Hey, this is Jennifer Tribe and you’re listening to Frankly IT, episode 80.
Despite being nearly a year since the global coronavirus pandemic was declared, it’s clear we still have a ways to go to truly get a handle on it and return life back to quote on quote normal, whatever that looks like. In the meantime, businesses all over the world continue to struggle with rolling lockdowns, new operational and safety guidelines, revenue declines, workforce changes, and more. Perhaps your business is one of them.
One bright spot of economic news in the US is the federal government recently announcing another round of PPP loans. My guest today is Brian Leimbach, the CEO of an IT consulting firm called CIO Advise, and he’e here talking about some of the new PPP rules and how you can use them to your advantage to strategically spend on IT in ways that will build your corporate resilience through 2021.
If you’re outside the US, there are some takeaways for you here as well. Because whether the money you’re spending is a stimulus loan from the government or whether it’s your own, knowing where to best spend your IT budget will put you in a stronger position to weather these turbulent times.
Let’s hear what Brian has to say.
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Interview With Brian Leimbach, President & CEO, CIO Advise
Jennifer: Welcome to the show, Brian.
Brian: Hi, how are you doing today?
Jennifer: We’re going to talk about if you have a limited pool of spending for IT this year, where does it make the most sense to invest it. And we’re going to start that conversation with a discussion about the PPP, because there are some exciting new developments in the PPP program that are relevant to IT spending this year.
Jennifer: So to give some quick background, the PPP is the payroll protection program. It’s a stimulus program from the U.S. federal government that aimed to cover payroll expenses for businesses that were suffering from the economic effects of COVID. And originally back in the spring when it started, one hundred percent of the loan proceeds had to be used for payroll and employee benefits expenses. Basically it was for keeping people employed. Late in December—December 27, 2020 I think—the federal government approved a top up to the PPP, which means businesses who qualify can now apply for a second loan. And the stipulations about what you can spend the money on have changed. You’re now allowed to spend money on some things that aren’t payroll related.
Brian: That’s correct. I think the biggest changes that were made was the first thing is the eligibility requirements. If you received a PPP loan last year and want to get a second one, you had to spend everything that you’ve received so far. And you need to do that prior to the new money coming into your account. Secondarily, there is a cap on two million dollars of total PPP loan and you have to have 300 or fewer employees. The first draw was 500 and fewer employees and a much higher dollar amount.
Brian: The other thing is, is that you had to experience last year a 25%or more reduction in gross gross receipts or revenue for any particular quarter in 2020. So what you would do, is say you look at your second quarter revenue for 2020, you compare it to 2019 and if it’s 25% lower than you are eligible for the second round of the loans.
Jennifer: What I’m hearing is that the requirements are getting a little tighter. They’re really focusing now on the smaller companies and the ones who have struggled significantly with that 25% decline.
Brian: Correct. If you remember correctly, last year there was a lot of news against very large corporations getting PPP money first when they actually didn’t even need it. So the second round, they were making sure that the small businesses were getting access to those funds and not the larger corporations.
Brian: Minority and underserved veteran and women-owned businesses, they earmarked $15 billion just for that and they’re going to use community financial institutions to get that money out to those folks. That’s something that wasn’t done before. They are trying to make sure that the funds get to the people who need it the most. There were some reports that minority-owned businesses and veteran and women-owned businesses did not get the funds the last round. So they wanted to make sure that was going to happen this time as well.
Jennifer: OK, and the other interesting thing is, as we mentioned previously, you had to spend 100 percent of the money on payroll related expenses. Now you can spend it on some other things. So tell us about those rules.
Brian: Yeah, so they have opened up… 40 percent of the funds can go to what they call operating expenses. And that can be used for PPE worker protection, facility modifications due to COVID, any property damages that were caused possibly by looting or public disturbances, and then any expenditures and supplies that are essential to run the current operations.
Brian: And then finally, which is very exciting news, is operating expenses that you can use for payments to business software or cloud computing services that facilitates business operations. So that’s really exciting news there.
Jennifer: So the IT component, it has to be software or cloud computing. So you couldn’t, for example, spend it on a new firewall or some new employee laptops?
Brian: That’s correct. It’s more software-related things.
Jennifer: If you’re in retail or restaurant business, for example, could you use the money to invest in your online ordering system?
Brian: Absolutely, yes, for sure. There is a lot of funds, they’re actually earmarking funds for the hospitality and restaurant industry. Right now, the maximum loan amounts are two and a half times your average monthly payroll costs. With the restaurant and hospitality industry it’s three and a half times that. They’re actually focusing on that area because they know that that was hit very hard.
Jennifer: OK, so assuming that you qualify for this new round and you have this pool of money that you could put towards IT investments in software and cloud computing, where do you advise that companies focus to make their business as sustainable as possible through the remaining period of COVID and the recession.
Brian: Where we’ve seen businesses investing in is online financial systems, moving things that might be on premise into the cloud. So anything that would be in like Microsoft Azure or AWS, moving those server type applications to the cloud is what we’ve seen, so they have greater access and don’t rely on facility-based systems.
