work time so that even though if you’re in the same space, you’re making sure that there is a division between your weekends, your week, your evenings, your morning so it all doesn’t become one big blur.
And of course professional advice. Whether it’s psychological advice or legal advice or accounting advice, it’s important that you do that. All the professionals are working. They’re all working remotely just like our firm is and if you all have any questions that come up from what we talk about today, we actually have special pricing for folks who listen to our seminars so that we can work with you all also and provide the services that you need.
In terms of long term goals, you have to, you know, keep them in mind but be nimble and understand that this is one of the first times in all of our living lives that while we usually know what the future is going to look like, we can think what the future may look like but we’re not sure. We do know that this will end, we do know that it won’t be exactly the same like what we’re coming back to. We know that it’s going to be somewhat dystopian, we know that it’s going to be in some ways like a bad science fiction movie where you’re being checked at checkpoints and that your civil liberties are being somewhat balanced by the need to keep the greater society safe and those are the kinds of issues that we’re going to have to look at. So long-term goals, we should keep them but we also need to make sure that we’re fulfilling short-term needs and balancing those too. And it’s a really tough situation that none of us in our lives have ever had to do that.
Okay. Just as importantly, we have a COVID-19 section on our website, www.oppenheimlaw.com. It’s right on the top and if you’re on your phone it just pops up. And there there’s lots of resources, lots of links both for unemployment or all the loan programs that we’re talking about today and all the different questions that you may have whether you’re an employee, whether you’re an employer, whether you’re a 1099, whether you’re a gig worker. All those things are on that site and it’s very important that you understand where you are in the society. If you are an Uber driver, you’re a gig worker, you’re a 1099. What benefits can you apply for? Can you apply for unemployment? Yes. Can you apply for the PPP? Technically, yes. What is better for you? The answer to that is you need to speak to your lawyer and your accountant to figure that out.
And again, I mentioned for those of you who need our consultation, we are discounting our services to those people who’ve been supportive of our efforts here in our fifth week of doing “Zoom at Noon”. You know, five weeks ago when we decided that we were going to do this, many people thought that there was going to be no need and that again, we were jumping the gun. And we were just looking at what was happening in China and of course our friends in Italy. And we thought that if this came here, we would need to provide the kinds of support and structure for all of us to get through this together.
Keep your eyes open for solutions to new challenges. Be on the lookout for new ways people are solving problems. Be open to try unorthodox solutions. I mean, at this point, we have to try different things and see what works. I mean, obviously, the medical community’s doing that, trying to figure out if they have found a cure which they probably have not. They’re working on a vaccine. Many people are working on a vaccine and obviously we’re hopeful that that will come about. And then we’re looking to see if we can transfer antibodies for people who’ve had it who now are less likely to get it and how long those antibodies are going to be good for.
And so the way society is gonna open up is where…is when one of these three highways opens up to allow for us to feel comfortable socially being close in proximity to one another. Until that time, it’s going to be very different. The flexible bend, the inflexible break. I believe that comes from some Chinese…from a Chinese proverb actually and that those folks that are able to bend, those houses in hurricanes that were able to withstand storms because they were made out of wood and actually were able to flex, the kinds of wood that bends such as bamboo when it blows in the wind, they are flexible. The inflexible will ultimately break and so we all wanna be the kind of flexible, bending type of material that can go with the wave and figure out how to survive. So far, I think we’ve all done phenomenally well and we’re very thankful that we’ve been able to help you all in this process.
In terms of the future, I mean, there’s…you know, we could look at virtual reality as something. Can we proceed here? Augmented reality. There are gonna be all kinds of things that the future is going to bring. I wanna talk about teleservices. Obviously, we’re providing teleservices just like we are today. We’re also providing teleservices to our clients. And of course telemed has been phenomenal. I know many of you. We have friends who have used their doctors via telemed and the doctors are now allowed to bill via telemed. In the past actually some were not and so now they’re starting to do that. And that’s one of the reasons why medical office space has become so less significant in terms of value because doctors are realizing that they will need a lot less space than they have.
