Small Business Thread - Advice for Navigating Covid-19

Discussion in 'The Mainboard' started by dallasdawg, Mar 18, 2020.

  1. Oranjello

    Oranjello Well-Known Member
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    I would ignore whatever source is saying the second one is proper. I've gotten 50+ emails about how to calculate payroll costs, and that's a new one.

    The real issue is whether there's a $100k cap or not. For example, if someone makes $150k plus benefits, obviously the salary is capped at $100k but are the benefits included or excluded?

    I have my own thoughts and answers, and will not muddle the thread because the answer is there is no answer.
     
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  2. Oranjello

    Oranjello Well-Known Member
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  3. Oranjello

    Oranjello Well-Known Member
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    If you want an answer... The application says its #2, but there's a legitimate argument the statute says #1
     
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  4. momux

    momux AFAM Scholar
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    2
     
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  5. momux

    momux AFAM Scholar
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    Didn’t realize this. Application is very specific about #2.

    internally though we are expecting a number of revisions to the application.
     
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  6. NYGator

    NYGator Well-Known Member
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    I’m with you. I am going to go with the more favorable interpretation, and I actually think it makes more sense, because unlike salary compensation, health care benefits are more even across employees.
     
  7. momux

    momux AFAM Scholar
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    I would advise against that to be honest. The application is very specific about how to answer it.
     
  8. NYGator

    NYGator Well-Known Member
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    That is what the application calls for though.
     
  9. momux

    momux AFAM Scholar
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    You’re right I think. Upon re-reading it appears that the salary and wages portion are all that count towards the cap. May just be a poorly written FAQ but I agree with you now.
     
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  10. momux

    momux AFAM Scholar
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  11. Oranjello

    Oranjello Well-Known Member
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    That's not the application that's a summary prepared by Treasury. This is the application; note the payroll cost paragraph at the top of page 3: https://www.sba.gov/sites/default/f...Paycheck Protection Program Application_0.pdf

    Also, pay attention to the paragraph after the one you screen shotted. Yes, it is ambiguous, but I think the last sentence is Treasury's/SBA's interpretation of the rule: "Payroll costs will be capped at $100,000 annualized for each employee."
     
  12. Oranjello

    Oranjello Well-Known Member
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  13. momux

    momux AFAM Scholar
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    I agree with you that the intention of the bill and careful reading will end up with that interpretation. But who knows what the actual implementation or interpretation willl be so why not try for it.

    Whoever put the parentheses in my screenshot after the first bullet point and not the header is a real dumbass.
     
  14. Oranjello

    Oranjello Well-Known Member
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    I agree it's worth a shot for sure, but--and I'm having this discussion in an email chain with some partners right now--the SBA has already released their implementation/interpretation, and it's found at the top of page 3 of the application. Yes, they may revise it in more formal regulations (likely released after the program begins accepting applications), but for now the application is the interpretation.

    Also, practically speaking, unless it's changed tomorrow, then when the program begins accepting applications on Friday, your SBA lender is going to listen to what they have been told by the SBA. I would imagine what the SBA tells the banker will be in line with their application (and not some Congressman or Treasury Department flyer). There are lots of questions and lots of reasonable answers, but this is moving extremely quickly and the bankers will need to defer to the SBA rather than arguing with one of probably dozens/hundreds of people in line applying for these things
     
  15. momux

    momux AFAM Scholar
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    Yeah you’re not wrong. On re-read in fact I think you are quite right.
     
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  16. Oranjello

    Oranjello Well-Known Member
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    FYI ADP is preparing customized reports with the type of information required by the application
     
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  17. Room 15

    Room 15 Mi equipo esta Los Tigres
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    Can anyone link to a good summary of PPP, at least the most up-to-date understanding of it? I work for a company with 9 employees, 7 of them hourly, and we're all getting 0 hours right now. I'm trying to politely tell him to apply for this damn thing so we can all start getting paid.
     
  18. Deuce

    Deuce Well-Known Member
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    These are the Treasury's overviews. Tell them to call their banker or CPA.

    https://home.treasury.gov/system/files/136/PPP -- Overview.pdf

    https://home.treasury.gov/system/files/136/PPP--Fact-Sheet.pdf
     
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  19. NYGator

    NYGator Well-Known Member
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    Check out the SBA website for payroll protection program. they have a current FAQ and it will be updated today. There is also tons of info on pages 8-10, but...