Brian: Now, there are certainly reasons why you would do that and reasons why you might not do that due to PII information or anything like. So you’ve got to be real careful what you’re moving. But we’re seeing a lot of folks moving to cloud-based CRM systems, cloud-based ERP systems, and also data warehousing and reporting systems in the cloud.
Jennifer: Is this a question of, oh, we finally have some money and we can make this move that we’ve been thinking about for a while? Or is this really, this is a strategic move that is going to help us through this pandemic?
Brian: I think it’s the latter. I think when you look at where businesses are struggling, initially the struggle was how do we get our remote access to our systems? And I think a lot of things happened during that period. People started taking home work computers, trying to plug them into their home internet. And with all the other folks working from home, as well as kids learning from home, the bandwidth didn’t seem to… It was a crunch time for everyone. That has evened out a bit now and I believe people are looking at security. How do we get access to our employees more effectively and utilizing cloud applications and cloud tools to do that.
Jennifer: Now you have a company called CIO Advise, and this is what you do, right? You go into companies and you help them decide how to spend their money, how to structure their IT department. So let’s say that I’m a company. I’ve just received some PPP money. I know I can spend it in IT. And I say, Brian, walk me through. How do I decide where to put this money?
Brian: Right. So you have to look at bottom line figures. Where is the money going to increase your bottom line? If it’s an ERP software system, can you actually improve processes, streamline things such that you can eliminate a lot of manual labor and a lot of manual work. So you’ve got to look at the bottom line of when I’m using these dollars, is it going to contribute to my top line revenue?
Jennifer: There are a lot of companies that are trying to figure out how to bring workers back into the office now and may be facing periods of lockdown again, where they have to go home and then come back. And so are there any investments teams can make in their IT that might help them with those issues?
Brian: Yeah, there’s something that’s out there that’s readily available from Microsoft. And so you got to look at a couple of different things. You’ve got to look at the health of the people that you want to bring in. You’ve got to look at local, state and federal regulations of where are the lockdowns. So if you have like a multi-city or multi-state or all over the country offices, you need to figure out what is going on locally in that area and when is it safe to bring back employees.
Brian: Microsoft has a tool that actually tracks local municipalities and the number of infection rates and tracks all that in a Power BI application. It also has a handheld application that employers can give to their employees to check in on them and find out where are they working from, how are they feeling today, and are you planning to come in today. Those kind of things can all be tracked. And all that information is brought back into a dashboard where the business leaders can make decisions on opening facilities or in fact, closing facilities again and making people go back to their home in order to work safely. So there is some tools out there that allow you to track all this information into a Power BI dashboard that is very interactive and is quite effective, actually. So that’s one way that you could use the PPP funds to figure that out.
Jennifer: Is that data from Microsoft only in the U.S. or does it cover other countries as well?
Brian: I believe it’s worldwide.
Jennifer: That’s excellent. That sounds like a great way to be very flexible and very quickly, you know, flex your workforce and respond to changes in COVID outbreaks.
Brian: Yes, for sure, and I think having the information in front of you instead of just guessing is powerful. It is really good for companies to use this type of data to make sure that they’re making the right decisions for their employees.
Jennifer: If you were advising a company who doesn’t qualify for the PPP or who isn’t within the United States, would you be telling them to invest in the same sorts of things for 2021, or would you advise them differently?
Brian: Absolutely no, I think I think everyone needs to be thinking about resilience and how do we come out of this stronger than we were. And that is looking at your expenses, looking at where your dollars can be utilized to simplify processes, to streamline something like approval processes instead of throwing emails all over the place. Maybe you have an application that integrates with a mobile app that if you need to have something approved, it pops up on the screen of your mobile device and you get it approved and you move forward very quickly. So those are the kind of things that I help my clients look for, those big win things that you can spend your dollars on and ensure that you are actually reducing costs and increasing your topline revenue.
Jennifer: Let’s assume now that you have qualified for this loan, I understand there are some forgiveness rules as well where you don’t have to pay the loan back. Can you tell us about those?
Brian: Yes, so for loans that are $150,000 or less, after you spend the money, there is a one-page simple form that you fill out. You show from your financial records that you’ve paid that money out and it takes very little time to get that forgiven. That’s the great thing about it. Our company actually used it and it worked flawlessly. As long as you spend it on what they say you can spend it on, it’s a no brainer. And they forgive the loan.
Jennifer: Closing thoughts on using the PPP to be really strategic with your IT investments this year.
Brian: I think it’s a great opportunity. This is money that can be utilized to build your business and make yourself more an online presence. Right. And so instead of having servers in the office or servers somewhere, you can actually do the things that you were planning to do. But when COVID hit you probably said, you know what, we’re not going to do that right now. That’s what this second round’s about, is how do you use some of those funds to put the projects that you are on hold and that stimulates the economy as a whole for companies like mine and other IT companies so that we can also rebound and have a healthy economic outlook here.
Jennifer: Great. Thank you so much for joining us today, Brian.
Brian: I appreciate your time. Thank you for having me.
Links from this episode
- Second Draw PPP Loans
- What Small Business Owners Need To Know About The New Round Of PPP Loans
- Return to the workplace with confidence (Microsoft COVID-planning resources)
- CIO Advise
- Brian Leimbach on LinkedIn
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