One of the things we wanna talk a little bit about and this is where lawyers come in again is to make sure you’re not being scammed. We’ve seen so many scams in the past few weeks. What happens is when people get scared, they wanna believe in something that may not be true. Fear and anxiety obviously fuel scammers. More time online means more exposure to cybercrimes. Remote work offers access to potentially confidential information and data breaches so we all have to be careful about that. Please don’t let your guard down. Protect yourself, protect your clients’ information, protect your own personal information. Do not release your social security information unless it’s maybe over the phone and it’s to someone that you’re absolutely certain needs it.
And again, using licensed professionals is critical at this point in time. they’re here to make sure that you are protected. We have some websites here that we all want to go over. We have the SBA loan applications. We have the disaster relief applications and we have the Florida unemployment application. I think there’s also the new Florida unemployment site that we have now on our COVID-19 site on our website and it may need to be updated. I know we have some questions. Let’s see what we got here.
Okay. I received the same email. Okay. Oh, someone else received the same email from the SBA. They’ll give me a $1,000 per employee that the business had in January. Okay, so that’s a new concept that they didn’t previously say. Previously they said they were giving businesses $10,000. Someone else says, “I’ve accepted a deferment payment from my mortgage company. Will this ruin my credit? I got a letter from my credit union saying that they may report to credit bureaus.” Most banks are not…and I think that’s something that you can always respond to and say it was part of COVID-19. And since so many people are gonna be in the same boat, the credit agencies are gonna have to reassess how they evaluate credit if anyone’s gonna make a loan to anyone. I think right now, worrying about your credit score is less important than hanging on to enough money for your family to make sure that you can get through the next several weeks.
I’ve tried to talk to a couple of credit cards. They are very reluctant to lower the interest rate as a help. No, they’re not gonna lower the interest rate. That they’re not gonna do but what they will do is lower the monthly payment or allow you to defer a payment. Obviously, high interest credit cards is a disaster long term but right now it may be your only lifeline. Are there any protections for multifamily landlords for foreclosures and such if tenants are not paying? Are there any protections for multifamily landlords for foreclosures? Not sure what that means. So if you’re a landlord right now, you probably are gonna have difficulty bringing a foreclosure in some states. But of course you’d be bringing in eviction if you’re a landlord. So I’m not sure if we’re talking about tenants here. So if we’re talking about tenants, some evictions are gonna be difficult and you’re gonna have to tread lightly. And so the best thing to do is to work something out with you tenants. Of course, that’s different for commercial tenants versus residential tenants.
Did you know where self-employed individuals who don’t own a company can apply for the PPP? Do you know where self-employed individuals…the answer is yes. You would have to go to your bank and it sounds like if you don’t have a bank, then you would have to go to the SBA, to the website that we have both at the end of this presentation as well as the URL that we have on our website. With regard to the EIDL advance, it appears that a business must have employees. This was not listed initially as a criterion. Looks like a two-person company with no payroll is out of luck. Under what is being explained today, that’s what it sounds like. I mean, these programs were meant to give money to the employers to pay their employees.
And what the SBA and the government is trying to make sure is last time around when they gave money to the banks to presumably use that money to help people with their mortgage payments and their underwater second mortgages, the money initially was not used for that and many times was used to buy back stock, to pay bonuses, and for other purposes to further the bank and not help the economy. So because of that stigma that happened last time, the concern is that any money given to any businesses goes directly to the employees. And so if you don’t have an employee and you are a 1099, it sounds like under those circumstances you would probably be best applying for unemployment.
Next question. Here’s a…can a realtor…okay. It appears that a business must…okay, we read that one. Can a realtor…here. okay. Can a realtor qualify for the $10,000 grant if they don’t pay salaries to themselves? Well, if you’d asked me this question last week and if you looked at our slides, we would’ve said yes because that’s what we were being advised by the SBA. From what we’re being told right now by folks who actually are getting letters from the SBA…and I have…and someone sent me the letter and I’ll have to read it very carefully. It suggests that you are going to get up to $10,000 if you have at least 10 employees. I don’t know what happens if you have 20 employees. Does that mean you get 20,000? The answer is probably not because they’re capping the EIDL at $15,000.
Okay. Another one. I just heard from the SBA…is changing the program and no longer will be providing the $10,000 grants. Okay. Well, there you have it. They’re not even providing the $10,000 grants. So we’re hearing lots of different information from different places. Even when we get on some SBA calls, we hear one thing and the information that’s being provided is regional information and it’s not necessarily information that we can take to the bank. And if we can, we can take it to the bank but it doesn’t take us anywhere.