    PAYCHECK PROTECTION PROGRAM (PPP) INFORMATION SHEET: BORROWERS
    The Paycheck Protection Program (“PPP”) authorizes up to $349 billion in forgivable loans to small businesses to pay their employees during the COVID-19 crisis. All loan terms will be the same for everyone.

    The loan amounts will be forgiven as long as:

    · The loan proceeds are used to cover payroll costs, and most mortgage interest, rent, and utility costs over the 8 week period after the loan is made; and

    · Employee and compensation levels are maintained.

    Payroll costs are capped at $100,000 on an annualized basis for each employee. Due to likely high subscription, it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs.

    Loan payments will be deferred for 6 months.

    When can I apply?
    · Starting April 3, 2020, small businesses and sole proprietorships can apply for and receive loans to cover their payroll and other certain expenses through existing SBA lenders.

    · Starting April 10, 2020, independent contractors and self-employed individuals can apply for and receive loans to cover their payroll and other certain expenses through existing SBA lenders.

    · Other regulated lenders will be available to make these loans as soon as they are approved and enrolled in the program.

    Where can I apply? You can apply through any existing SBA lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. Other regulated lenders will be available to make these loans once they are approved and enrolled in the program. You should consult with your local lender as to whether it is participating. Visit www.sba.gov for a list of SBA lenders.

    Who can apply? All businesses – including nonprofits, veterans organizations, Tribal business concerns, sole proprietorships, self-employed individuals, and independent contractors – with 500 or fewer employees can apply. Businesses in certain industries can have more than 500 employees if they meet applicable SBA employee-based size standards for those industries (click HERE for additional detail).

    For this program, the SBA’s affiliation standards are waived for small businesses (1) in the hotel and food services industries (click HERE for NAICS code 72 to confirm); or (2) that are franchises in the SBA’s Franchise Directory (click HERE to check); or (3) that receive financial assistance from small business investment companies licensed by the SBA. Additional guidance may be released as appropriate.


    What do I need to apply? You will need to complete the Paycheck Protection Program loan application and submit the application with the required documentation to an approved lender that is available to process your application by June 30, 2020. Click HERE for the application.

    What other documents will I need to include in my application? You will need to provide your lender with payroll documentation.

    Do I need to first look for other funds before applying to this program? No. We are waiving the usual SBA requirement that you try to obtain some or all of the loan funds from other sources (i.e., we are waiving the Credit Elsewhere requirement).

    How long will this program last? Although the program is open until June 30, 2020, we encourage you to apply as quickly as you can because there is a funding cap and lenders need time to process your loan.

    How many loans can I take out under this program? Only one.
    What can I use these loans for? You should use the proceeds from these loans on your:

    · Payroll costs, including benefits;

    · Interest on mortgage obligations, incurred before February 15, 2020;

    · Rent, under lease agreements in force before February 15, 2020; and

    · Utilities, for which service began before February 15, 2020.

    What counts as payroll costs? Payroll costs include:

    · Salary, wages, commissions, or tips (capped at $100,000 on an annualized basis for each employee);

    · Employee benefits including costs for vacation, parental, family, medical, or sick leave; allowance for separation or dismissal; payments required for the provisions of group health care benefits including insurance premiums; and payment of any retirement benefit;

    · State and local taxes assessed on compensation; and

    · For a sole proprietor or independent contractor: wages, commissions, income, or net earnings from self-employment, capped at $100,000 on an annualized basis for each employee.

    How large can my loan be? Loans can be for up to two months of your average monthly payroll costs from the last year plus an additional 25% of that amount. That amount is subject to a $10 million cap. If you are a seasonal or new business, you will use different applicable time periods for your calculation. Payroll costs will be capped at $100,000 annualized for each employee.

    How much of my loan will be forgiven? You will owe money when your loan is due if you use the loan amount for anything other than payroll costs, mortgage interest, rent, and utilities payments over the 8 weeks after getting the loan. Due to likely high subscription, it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs.

    You will also owe money if you do not maintain your staff and payroll.


    · Number of Staff: Your loan forgiveness will be reduced if you decrease your full-time employee headcount.

    · Level of Payroll: Your loan forgiveness will also be reduced if you decrease salaries and wages by more than 25% for any employee that made less than $100,000 annualized in 2019.

    · Re-Hiring: You have until June 30, 2020 to restore your full-time employment and salary levels for any changes made between February 15, 2020 and April 26, 2020.

    How can I request loan forgiveness? You can submit a request to the lender that is servicing the loan. The request will include documents that verify the number of full-time equivalent employees and pay rates, as well as the payments on eligible mortgage, lease, and utility obligations. You must certify that the documents are true and that you used the forgiveness amount to keep employees and make eligible mortgage interest, rent, and utility payments. The lender must make a decision on the forgiveness within 60 days.

