Finances and Foibles: Navigating Government Stimulus

Ed Wenck | Jun 29, 2020
Business plan 450A leading consulting firm has some tips for integrators navigating the tricky world of government stimulus

Mitch Reitman has a metaphor he uses when it comes to sudden difficulties and disruptions. “I love sailing. And a friend of my dad’s noted that during a race, if the wind comes up, and the waves get big, do we want to head back to the harbor?

“Or do we want to win the race?”

Reitman, whose firm Reitman Consulting has been advising those in the security and alarm industry for decades, believes that the way to weather a storm like the current pandemic-triggered-recession is to look for ways not just to survive, but to win – to make your business more successful. The first way to do that is to ensure you’re getting good information. 

What’s in a Loan?

“The big thing that's gotten the most attention is the PPP,” says Reitman. “The Payroll Protection Program. And one of the biggest misconceptions about it is that it was built to help small businesses. It can and it does, but it was also to keep the unemployment agencies from being overwhelmed by all these people who were suddenly out of work.”
As the PPP and other programs change, Reitman cautions about listening to shifts via the wrong sources. “Get your info from your accountant, your attorney, your tax adviser. Don’t get your info from the Today Show. All of these stimulus programs are in such a state of flux that there’s no way the media can keep up properly.”

There are other programs beyond PPP, too – the EIDL, or “economic disaster” loans usually triggered by losses from a hurricane or earthquake. “These are pretty long-term, low-interest loans,” says Reitman. But he cautions: “There are certain things you can spend it on and certain things you can't, you can't take the money and put it in the stock market. You can't buy a Learjet, you can't buy a Ferrari for your business with it, be very careful. The loan documents will tell you what the allowed uses are.” 

Tips and Pitfalls

For those receiving any of these loans, Reitman recommends setting up separate accounts for dispersing those funds: “What I strongly suggest is when you do get this loan, put it in a separate freestanding account; the money stands alone. And that way, when you go to the bank, if you say, ‘Look, I had a payroll for $30,000, I paid rent for $4,000. Every time I did that, here's a transfer for exactly that amount of the loan proceeds  -- I've used that money the way you told me to use it, here it is, all on one sheet of paper.’ It doesn't take a team of auditors and analysts to ensure you did it right.”

As the auditors look at a company’s books, Reitman has a cautionary tale about how a firm defines “independent contractors:” “If you hire somebody to come in and bake a cake for your annual holiday party, that’s a contractor. That's something you don't already provide. If you hire an installer to come in and do some work in another city, that's exactly like the work you would do in your own city.” And that individual will be defined as an employee by state and federal agencies looking to collect payroll taxes.

Reitman also sees successful firms making the best of a bad situation. “There are a lot of very talented people out there that have gotten laid off by some poorly run companies. And I think there's a lot of opportunity for properly-run companies to pick up a lot of talent.” 

You can find more tips and info from Mitch Reitman in this CEDIA Podcast – “Stimulus Update” -- and at his company website, Reitman.us.