Alex Strong is a Federal Legislative Director for Government Affairs at the National Association of Home Builders (NAHB). Alex directs the federal lobbying on Trade, Small Business issues, Legal and Regulatory Reform, Property Rights, and Technology issues, as well as political activities in eight states for NAHB.
Alex holds a B.A. in Economics from Virginia Polytechnic Institute and State University (Virginia Tech) and a M.P.P from George Mason University. He joined NAHB in 2005.
Previously, Alex was Director of State & Local Government Affairs at NAHB, Deputy Director of Policy for the Republican Governors Public Policy Committee, and Legislative Intern to former-U.S. Representative Bob Riley (AL).
Heather Voorman is the Program Manager for Housing Finance for the National Association of Home Builders (NAHB). She received her B.S. from South Dakota State University and her J.D. from the University of Nebraska College of Law.
Prior to joining NAHB, Heather worked as the Policy Director for the National Association for County Community and Economic Development (NACCED) and the National Association of Local Housing Finance Agencies (NALHFA).
Additionally, her previous professional experience includes Community Development Coordinator for the Nebraska Department of Economic Development and Legislative Assistant in the U.S. House of Representatives handling topics including housing, small business, and regulatory issues.
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Transcript
Intro: [00:00:07] Broadcasting live from the Business RadioX Studios in Tallahassee, Florida, it’s time for Florida Home Builders Radio. Now, here’s your host.
Stone Payton: [00:00:23] Welcome to another exciting and informative addition of Florida Home Builders Radio. Stone Payton here with you this afternoon. Please join me in welcoming to the broadcast, first up on today’s episode, Federal Legislative Director for Government Affairs at the National Association of Home Builders, Mr. Alex Strong. Good afternoon, sir.
Alex Strong: [00:00:45] Thank you, Stone. Thanks for having us.
Stone Payton: [00:00:46] Well, we are delighted to have you. We’ve been hearing a lot, of course, about these different kinds of relief programs where the government really is trying to help us. The Federal Government is trying to lend a helping hand. Can you give us a little bit of a primer of some of the key things that they’re doing to try to help us?
Alex Strong: [00:01:07] Yeah, happy to. Obviously, this has been a huge topic of conversation for folks, given the COVID-19 disaster and ensuing troubling, uncertain economic times we face ahead. So, a lot of folks reasonably have been asking us, what is the Federal Government doing? And that’s why I’m here, along with my colleague, Heather Voorman, just to talk a little bit about the CARES Act and what that legislation contained in the way of relief for small businesses. Both of these programs are administered, at least, through the Small Business Administration. And I’m going to talk a little bit about the the EIDL Loan Program first. That’s the economic injury disaster loan program. And then, my colleague, Heather Voorman, again, is going to talk a little bit about the Paycheck Protection Program. That’s the other program folks have been hearing a lot about.
Alex Strong: [00:02:04] So, just real real quickly, what is the EIDL, the Economic Injury Disaster Loan Program? It is direct assistance from the Small Business Administration in the form of low interest loans to small businesses or private non-profit organizations that suffer substantial economic injury as a result of a declared disaster. The next question that logically comes up is, who’s eligible to participate in the program?
Stone Payton: [00:02:36] Yeah.
Alex Strong: [00:02:36] So, first and foremost, you have to be a federally declared disaster area. And right now, all 50 states and all territories are, in fact, declared disasters areas for these purposes. So, the only additional criteria you have to meet in order to be eligible is to be either a small business, which the CARES Act defined as not having not more than 500 employees. You could be a sole proprietor with or without employees. Independent contractors are eligible. Cooperatives, and employee-owned businesses, tribal small businesses. And importantly, particularly for local home builders associations, 501c(6) entities are eligible, provided they aren’t “in the business of lobbying.”
Alex Strong: [00:03:24] Now, just really quickly on that last point, what we’re hearing from outside counsel is that the SBA, when they consider the question of whether or not you’re in the business of lobbying, they’re looking at how much resources you devote to lobbying activities. If it’s 50% plus one dollar, then you’re probably not eligible for the EIDL. If it’s less, and it should be less probably for most local home builders associations, then you would be eligible to participate in this EIDL Loan Program. So, that’s a determination that local home builders associations probably need to make with their attorney or their tax counsel, but certainly a consideration to be made in applying.
Alex Strong: [00:04:14] If I could go in just who is eligible, the disaster areas, I covered that. A little bit about the loan itself, the terms and conditions, the maximum loan is $2 million depending on demonstrated injury. It can be 30-year loans with the first payment not due for a year. And importantly, worth noting, these loans, the EIDL loans are not eligible to be forgiven. And this will be in contrast to what you hear from Heather about the PPP Program. So, that should be noted. The allowable uses for these funds, the EIDL loans can be used. They’re essentially working capital loans. And so, they can be used for payroll, and other costs, and otherwise to pay obligations that cannot be met due to a revenue loss.
