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Riding Out the Storm

Business Tips for Uncertain Times

In addition to practicing criminal defense, Attorney Marc Lopez is also a small business owner trying to navigate uncharted economic waters. He knows he’s not alone, and he couldn’t think of anyone he’d rather turn to for guidance than Attorneys Matt Griffith and Chad Rollins of the Griffith Xidias Law Group. What follows is a lightly edited transcript of their conversation.

Marc Lopez
Hi, this is Marc Lopez and Attorney Matt Griffith and Attorney Chad Rollins, and these two are some of the brightest business attorneys I know. So I wanted to speak with them—just about, you know, the business climate involving the shut-down and stay-at-home orders. I know that both Matt and Chad do a lot of real estate law, and one of the big things that Governor Holcomb did was say, Hey, no evictions—at least until May.

So, Matt, I wanted to start with you. What is the business climate right now? What is going through entrepreneurs, solopreneurs, real estate investors—what’s going through their heads right now?

Matt Griffith
It’s not good. The situation is bad and getting worse. I’ll talk about the commercial, and then Chad can talk about the residential. Chad handles a lot of our landlord, tenant, and eviction work on the residential side. 

On the commercial side, businesses are shut down. If you have a barbershop, or a small restaurant, or some other retail business, you have no income. And because you have no income, you can’t pay your rent. And because you can’t pay your rent, your landlord can’t pay his mortgage, and he can’t pay the people on his property management team. It’s bad. It’s bad and it’s getting worse. The federal government’s programs to address some of these issues are good, but way too slow. Way, way too slow. They should’ve got checks out three weeks earlier. If they had done that, we wouldn’t have seen another five-and-a-half million people making first-time unemployment claims this past week.

Marc Lopez
Matt, are you talking about relief for individuals, or are you talking about relief for businesses?

Matt Griffith
So, individuals are gonna get some checks that are going straight to people that have, essentially, below $75,000 of—I think it’s 75—of income. So they’re just gonna get a check from the federal government, depending on when they file their tax returns and whether the federal government still has a connection to their bank account. So the federal government would give those people checks, and those checks are coming out. 

But on the business side, there are essentially two programs that people are relying upon. One is the PPP—which is the Payroll Protection Program—where a small business can make an application to get a loan from the Small Business Administration up to two-and-a-half times whatever their normal salary is. The salary is paid to their employees. So, if you pay $10,000 a month on average for wages for your employees, then you could get two-and-a-half times that amount. You get a check from the government in the form of a loan that is 100 percent forgivable if you keep those people employed. Seventy-five percent of the money you got on that loan—if it’s used for employment purposes, you pay employee wages—then you’re gonna basically get that money for free. 

And then there’s another loan program that’s a traditional disaster relief program, where there’s up to a $10,000 grant per business, and you can just get that money in the form of a grant. You go directly online—there’s no lender relationship. You go directly online to the SBA website, and you can apply for that money. Normally that money is doled out in three days, but it’s taking as many as 10 days for people to get that money. It’s a mess. And then, to make the situation worse, the first round of—this is all under the Cares Act—the first round of funding is gone. The SBA isn’t even taking applications anymore for the PPP. You can’t even ask the government for money any longer. They stopped taking those applications yesterday. The situation’s serious.

Marc Lopez
And we’re filming this today, Thursday—

Matt Griffith
The 16th.

Marc Lopez
And every single news outlet has reported that they are done. There is no more money, unless Congress offers more—

Matt Griffith
Authorizes more, yeah.

Marc Lopez
Yeah, so, anybody that’s watching this—if they have an SBA number, are they basically in a queue to get funded? Or, if you don’t have money in your account right now, you are just out of luck?

Matt Griffith
If you applied—well, I’m of the opinion that there’s gonna be so much political pressure on Congress that Congress will authorize another $250 billion. The first round was $349 billion, and for over a week, the Trump administration has been asking for another $250 billion. The Democrats wanna add a whole bunch of other stuff onto the bill, and the Republicans wanna keep it clean and just do another $250 billion of authorization, and they’re arguing about that. And it’s so stupid, because while they’re arguing, more and more people are going on the unemployment dole instead of working. That’s politics.

Marc Lopez
No, it’s absolutely insane. People are suffering. I mean, like—exactly what you said, you know? If I can’t pay my rent, my landlord can’t pay his mortgage—and then you’re exactly correct. It’s a giant domino effect.

Matt Griffith
Yup.

Marc Lopez
What advice do you have for landlords—people that own buildings where, literally, even if the people wanted to pay, they physically cannot come in and provide a service for customers to pay them? What advice do you have for the landlords who are watching this?

Matt Griffith
So on the commercial side—and Chad, again, can talk about the residential side—on the commercial side, landlords—if they have a mortgage, they need to go to the mortgage lender. They probably should’ve done this two weeks ago. Well, let me put it this way: My smart clients did two things—they were doing two things. My smart clients were going to their tenants and helping the tenants apply for PPP and other programs. They were actually assisting the tenants—the commercial tenants—on getting SBA relief. And they also were working out partial payments, so that the tenants continue to make some payments to the landlord. 