Can we apply for the PPP as an owner of a business without drawing a W2 salary? Only salary of the business is the owners. Only salary of the business is the owners. Well, if you are taking a salary as an employee of your business, the answer is yes. If you’re not, you still might be able to but it will likely not be fully dischargeable and it may be a loan that has to be repaid back because you’re only allowed to use that money to pay back salaries which are not 1099 but W2 salaries, as well as a small portion of your rent or your mortgage payment. So if you’re not paying salaries and you’re only paying yourself, you could probably get the loan but it won’t be dischargeable and you’ll have to pay it back.
I also received another email from Wells Fargo telling me I’m still in line but they have nothing to offer me at this time in regard to the PPP. Well, that sucks. Okay? And not just…that’s just not right and hopefully that will change or you will have to change banks. Maybe, you know, you need to go to Quicken Loans or whatever but it’s really unfortunate the bank that you have a banking relationship with tells you that. That’s just really…it’s just not right.
Will this be recorded to be listened to again? The answer is yes. They’re all recorded, they’re all transcribed. And so you will be able to hear it. How long is it taking you to hear from unemployment once you file? The answer is I have no idea because as you saw, virtually no one today who has applied for unemployment has heard from them. And so what you need to do is you need to log on to the site and put in the appropriate information, maybe your social or whatever else you’re identified with, and see what the status of your application is. And you ought to be doing that on a regular basis.
From Zach here, Zach Shulman. In response to the question for multifamily landlord who may be subject to future foreclosures because your tenants are not paying rent, a chapter 11 bankruptcy for the landlord under the new chapter…under the new subchapter five may be beneficial to reorganize a mortgage debt that they cannot pay right now. And that’s excellent. In fact, can we go to Zach for a second. Zach, are you there? No, we can’t. okay. Anyway, so the answer…answer live? No? okay. Zach, thank you. Yeah, so the answer is that you may have to file for some reorganization if in fact you’re having a problem with your landlord and…excuse me, with your bank because your tenants aren’t paying. And maybe the new chapter 5 and subchapter 11 would be a perfect, perfect answer for you.
I think we have a few more questions here. SBA has been directed by the government to pay $10,000. Can they arbitrarily change the specifics of the government directive? It says $10,000. Okay. And the answer is they probably can’t but they’re probably doing it. Okay, we’re gonna go to Zach for a second. Can we? Zach, are you there? Nope, yep, here we are. Can’t find Zach. Okay. Is there…here, there he is. Zach?
Roy: Hi, Zach. Thanks for joining us. So the answer to…so can you repeat the question and then answer it a little bit more?
Zach: Yeah, I can pull up…oh, I think that what the question from the multifamily landlord…it seems that they are afraid, rightfully so, that if they have a lot of tenant occupied properties that if the tenants aren’t paying them and won’t be paying them for some time, what’s gonna happen to their mortgage or mortgages on all those properties? And that’s a very valid concern and what I’ve responded in the Q&A was that is exactly the type of potential bankruptcy that could help them whether they own the properties individually or through a business. That’s exact type of situation that the new subchapter five which we discussed a few weeks ago at the prior “Zoom at Noon” could be helpful. And by doing so, the goal would be to reorganize the mortgage debt which could be done.
Roy: So it could be reorganized in what? Changing the principal, changing the interest rate, extending the payments out?
Zach: Potentially all of the above. It’s gonna depend on what the value is of the properties compared to the debt. You know, what might be able to be done is a reduction of the principal. What might be able to be done is an extension of the debt. Maybe even changing the payment terms.
Roy: So let’s talk a little bit about cramdowns because that’s what you’re talking about here. Right?
Zach: Right. Yes.
Roy: So just explain that a little bit, what that means for people who have properties that are gonna be underwater.
Roy: Commercial properties, commercial properties.
Zach: Commercial properties, right. So commercial property…in the chapter 11 bankruptcy, if the value of the property is worth less than the mortgage, then there is a possibility to reduce the mortgage down to the value of the property. We saw this a great deal back in the Great Recession where property values plummeted and we had people doing cramdowns all the time.
Roy: So commercial property would include a multifamily, a duplex, a triplex, a quadplex, right? It wouldn’t just include, you know, a mall or an office building?