Alex Strong: [00:05:04] And there’s one other thing I’ll touch on on this EIDL before I kick it over to Heather is the EIDL emergency grant provision. This is something NHB, a lot of organizations pushed for in the CARES Act. It is a new component to the EIDL Loan Program. And what it says is that applicants for an EIDL loan can, at the time they’re requesting the loan, also request an advance of up to $10,000-
Stone Payton: [00:05:31] Wow!
Alex Strong: [00:05:31] … on that loan. Yeah, it’s a good chunk of money for folks to, again, sort of keep the lights on. And here’s the kicker and the incredible thing, really, is there is no repayment requirement, regardless of whether you are subsequently denied any EIDL loan. And I usually repeat that for a fact, right, because that’s pretty remarkable. The federal government is giving those folks applying for these EIDL emergency grants, including 501c(6)s an upto $10,000 advance, which has no repayment requirement regardless of whether you’re subsequently denied for an EIDL loan.
Alex Strong: [00:06:13] So, I mean, finally, I would direct listeners to the SBA website. This, again, is a little bit different than the PPP Program. You apply for an EIDL loan directly through the SBA.gov website. So, go check it out, SBA.gov/disaster, and walk through there online application if you think this program might be a good fit for you or your organization, I focused a lot and talked a lot about local HBAs being able to apply for this, but it applies for small businesses as well as I noted. That’s the short of it for now on the EIDL. Like I said, Heather, Heather Voorman, a colleague of mine at NAHB who works down in the Housing Finance Policy shop, she’s going to talk a little bit now about about the Paycheck Protection Program, the PPP Loan Program. So, Heather, you there?
Heather Voorman: [00:07:09] Yes, I’m here. Thanks, Alex. And thanks, Stone, for having us today.
Stone Payton: [00:07:13] Well, welcome to the show. We are delighted to have you. I have two more questions for Alex before we go there.
Heather Voorman: [00:07:19] Sure.
Stone Payton: [00:07:19] You mentioned a phrase, “demonstrated injury.” Alex, can you say more about that? How do you demonstrate injury or document injury?
Alex Strong: [00:07:30] Right. So, on the application, they’ll ask. So, what we’re hearing from most small local or even state home builders associations, for instance, particularly in the south where home shows were going on just as this outbreak was happening, and then the subsequent stay-at-home orders in a lot of places. So, a lot of the HBAs could, for instance, demonstrate on the application loss of revenue associated with the home builders-
Stone Payton: [00:07:58] Okay.
Alex Strong: [00:07:58] Yeah, with a home show that was canceled. So, that’s the kind of thing they’re looking for. If you can demonstrate that you would have had some revenue, but for this disaster, then that’s what they’re looking for.
Stone Payton: [00:08:10] And how ugly and hairy is this paperwork? It’s probably unfounded because I don’t guess I’ve ever gone after one of these kind of loans for our business, the media business, but I have this fear that it’s gonna be this big, hairy involved set of paperwork. But have they streamlined it a little bit?
Alex Strong: [00:08:29] Yeah. I mean, your concern is well-founded, I mean, we’re talking about the Federal Government, right?
Stone Payton: [00:08:35] Right.
Alex Strong: [00:08:36] So, anything coming out of those agencies can be problematic and tedious. That said, they really have tried here to streamline it. And in particular, with the EIDL loan, you apply, again, directly through the SBA website. I believe it’s like a two-page deal now that you can fill out all online.
Stone Payton: [00:08:57] Wow, okay.
Alex Strong: [00:08:57] Yeah. I mean, it’s not exactly a trip to the dentist but it’s not even terribly [crosstalk].
Stone Payton: [00:09:05] All right. So, Heather, this Paycheck Protection Program, there had been some new developments just recently. We’re kind of in another phase. Walk us through that, if you will?
Heather Voorman: [00:09:17] Sure. I’ll just give a little bit of background on it before we jump into what’s happened recently. The CARES Act also allocated $349 billion to small businesses through the Paycheck Protection Program or as we like to call it, the PPP. And if any of you are familiar with the SBA Loan Program, the 7A Loan Program, this is an expansion of that program, except for it’s trying to streamline it and increase the eligibility for the program. So, you don’t have to make payments on this loan for six months. You don’t have to provide any collateral or personal guarantees, there is no fees to apply, it’s a 1% interest, and you have two years to pay it back, but there’s no prepayment penalties or fees. And then, there’s also, unlike the EIDL Loan, there is possibility for loan forgiveness. So, that’s why this program has been pretty popular with small businesses across the country.