The smart landlords also were applying for their own relief, because they’re eligible for relief. They’re a business, and they could also get relief, especially if they have staff. So anybody that has, you know, property managers that have a staff of people—they could apply for PPP and SBA disaster assistance, as well. And then they also—the smart commercial landlords—were going to their lenders and working out deals to defer payments, and most lenders were giving anywhere from three-to-six months of loan payment deferment. And so you would just take the next 90 days of loan payments, and they would tack it onto the back of the loan as additional principal.

Marc Lopez
They’ve basically got a three-month grace period—they gotta pay it back at the end. That is smart. That is actually fantastic.

Matt Griffith
So, you might ask yourself, Well, why would the banks do that? Why would a commercial bank do that? And I’ll tell you why: Because commercial banks are not in the business of foreclosing on restaurants and barbershops and ice-cream places and all the retail stores. I mean, think about it. If you were a bank, and you financed a strip mall—do you wanna take over all those businesses? Do you know how cheap it’s going to be to buy used restaurant equipment in three-to-six months? If you want to start a restaurant—

Marc Lopez
It’s scary, yeah!

Matt Griffith
Seriously—if you want to start a restaurant, wait three-to-six months, and they’ll give you the equipment to start a restaurant. You will have tables and chairs and stoves and refrigerators and freezers. You’re gonna be able to get all that equipment dirt, dirt cheap, because so many restaurants are gonna go bust. And the banks don’t want that stuff. They know that when they foreclose and they take all that stuff back, they’re not gonna get any value out of it. The market’s going to be in the toilet. So that’s why banks are giving landlords assistance—so landlords can give assistance to the tenants, so that everybody can just keep going. We just gotta ride out the storm. We’re all in the same boat.

Marc Lopez
No, absolutely. You know—what is a bank gonna do with ice-cream parlor equipment? They want to work. You’re totally right about that. Chad, what perspective do you have from the residential market?

Chad Rollins
So along the same lines as what Matt’s saying—I mean, landlords and investors of residence property have been caught holding the bag. The one advantage commercial landlords have is they can still file for eviction. So if it doesn’t benefit them, or it doesn’t make sense for them to hold out and work with their tenant to put this on the back end, and they need to—they still can. Unfortunately, Governor Holcomb passed that executive order that put a stop on all new eviction before closure proceedings as it relates to residential property. So they’re outta luck there. 

The bigger disadvantage is that a lot of the counties’ small claims courts—as well as the superior courts—are interpreting that executive order to not just be the initiation of a foreclosure eviction, but to a complete stop of anything. So even rulings have already come down awarding possession back to the landlord, where they can potentially move that tenant out and get a paying tenant in—the courts are intervening and stopping that. So now they’ve got a possession order for—potentially—the end of March that already says that they’ve been granted possession back, but they can’t enforce it. So the tenant’s not gonna pay—they know they’re already on the way out—and the landlord’s stuck holding the bag for potentially the next—at least until May, when the state of emergency is lifted—potentially. 

But if that gets extended again, then they’re gonna still be in that same boat. So investors that I’ve worked with—and the landlords—I’ve told them they have to make a business decision. They have to decide whether it makes sense to just do a trickle effect and get a little bit of money coming in from the tenant—even if it’s not full payment—in lieu of an eviction, and then deal with them on the back end. And they also—just like Matt was saying of commercial—they need to reach out to their lenders and their mortgage companies and work with them and take advantage of any cashflow opportunities they have—pushing the mortgages and restructuring those—because even though they’re not getting the money coming in, they’re still obligated to pay the banks. So they just have to make do and ride the storm out. I’m hoping that the stimulus checks will start to trickle in for some of these people that have been hit hard, and they can put that towards some of the rent. 

I understand that there’s life decisions. You gotta put it where you need it first, which is food on the table for the family—but then if there’s leftovers, then maybe you can kinda go back up the scale, as you were saying, so the domino effect can be stopped a little bit. But other than that, they just have to ride out the storm and do the best they can to make do.

Marc Lopez
Chad, give us some advice. If someone’s watching this and they are a renter, and they’re unemployed—they are laid off, they cannot pay rent—give them some sound advice on what to do—what next steps they should do right now.

Chad Rollins
There’s not much advice you can give a renter that’s in that situation, because even in Governor Holcomb’s order, they’re still obligated to that financial debt, so they still have to pay the rent. It doesn’t stop that. 

They can try to work with the landlord. They can come up with some plan that says that they will pay as much as they can now, and then tack on once they get back on their feet—or in a couple of months—and that they’ll just pay a premium to get caught back up. But it really falls on the decision of the landlord. The tenant really doesn’t have much ability to do anything—other than plead.

Marc Lopez
And what about the opposite of that? What is some advice you have for landlords that have renters—and for various reasons they’re unable to pay rent? What’s some advice that you can give them?