Zach: Correct. Yeah. Yeah, but the only prohibition is if the person…if it’s an individual bankruptcy…let’s say a chapter 13 or individual chapter 11 and an individual’s filing and they wanna cramdown the mortgage on their primary home, then that could be an issue. But there’s exceptions and exceptions to the exceptions.
Roy: What happens if you have a triplex and you live in one of those and then the other two are rented? Is that deemed commercial or is it residential or is it both?
Zach: That’s a good question. I think that a situation like that, they would be able to cramdown.
Roy: Because we have a lot of people on the call today who own vacation rentals. And those are all commercial properties. And it seems to me whether they own it in their name individually or whether they own it in an LLC, they should be able to file under that new subchapter 5 of the chapter 11, it seems to me.
Zach: Absolutely. That’s the exact situation…what it was made for.
Roy: Right. And then if you have large hotel operators whose places are shuttered, they too should be able to file a chapter 11 and be able…but not under sub five probably to reset their debt based on the new values of the properties.
Zach: Right, right. And then if their total debt is less than $7.5 million under the new provisions, they would be able to do a subchapter 5 which is the simpler way of doing a chapter 11.
Roy: So if any of you folks out there have these issues, you’re welcome to call me, you can call Zach directly. It doesn’t really matter. We’re working together on these matters and we know there’s gonna be a lot of folks whose properties are gonna be revalued downward based on the fact that the social distancing won’t allow people to necessarily travel to Florida as frequently with the middle seat being empty for a period of time. And by the way, that’s what airplanes are doing right now. When they do fly…when they do fly which means only 10% of their flights are flying. When those planes do fly, the middle seat is empty and it’s probably gonna remain empty for an extended period of time. In fact, there are years ago I remember the middle seat was always empty. And then all of a sudden, they started cramming people in.
And so we’re kinda going to go back to where we were where flying was maybe more expensive and we just didn’t decide to just go somewhere. It was a big thing. And that middle seat’s gonna be empty which means flights are gonna be more expensive. But it also means less people are gonna come down for vacation rentals and when they do come down, they will come down for longer periods of time. They will come down, you know, maybe for the whole season and not just for a week. So the idea of spring break may disappear for a period of time because this new social distancing just won’t conform with how spring break is currently organized and how people travel down for spring break.
We have another question here. How long does it take to hear from…no, we…I think we’ve done these? Is there…SBA has been directed…no, these are all…from the SBA…no, these are all the questions we’ve had. Are there any other questions? I just wanna make sure that we’ve answered all the questions. I’ve accepted a deferment payment from my mortgage company. No, okay. Can a pretty revenue venture…can a pretty revenue venture access any government support? I don’t know what that means. Anyway, Zach, any other ideas that you wanna share with everyone before we cut out?
Zach: No. I think what you hit on earlier, contact your creditors, try to work something out and there’s always options such as bankruptcy and foreclosure defense and all these legal options that we’re talking about as available down the road. But I think like you’re explaining, exhaust all the options beforehand.
Roy: Right. Thank you. Someone said our charts are fantastic. Well, I wanna thank Paola Vergara again and Lance Oppenheim for putting those together. It’s kind of a fun thing to decide which charts are of interest but they are interesting to us and we appreciate whoever just said that. Thank you. In many situations, loan forgiveness results…is a tax liability for the forgiven amount. Do you know if that applies to PPP program? The answer is we are not sure but it’s likely that it will not be considered income but there are some questions about how that money will hit the bottom line. And so right now I think people are just concerned about the existential threat of keeping their businesses going but there could be some tax consequences but I think that’s gonna get ironed out at the end. You also may have huge losses that you’re gonna offset anyway. And so if you have those losses, it may not be relevant to that because you could use your losses to offset that income. Anyway, Zach, anything else that you’re seeing on the horizon?
Zach: No, I think you covered everything very well.
Roy: Well, we appreciate everyone joining us today. Again, I just wanna reiterate that you go to our website, www.oppenheimlaw.com. There’s a COVID-19 section that you can look at. That should be a good resource. If you have any questions about foreclosure or bankruptcy, you certainly can call Zach or ourselves. We also are offering special discounts right now to those of you who wanna speak to us and have a consult, for those of you who’ve participated in this seminar. And so we’ll see you again next Tuesday. “Zoom at Noon”. Zach, thanks again, and everyone else, thank you for joining us. Have a great day. Bye, bye.