Heather Voorman: [00:10:16] So, it is available to small businesses with fewer than 500 employees. But one thing we have been noticing with builders is there was an interim rule, which is not the final rule for this program, but Treasury did release it last Thursday evening, and it had a provision in there saying that builders who build homes for future sale are ineligible for this program. And so, we are trying to find clarity on that issue at this time. We don’t know if that means you’re doing 50% or more spec homes. We don’t know if that means you do one spec home. So, we have been working very closely with Treasury, the White House, and Congress to nail this down and also to make sure that as many builders as possible are eligible for this program. And so, our CEO, Jerry Howard, has been speaking directly with the White House on this issue, which they have called the glitch. So, we’re hoping that we can get this solved pretty quickly.
Heather Voorman: [00:11:13] Some other businesses that are eligible, unlike the EIDL Program, you can be a 501c(3) nonprofit and apply, but not for the 501c(6) nonprofits. So, that’s something that Alex can maybe talk about in a bit. We’re trying to really push hard for expansion to the 501c(6) organizations. Sole proprietors are also included, and independent contractors, self-employed individuals. And so, this is part of the expansion. They’re really making sure that all small businesses are included in this program. And then, tribal businesses and 501(c)(19) veterans organizations.
Heather Voorman: [00:11:52] So, as we’re talking about before, there’s been a little bit of an opening in this program in the last day. So, on April 3rd, the program opened for small businesses. And then, this Friday, April 10th, it was opened up to sole proprietorships. So, now sole proprietorships, and independent contractors, and self-employed individuals can apply for this program. There’s not a whole lot of changes from the application process from the small businesses to the sole proprietorships. It’s the same application. You just have to check that sole proprietor on the top. But the calculations are a little bit different for your loan amount.
Heather Voorman: [00:12:31] So, for the regular program, your loan amount is based on an average, a monthly average of your payroll, times 2.5. So, what a small proprietor would do is look at your net earnings from your self-employment. And then, if you do have maybe one or two employees, you can include those as well. So, that’s what they’re looking at for sole proprietors. And so, it’s a pretty similar calculation. You’re just going to look at a slightly different number.
Heather Voorman: [00:12:59] And then, it also is limited. So, if you make $100,000 or more per year or any of your employees make over $100,000 per year, you do have to tamp that back, so that all employees are making $100,000 or less for year when counting your payroll.
Heather Voorman: [00:13:17] So, some of the eligible expenses for this program, it’s really, as the name says, a paycheck protection program. So, 75% of your loan needs to be used for your payroll cost, to keep people on the payroll and make sure your business is staying afloat. Some other eligible expenses are your rent, your mortgage interest and utilities. And like I said before, this is a forgivable loan. So, if you use it correctly for those expenses, 75% payroll, and then for those other eligible expenses, and you document that correctly, you can turn in those documents at the end of your loan period and apply for forgiveness.
Heather Voorman: [00:13:56] One thing you do have to keep in mind, though, is you do have to keep your employee headcount the same as when you calculated your loan amount. So, you have to compare employees on board, which is difficult at this time, we realized because of everything that’s happening in the economy. The other thing is you can decrease wages, but not by more than 25% for those that made $100,000 or less in 2019. So, you’ve got to keep your salary and wage levels pretty much the same from when you calculated your loan amount.
Heather Voorman: [00:14:31] In a nutshell, to apply, it’s a little different than the EIDL Program. You do have to go through a lender, an SBA-approved lender. So, if you worked with one in the past, that’s your best bet to go to that lender and get your application in. But SBA also has a website that you can go to to find lenders that are in your community. And that’s just SBA.gov/paycheckprotection/find. And so, you can find a lender that you can work with.
Stone Payton: [00:15:00] And when you use the word ‘payroll,’ do the people have to be W2 type of employees to qualify as payroll or are there other people that could fit into the group or do we know yet?
Heather Voorman: [00:15:13] So, you do have to use your actual employees, W2 employees.
Stone Payton: [00:15:18] Okay.
Heather Voorman: [00:15:18] We have had a lot of questions about using 1099 contractors. And unfortunately, since they do qualify on their own for this program, you’re not allowed to include them in your payroll calculations.
Stone Payton: [00:15:30] Got it. So, other loans that we should be looking at? Right now, these are the two programs that our members should probably, at least, be looking at to begin with. Yeah?
Heather Voorman: [00:15:42] Yes, I think that’s right. They are really tailored to small businesses, but I don’t know if Alex has any words of wisdom and maybe some things that are coming down the pipeline. But right now, this is really what we’re encouraging our members to look into.
Alex Strong: [00:15:56] Yeah, I think that’s right. I mean,just as a general matter, the PPP, the Paycheck Protection Program, is probably gonna be a little bit better suited for businesses that qualify given the forgivability of that loan. And the EIDL, while available, obviously, to small businesses, is probably going to be the best bet. Really, the only bet right now for 501c(6)s. That is to say, many of the the local associations.
