Small Business Thread - Advice for Navigating Covid-19

PM sent

 

2 Year maturity - huh

 

we throw an extra 50 in the petty cash drawer every now and then and see if they lose their minds trying to balance it or if it just disappears.

 

Funny you say that. I just got a fraud alert for my company card. Also found out one of my employees has been using it to renew their Amazon Prime and Music account. I called Amazon and they asked me for the Amazon Account number. Well if I had that I wouldn't be calling now would I?

The Amazon support person is refusing to tell me the person's name. They are making me go down my payroll list and guess. Gotta protect the privacy of a thief.

 

So Trump just said April 3rd for PPP. My banker said, good luck.

 

Yeah the one we spoke to yesterday says they’ve received no guidance.

In what way did he mean good luck? Like no way the money gets distributed or the process is going to be a morass?

 

our banker at Wells said PPP wasn't approved yet when we submitted the form posted here. Classic.

 

Meaning. It is not that close. My banker doesn’t even know if that is the form.

 

Went ahead and applied for EIDL...we’ll do PPP whenever it becomes available

Will post about my experience when I get a chance

 

Guess I will figure this out when I speak with my accountant tomorrow, but I submitted the EIDL for my businesses last night. I also have a pass through LLC that my businesses pay me 1099 income with. I wasn’t planning on filing EIDL with my pass though entity but technically I have payroll for myself that I need to pay as well as business loans. I guess apply for the EIDL for that too?

 

On rent, mortgage interest, and utilities? or a Z71?

 

It says on the Fact Sheet released with the form you can't apply until April 3.

Plus, that form has "version 1" in the name and seems fairly basic. Wouldn't be surprised to see it revised

 

My big concern on the form is it requires initialing by all partners over 20% and I have one partner who is somewhat disgruntled and not working for the company right now. I think it is in his best interest to help maximize shareholder value, but could be a struggle. I may have to go Tiger King on him if he doesn't get on board.

 

yes, that was my plan. Avoid the eidl for myself and lean on the PPP since I have cash on hand. But that 10k with seemingly loose restrictions and forgiveness seem like low hanging fruit right now. Have a 5k/mo business note I could use it for.

 

Thats scary but not surprising. Certain parts of the hospitals are ghost towns. People that might have gone in for a questionable reason are definitely staying home. Elective procedures are not being preformed. Trauma is down because people are sitting at home on the couch. The percentage of people in the hospital doesn't scare me. What does scare me is the utilization of hospital resources. When you overtax the hospital that is when people start dying.

 

FYI, my accountant is insisting PPP is Friday and the SBA did release an FAQ and the loan application. My banker is still saying no. here is the FAQ...

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.

 

FYI I am involved in this from one of the major banks perspective. It is a mad scramble right now to get our tech/data/process stood up to be able to process these loan requests starting on Friday.

What you guys have posted is about all that exists in terms of guidance from the SBA so far on this, so we are all kind of flying blind.

I would recommend anyone looking for PPP loan to start preparing your documentation now. The program will run until June 30 but the expectation on our side is that the funding will run out before that date.

 

Is your banker SBA approved? Our entire office is hammering out these applications. This is what the banks we are working with have requested with the applications (if they don’t already have in their files):

1. Articles of Incorporation/Organization
2. Bylaws/Operating Agreements
3. 2019 W-3, 940, and all 4 quarters 941 and state unemployment returns
4. Payroll Summary for 2019
5. 2019 P&L - Total and by month
6. Most recent Payroll Summary by EE with hours worked to calc the FTEs

 

NYGator not sure if you have an opinion on this one. I think I know the answer.

Here's a scenario that we're potentially dealing with. Let's say we're employing someone who's on a project-based arrangement (show runner, editor, etc.) with a set start date and end date and is technically an employee who has met the 30 day threshold (for a long time the industry has attempted to treat these people as independent contractors, but that's bullshit and for a separate convo).

