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  • Will Crook CPA

Don Quixote Strikes Again.... sadly

Almost two weeks ago I texted a blog post.  This post was my first and only - not something I have ever done. I sent that post to everyone I could think of and begged people to pass it on, and it was. But it quietly died as one would expect. Yet I feel compelled to joust at the windmill of Congress one more time...


The idea was simple and (IMO) elegant - Treasury needed to fully backflush payroll so that companies made payroll while businesses were shuttered. I threw in a twist of a limiter based on a proportional decrease in actual vs. same period gross revenue (or better, cash receipts). I still like that idea.

Then Congress worked through the CARES Act. While the functional concept CARES and specifically the Payroll Protection Loan Program (with related forgiveness) could accomplish the same thing as backflushing payroll, I groaned. From my limited perch, it was obvious that EVERY business would apply, whether they needed it or not. I was equally certain that SBA and our banks are not equipped to process loans all at once for every business in America. Furthermore, the $377B appropriated for the program, of which $350B was to be for loan proceeds couldn't go very far. A 2010 SBA survey found there to be roughly 27M businesses in the US with under 500 employees, 27% of which had active payrolls.  That is 7.3M businesses (2010 numbers) that would qualify for this program today... Simple math yields that if HALF of those applied, the average loan would be $95,000.  I would bet a diet Coke that those numbers are all significantly understated.

That wouldn't be a fair wager as I stumbled across this chilling headline Friday night: 



That is 6% subscription in 8 hours with one major bank. Average loan application: $261,000.  BofA's CEO also flatly stated that existing borrower customers would have their applications first.  Of course that's the case.. it is BofA's logical interest to make sure its own customers have every chance of servicing their BofA debt. Every bank will do the same.


Now to bring it back to Main Street.  I spent all last week huddling with clients helping them strategize how to apply and maximize this suddenly shiny golden lifeline.  I counseled each one to have plan B in case of the obvious (a run on the program, banks lacking guidance not accepting applications, etc).  The answer from everyone..."I will have to lay most of my folks off immediately".  There were 3M+ first time claims last week. 6M+ first time claims this week. And those numbers are folks that could get their claims processed. As COVID-19's infection rate is growing exponentially, so is mass unemployment.

Somehow we have to access thought leaders that could champion an idea and at least have it discussed. I beg anyone reading this to send it to anyone you know that can get this in front of anyone that can start a discussion in Washington DC. We somehow have to somehow get this concept in front of Speaker Pelosi.  She stated Thursday, in effect, that Congress is going to have to go big and go big now on relief.


Here, again, is the fastest way to do it right now, plain and simple:


  1. 100% (or perhaps 100% + some factor) of every payroll in America gets reimbursed immediately after funding. We were at full employment, we would immediately revert back to full employment with this program, and take the burden off the states and their wholly inadequate unemployment infrastructure.

  2. The administrative task is run through the payroll processing companies - they are far better equipped to do this than the banks, and there are far fewer of them to govern, audit, inspect, etc. They run this process every pay period for the vast majority of American business.

  3. Task the payroll processors with regulation.  They ALREADY have the EXACT data on who was getting paid what over recent history.  They can be the watchdog preventing fraud and abuse.

  4. Use the SBA programs and the banks to fund operations of self employed and gig workers.  They can handle that volume.

  5. Allow SBA to loan small business working capital to cover non-payroll costs.

  6. Name the program - Bailout of the American Worker (because this would do exactly that, and in the process, go a long way in saving the American employer)

I went to bed last night almost crying for my clients AND their employees about to be laid off by the inescapable governance of the balance in their employer's bank account. I leave you with one last thought:  Capitalism works.  You want something done, you pay someone who is willing to do it at a mutually agreeable price and everyone benefits. Society (in the form of our government) did the right thing and asked everyone to stay home to save countless lives. Society needs to pay for what it wants....

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