    What is my interest rate? 0.50% fixed rate.

    When do I need to start paying interest on my loan? All payments are deferred for 6 months; however, interest will continue to accrue over this period.

    When is my loan due? In 2 years.

    Can I pay my loan earlier than 2 years? Yes. There are no prepayment penalties or fees.

    Do I need to pledge any collateral for these loans? No. No collateral is required.

    Do I need to personally guarantee this loan? No. There is no personal guarantee requirement.

    ***However, if the proceeds are used for fraudulent purposes, the U.S. government will pursue criminal charges against you.***

    What do I need to certify? As part of your application, you need to certify in good faith that:

    · Current economic uncertainty makes the loan necessary to support your ongoing operations.

    · The funds will be used to retain workers and maintain payroll or to make mortgage, lease, and utility payments.

    · You have not and will not receive another loan under this program.

    · You will provide to the lender documentation that verifies the number of full-time equivalent employees on payroll and the dollar amounts of payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities for the eight weeks after getting this loan.

    · Loan forgiveness will be provided for the sum of documented payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities. Due to likely high subscription, it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs.

    · All the information you provided in your application and in all supporting documents and forms is true and accurate. Knowingly making a false statement to get a loan under this program is punishable by law.


    · You acknowledge that the lender will calculate the eligible loan amount using the tax documents you submitted. You affirm that the tax documents are identical to those you submitted to the IRS. And you also understand, acknowledge, and agree that the lender can share the tax information with the SBA’s authorized representatives, including authorized representatives of the SBA Office of Inspector General, for the purpose of compliance with SBA Loan Program Requirements and all SBA reviews.
     
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  20. dallasdawg

    dallasdawg does the tin man have a sheet metal cock?
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    you’d hope they would have already decided to apply. there’s no downside

    wonder how many businesses are going to fail because they didn’t even try
     
  21. momux

    momux AFAM Scholar
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    It’s literally free money.
     
  22. Room 15

    Room 15 Mi equipo esta Los Tigres
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    That's why I'm going to keep hammering him. He respects me enough (I think) to listen...we'll see.
     
  23. Oranjello

    Oranjello Well-Known Member
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    Hearing a 200+ page SOP (presumably a procedure manual) is expected to be released by the SBA to lenders today
     
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  24. CUAngler

    CUAngler Royale with Cheese
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    Hearing it's doubtful this goes down tomorrow.
     
  25. Houndster

    Houndster Well-Known Member
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    How fast do you guys think the $350 billion will go?
     
  26. Frankie Carbone

    Frankie Carbone eh che se dice
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    For an S-Corp who only has 1 employee on salary, would they be able to apply for the PPP?
     
  27. Deuce

    Deuce Well-Known Member
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    The money will run out, but not in the first week.
     
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  28. gowolverines8

    gowolverines8 Well-Known Member

    from what I’ve read it seems like the government is going have to decide one of two things

    1. have pretty traditional vetting process that will take a long time to disburse funds to prevent fraud as much as possible
    2. Implement an automated process that will disburse funds quickly but potentially allow fraud
     
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  29. Deuce

    Deuce Well-Known Member
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    Nothing like dropping 200 pages of procedure on people, 12 hours before they are expected to inject $350B into the economy.
     
  30. Room 15

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    Is there a requirement that the business is open? Like can bars/restaurants/hotels apply?
     
  31. colonel_forbin

    colonel_forbin Well-Known Member
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    The bolded is correct. This is what the actual Act says:

    “(viii) the term ‘payroll costs’—

    “(I) means—​

    “(aa) the sum of payments of any compensation with respect to employees that is a—

    “(AA) salary, wage, commission, or similar compensation;
    “(BB) payment of cash tip or equivalent;
    “(CC) payment for vacation, parental, family, medical, or sick leave;
    “(DD) allowance for dismissal or separation;
    “(EE) payment required for the provisions of group health care benefits, including insurance premiums;
    “(FF) payment of any retirement benefit; or
    “(GG) payment of State or local tax assessed on the compensation of employees; and
    “(II) shall not include—

    “(aa) the compensation of an individual employee in excess of an annual salary of $100,000, as prorated for the covered period;
    “(bb) taxes imposed or withheld under chapters 21, 22, or 24 of the Internal Revenue Code of 1986 during the covered period;

    ****

    So it's not just salary + health insurance. Rather, it's salary + health insurance + 401k benefits, etc. not to exceed $100,000 per person when you add it all up.