If this e'ee gets sick or decides to take advantage of the child care provision of the act . . . let's say, a week before his out date (or even a day before), how would the act apply to this person? I assume he would be treated as a full time employee with all protections provided under the act available to him, regardless of when the employee triggers the leave?

I know that e'ers can deduct from payroll taxes and apply for accelerated payment from the IRS, but want to make sure this is handled appropriately. Seems as though the act is designed to protect employees and for good reason.

 

Yes. That said, many of the requirements you are citing above are not required by the SBA. Are you saying banks will add in their own requirements?

 

I only have full time employees on W2's, so it is hard for me to think in these terms. Mine is pretty straight forward.

 

I’d imagine it will vary by bank, but this is what we’re being asked for right now.

 

I've seen several banks say they plan on accepting applications beginning Friday.

 

That's an odd list. What about benefits like PTO, health, retirement?

Here's one banks set of requested documents, which seems appropriate to me:

• Payroll reports for 2019 and 2020 year to date showing the following by employee and/or officers:
  • Gross wages
  • Paid time off
  • Paid vacation
  • Pay for family medical leave
  • State and local taxes (form 940, 941, or 944)
  • 1099’s for independent contractors (if applicable)
• Completed 2019 tax return OR 2019 Profit and Loss Report and Balance Sheet
• Documentation showing:
  • Funds received in the form of an Economic Injury loan since 1/31/20
  • Payments for group health care benefits including premiums paid in 2019 to 2020 year to date
  • Payment of any retirement benefits paid in 2019 and 2020 year to date

 

That seems more appropriate. I wonder if his situation was what it is because maybe he doesnt have a preexisting relationship withe the bank. We already have a loan with the bank so I'm sure they have info on incorporation, etc.

 

We’re taking the health insurance and retirement from the P&L for our calc’s, but they haven’t requested documentation for that. PTO is included in wages so that’s all covered by the payroll forms.

 

That looks like the word for word list I've emailed to my clients today.

The Articles of Organization, Resolutions, etc are likely if you don't have a relationship with the bank. There is what seems to be a "gentleman's agreement" among the banks and the SBA that banks are NOT prospecting these loans for two reasons: A. Speed of Delivery and B. Reduce the potential for fraud. So likely if you have a deposit or lending relationship with your bank they should have sufficient corporate due diligence documents listed..

 

It’s settled at this point. One of the Clemson posters posted an official FAQ and I just spoke to someone who does SBA loans exclusively and is “consulting” for it.

You can do both, just can’t double dip on the payroll/rent forgiveness portion.

 

What will it take to provide you a satisfactory answer? Why don't you call a bank?

 

The clemson poster posted a FAQ from a senate committee. While official, it's not binding on the Treasury or SBA, so it's simply a suggestion on their interpretation of the statute. That said, it's 100% clear you can obtain both loans.

Aside from the statutory text, the only guidance issued by the federal government as of today can be found at these 2 links:
https://www.sba.gov/page/coronaviru...ness-guidance-loan-resources#section-header-0
https://home.treasury.gov/policy-issues/top-priorities/cares-act/assistance-for-small-businesses

 

Kabbage, square and PayPal supposedly cut off credit lines today, not good for a lot of small businesses, especially startups.

 

Yeah no reason not to. The government is going to pay your wage bill for the next two months.

 

So, my finance guys are having an internal debate over one issue and we have seen it answered both ways. Wondering if anyone has clarity on this...

Which interpretation of monthly payroll expense is correct?

Let's say for example you only have 3 employees and one makes 90K, one makes 80K and the last makes $150K. I have seen some say that your monthly payroll (salary part) is...

(90+80+100)/12 = $22.5K

I have seen others say it is ((90+80+100)-50)/12 = $18.3K

In the latter example, the amount you pay over 100K gets subtracted from the total adjusted compensation up to 100K and reduces the amount of loan that is available to you.

 

It’s the first one.

 

I agree, but I was getting pushback.

 

The first one.

 

definitely the first one

 

Ok follow up...

1 only cap salary at 100k
2 cap salary + health benefit at 100k total