Stone Payton: [00:16:25] And what do we know about timeline? I’m operating under the impression, your counsel is jump on this, at least find out about it, explore it with your SBA lender, go to that portal for the grant idea. But what do we know about the timeline of receiving funds? Do we have any data in on that yet? Are we talking about getting this money in a month, three months, or do we know?
Alex Strong: [00:16:48] Yeah. Anecdotally, what we’re hearing right now or, at least, as it applies to the EIDL loan is that they are taking two to three weeks to process the loan application. And then, once they processed it in that emergency grant up to $10,000 that I spoke about, that will be delivered within three days from that. So, we don’t have a great sense, but we’re talking about a couple to a few weeks, at least, in theory, for the EIDL. I’m not sure, Heather, if you’re hearing something different on the PPP front.
Heather Voorman: [00:17:23] So, with the PPP loan, it’s it’s hard to say when loans will actually be funded, but I know they’re trying to work within a tight timeline because the program does technically end on June 30th. And so, they’re trying to process those applications to give people time to use those funds before the June 30th date.
Alex Strong: [00:17:45] And Stone, I would echo what you sort of led in there with, and that is that folks, if they haven’t already, they should be at their local SBA approved lender applying for these funds. These has been reported, widely reported nationally. These funds are going quickly. Now, we believe Congress is going to plus these programs up at some point, but we don’t know exactly when that’ll be and how much. But you should absolutely, if you haven’t already, go visit your local SBA-approved lender and/or go apply through the SBA website for that EIDL loan.
Stone Payton: [00:18:26] You guys have been very transparent about what we don’t know yet. And to me, this is one of the great advantages of being part of the National Association of Home Builders and your local home builders associations. We have people like you. I mean, this is what you’re doing. You’re out there working this, you’re collecting the information, and you’re out there trying to influence key decision makers, so that this genuinely does serve everyone concerned. Can you sort of re-summarize, if you will, some of the things that you guys are really paying very close attention to and some of the things you’re trying to influence on behalf of our members?
Alex Strong: [00:19:05] Yeah, absolutely. I mean, we’re all sort of operating from an unwritten new script here. I mean, we haven’t been through this kind of thing before, really. So, we’re writing it as we go. And Congress, for that matter, frankly, is writing it as they go. So, there are gonna be some problems. There are gonna be some folks that unfortunately fall through the cracks. We’re trying to limit that, try to make the universe of our members who are eligible for these programs as vast as possible, try to get that relief to the small businesses to make sure they can weather these uncertain, troubling times.
Alex Strong: [00:19:39] And sort of to that end, we’re really focusing on,as Heather mentioned, some of the issues with the PPP guidance that we’re hearing is sowing confusion with SBA lenders and causing some home builders to be excluded from the PPP Program. We’re looking at that. And then, for the next corona package that we know is coming likely when Congress comes back on the 20th, we’re looking to try to expand eligibility for the PPP Program to include 501c(6)s. We’re working very closely with the national ASAE and the US Chamber of Commerce along those same lines to make sure that the professional trade organizations that employ individuals themselves and are going to help small businesses navigate these troubling times, we’re trying to make sure that they have the resources to keep the doors open and keep helping folks. Heather, did I miss anything there? What else are we doing?
Heather Voorman: [00:20:45] I think that’s right. We’re also working very closely with SBA and Treasury as they release guidance daily, which is good and bad because we have to make sure that we’re getting out that information as soon as it comes out. But also, it’s good to have clarity and more guidance on how these programs are going to be implemented. But definitely working with them and making sure that they understand the needs of home builders and small businesses across the country as they release the guidance.
Stone Payton: [00:21:12] Well, thank you both for your diligence. Thank you for the work you’re doing. Thank you for investing the time with us today to communicate with our membership. And with your permission, as dynamic as this situation is, we may very well reach out again and ask you to share an update with us if you’re up for that at some point.
Alex Strong: [00:21:30] Absolutely. Please do. This has been great. Thanks again, Stone.
Stone Payton: [00:21:34] Well, it has been an absolute pleasure having you both. And for our listeners out there, our members, our supporting members, our sponsors, anyone in the home builders ecosystem, if you have other topics or questions that you would like to see addressed on Florida Home Builders Radio, just reach out and let us know, and we’ll do everything in our power to make that happen. But until then, this is Stone Payton for our guests today, Alex Strong and Heather Voorman, and everyone here at the Business RadioX family saying and we’ll see you next time on Florida Home Builders Radio.
About FHBA
Established in 1947, the Florida Home Builders Association (FHBA) strives to create a climate in which the construction industry can prosper. FHBA is affiliated with the National Association of Home Builders and is home to twenty-three local home builders’ associations across the state.
Together, the association works create the best possible economic and regulatory environment for member success through superior lobbying efforts, educational forums, and providing members with networking and a comprehensive menu of products and services.