Chad Rollins
They need to be proactive. A simple threat’s not gonna be effective in this sense, because once someone’s pushed into their corner, they can’t go any further—so at that point a threat just is gonna fall on deaf years. So you have to give them a lifeline, if you can, and that may be, Look, I understand you’re in a bad spot. Have an open conversation—What’s your scenario? What do you have coming in, and what can you afford to pay? Even if that’s only 10 cents on the dollar, it’s better than nothing. And you can’t do anything—you can’t file the eviction anyway, so take whatever you can to give yourself some income coming in, and deal with it on the back side.

Marc Lopez
It sounds like for both of you gentlemen, the key to a lot of this is talking to everybody—trying to communicate effectively—you know, whether or not you’re the landlord, the renter, the business owner, the bank—it seems like communication is key. Am I right about that?

Chad Rollins
Yeah.

Marc Lopez
Obviously, money is key. That’s the king. But in these times, you can’t do too much, and you know, it seems like communication is really paramount.

Matt Griffith
Well, think about it—each player in the chain, right? So if you work for that barbershop, you can’t cut hair right now, right?

Marc Lopez
You’re lucky, man—you haven’t got that problem!

Matt Griffith
I was waiting for that. I don’t know why I used barbershop as an example. I think, Marc, I had hair when I first met you. Maybe not, I don’t know. 

But you can’t work, right? So what’s a person gonna do? They’re gonna—like Chad said—they’re gonna try to put food on their table as best they can. So they’re gonna go file unemployment, if they can’t work. And here’s what’s really dumb—the way the federal government set this up. They actually gave more money to people to stay home than to work. The unemployment benefits were jacked up, and for some people, the unemployment benefits were better than their wages. So, okay—but people are gonna naturally do what they’ve got to do. 

If you are the owner of the barbershop, what are you gonna do? You can’t pay your rent, and you can’t pay your employees. So you gotta let your employees off. And you can’t open your doors for business, because there’s an order that says you can’t open up and conduct business. So you can’t pay your rent—what are you gonna do? I mean, people are gonna naturally do what they can only do, right? You can’t expect them to pay the rent if they got no income coming in the door. So it behooves the landlord to reach out to the tenant and say, Hey, what can we do to work through this together? 

It’s gotta be a win-win. It’s sorta like the prisoner’s dilemma, right? Two guys that robbed a liquor store—they’re in questioning room A and questioning room B, right? And the police are interviewing both of them. If they stick to their story, they’re golden. They both have alibis for each other, and they’re great—but if one cracks, the whole thing falls apart, and they’re probably both going to jail. 

Well, guess what? It’s the same for us. We’re all in this together, okay? We desperately need to hold things together, so that we don’t go into a depression. We’re probably gonna hit a recession. It’s possible we actually get out of this without a recession—that’s defined as two quarters in a row where the economy goes downwards. Two quarters in a row. It’s possible that we have one horrible quarter. The first quarter actually wasn’t bad, surprisingly. March was bad—January and February, not so bad. 

So, the second quarter’s gonna be the big one. That’s gonna be very painful, the second quarter, and then hopefully we bounce out of it quickly in the third quarter. I’m of the opinion that we’re gonna come out hard and fast, but I think there’s gonna be a lot of collateral damage. There is talk—I heard that HUD is already talking about some kind of mortgage foreclosure assistance. So, for those who are old enough to not have hair and who went through the mortgage foreclosure crisis—that was crazy. We had so many mortgage foreclosures. I don’t think we’re gonna have that volume of foreclosures this time. I do think there’s gonna be a big tick up in bankruptcies—both business and individuals—and I think there’s gonna be an uptick in foreclosures. 

There’ll be an uptick in evictions, for sure, because this assistance from the federal government was inadequate to replace what the economy normally does, and it was too slow. It was too slow. It was too slow by about three weeks—and, you know, the Republicans and the Democrats arm-wrestled for an extra week about stuff. Even after they had the bill done, they spent another week arguing with each other—so that was one of the three weeks. If they had gotten the relief out three weeks earlier, we’d be in a completely different scenario, but three weeks made a big difference. A lot of people got fired or laid off in the past 30 days—a huge number—and now we’re in the spot we’re in. Twenty million people lost their job in the past month. That’s a lot.

Marc Lopez
Unemployment claims are just insane right now too.

Matt Griffith
Every state is suffering this.

Marc Lopez
Well, hey—I really appreciate both you guys taking your time to chat with me. And Matt, what is the absolute best way for someone to get a hold of yourself or Chad?

Matt Griffith
I would say go to our website, indybizlaw.com—I-N-D-Y-B-I-Z-L-A-W.com. That’s probably the easiest way. Go there, and there are links, our phone numbers. Our physical address is on there, but our doors are closed right now, so . . . 

You know, it’s interesting—we have a virtual law office. It’s indianavirtuallaw.com. We’ve kind of been anticipating that more and more of our clients are gonna be getting legal services online. We’ve been talking about and thinking about and planning for that for years, actually—but we didn’t realize the extent to which we would be forced into that through a pandemic! But that’s the easiest way to get ahold of us—just go to indybizlaw.com, and either give us a call, or send us an email.

Marc Lopez
Perfect. Thanks so much, gentlemen.

Matt Griffith
Thank you, Marc. Appreciate it.