    But the real question is the bolded part in my post. Oranjello

    As I read that, if an employee makes $90,000/year, the ~$25,000 in federal and FICA taxes on that would not be part of the "payroll costs," correct? Because if that's the case, then the maximum loan for that person would be like $65,000 and the employer would basically have to come out of pocket for the $25,000 which would otherwise be withheld for taxes.

    It makes sense because otherwise, the government would basically be giving away free money and not collecting on the taxes it would otherwise collect.
     
  32. momux

    momux AFAM Scholar
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    Tough to interpret. I can see the argument you are making but the first section “inclusions” says that all wages are included (full brunt of the salary). I think the exclusion is to prevent any sort of double dipping.
     
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  33. Oranjello

    Oranjello Well-Known Member
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    In determining "payroll costs," you do not include “taxes imposed or withheld under chapters 21 [Social Security and Medicare taxes, employee and employer portion], 22 [railroad retirement tax], or 24 [withholding obligations from employees].” You can't add them to the total amount of "payroll costs" like you can with their PTO
     
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  34. Oranjello

    Oranjello Well-Known Member
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    Look at all the questions ITT. If it actually exists, at least the lenders will have a place to turn to seek answers. Under the circumstances, no one can reasonably expect lenders to have an answer immediately.
     
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  35. CUAngler

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    This is me. Yes is the word I was given. I am not on my business payroll, it's passed on to my s-corp
     
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  36. Oranjello

    Oranjello Well-Known Member
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    Don't forget it's a monthly average. If someone makes $60,000 and has $20,000 in benefits per year, you divide that 80,000 by the number of payroll periods to get their monthly average pay. If they are paid once a month, the monthly average is $6,667. Times 2.5 = $16,667.5 for that single employee
     
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  37. Frankie Carbone

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    From what I understand the chances of forgiveness on the loan should be high?
     
  38. Houndster

    Houndster Well-Known Member
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    It would still be $90k, those are employee withholdings.
     
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  39. Oranjello

    Oranjello Well-Known Member
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    No one can predict what you do with the money. If you properly spend it, substantiate that spending, and do not reduce worker pay or headcount, then by law they have to forgive it.
     
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  40. Oranjello

    Oranjello Well-Known Member
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    It's a good thing Treasury put the interest rate on these loans at 0.5%. There are probably going to be a lot of people who don't get the loan forgiven because they just signed up for free money without any real clue as to the strings attached
     
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  41. Houndster

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    The forgiveness is based on what you actually pay in payroll, rent/mortgage interest, and utilities over an 8 week period that I believe started on April 1st.

    I’d recommend talking to your CPA so you fully understand how the loan works. He/she should be able to do the calc and application for you and give you a decent idea of what will be forgiven.
     
  42. colonel_forbin

    colonel_forbin Well-Known Member
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    We've been told to open up a separate checking account, have the funds deposited to that account, and then pay everything that's forgivable out of that account to easily show what's been paid.
     
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  43. CUAngler

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    The question I have is I'm the sole employee of that entity and how I structure my income. So theoretically that money all goes to payroll and no one is laid off.
     
  44. Oranjello

    Oranjello Well-Known Member
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    I don't know your business structure, but if you don't have a payroll report or a way to substantiate how the money is used then I'd figure one out. They are going to want to see paperwork. It's an unclear area for solo's and IC's. For example, for a real estate agent who is 1099 and applies for the loan. They otherwise qualify for the loan, but how do they document how it is spent in order to get the loan forgiven? They don't have payroll, they just get cash and do whatever with it, like any other employee does
     
  45. Frankie Carbone

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    Same. That’s why I think we should be qualified for the forgiveness. I have my quarterly 941 reports and 2020 salary schedule in wages and retirement contributions.
     
  46. Oranjello

    Oranjello Well-Known Member
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    Yeah, that's the easiest way
     
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  47. NYGator

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    so while this language may be clear in the act, the forms and guidelines they have put out since tend to contradict and support this at the same time. I spoke to my bank and to my accountant and both have their hands up when it comes to interpretation. I suspect it will fall on the bank to underwrite it based upon however they interpret it unless additional guidance is given, and their interpretation will be what is honored.
     
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  48. NYGator

    NYGator Well-Known Member
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  49. dallasdawg

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    so its gross salary minus federal obligations correct?
     
  50. dallasdawg

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    and do you use the 12 months of 2019, or a rolling 12 months? i've heard both