Small businesses need all the help they can get with staying afloat during these Extraordinary Times, so we've compiled a few resources from some of our strategic partners on some of the new protections in effect as a result of the pandemic that we hope you find helpful.
New SBA Loans
Information provided by Mike Pine, CPA www.pinecocpas.com
As we are sure you have seen, there are two loans being offered by the Small Business Administration (SBA) that are all the talk right now coming from the Coronavirus Aid, Relief and Economic Security (CARES) Act. While the details are constantly changing, this is what we know and/or think right now.
Payroll
Protection Program (PPP) Loan
The idea of the PPP loan is to help small businesses
continue paying their employees and bring back any furloughed employees.
The basic idea is that you can get a loan amount of 2.5 times your
average monthly salaries (up to $10,000,000) and some, if not all, of this debt
will be forgiven. While that seems simple, the devil is in the details,
as they say. Everyone’s story is different and there hasn’t been enough
time to interpret the CARES Act to answer every question. At this point,
the primary focus is on getting the applications started so that money can be
disbursed. More details about what is forgiven will come out in the
coming weeks.
How Do I Apply for the PPP Loan?
- When & how to apply
- Friday, April 3rd – Small business owners & sole proprietors
- Friday, April 10th – Independent contractors
- Where to apply
- You can apply through any financial institution who is participating in the SBA 7(a) loan program. This includes most banks and credit unions. It is recommended that you apply with your current bank.
- To calculate the amount of loan amount you can request, you will calculate the average monthly payroll using one of these three time periods:
- If you were in business in 2019, you will use the monthly average for the entire year of 2019
- If you are a seasonal business, you can use the monthly average for Feb 15, 2019 through Jun 30, 2019. What is a seasonal business? That’s a good question and hasn’t been defined. If you tend to pay more wages in this time period than over the entire year, we would recommend using the seasonal calculation.
- If you were not in business until 2020, you will then use the monthly average for Jan 2020 and Feb 2020
- What is included in this calculation?
- Employee salaries, commissions or other compensations (including paid holiday, vacation sick, medical or family leave)
- Any one employee’s total salary is capped at $100,000 for purposes of this calculation.
- Payments for dismissal or separation
- Group health insurance premiums
- Employer contributions to retirement plans
- Payroll taxes **
- There is uncertainty about whether this includes Federal (FICA & Federal Unemployment) or just State (state unemployment)
- Workers compensation insurance
- Independent Contractors **
- At this point, there is conflicting information about whether you can include payments to Independent Contractors in the calculation. For the sources that say they cannot be included, the reasoning is that the independent contractors can file for the PPP loan themselves.
- For the ** items above, it is your decision whether to include them. You can include them with the chance that they will not be included in the forgiven amount and will have to be repaid.
- For any amount not forgiven, the terms of the loan are 0.5% and must be paid within 2 years. They are deferring payments for 6-12 months, but interest will accrue during that time.
- Additional information:
- Company must have less than 500 employees
- There is no personal guarantee
- Must have been in business on 2/15/20
Economic
Injury Disaster Loan (EIDL)
The EIDL loan can provide up to $2,000,000 for working
capital to keep small businesses operating. We don’t currently know how
the loan amount is determined or how they will determine who is qualified to
receive it. However, as of this writing, you can apply for the loan and
receive a $10,000 advance within 3 business days. This advance does not
have to be repaid, even if you are ultimately denied for the EIDL loan.
This $10,000 advance cannot be used for the same purposes as the PPP loan but
can instead be used for other business expenses.
How Do I Apply for
the EIDL Loan?
To apply for the EIDL, please visit https://covid19relief.sba.gov/#/. The application is submitted through the SBA website directly and is a very quick application to fill out, as it only goes as far as getting information for the $10,000 advance. We assume they will come back with additional questions for the actual loan.
For
Which Loan(s) Should You Apply?
This is a question only you can answer. Because the EIDL loan includes the $10,000 advance that does not have to be repaid and based on the other information that we know currently, we recommend that small business clients apply for both the PPP and EIDL loans. There is a chance that the $10,000 EIDL loan advance will go against your PPP loan forgiveness amount, but that is still very much up for debate. If it does, you can simply repay the PPP loan.
Here's another document that gives further details on SCORE SBA Loans.
Emergency Business Relief Page
Information provided by Snapshot Business Services - https://www.snapshotbusinessservices.com/
Our friends at Snapshot Business Services have put together an Emergency Business Relief page that has some good information and links to resources on it. Please check it out.