For small business owners, the Small Business Paycheck Protection Program was part of the $2 trillion plus stimulus bill passed last week.  In broad brushes small businesses qualify for an SBA loan.  The portion of the loan attributable to payroll and healthcare for employees making less than $100,000, healthcare costs, utility costs, and rent is forgiven for two months following the loan origination.  

I know that this Arfcom and we abhor the Government cheese, but this may keep some of our businesses afloat.  


https://www.skadden.com/insights/publications/2020/03/cares-act-provides-much-needed-stimulus

Small Business Paycheck Protection Programs

The CARES Act expands the ability to obtain loans under Section 7(a) of the Small Business Act through a new $349 billion Paycheck Protection Program. Under the program, small businesses, other business concerns, nonprofits and veterans organizations that generally have fewer than 500 employees; self-employed; sole proprietors; independent contractors; and businesses in the accommodation and food services sector with fewer than 500 employees per location, are eligible for small business loans to cover payroll; health care costs; mortgage interest payments, rent and utility payments; and interest on pre-existing debt obligations. The program also permits borrowers to refinance economic injury disaster loans made between January 31, 2020, and the date on which loans are made available under the program. The amount of the loan cannot exceed the sum of 2.5 times the average monthly payroll cost during the year prior to the loan and the amount of economic injury disaster loans being refinanced under the program; it must be capped at $10 million and have a maximum interest rate of 4%. Loans are available to eligible borrowers under the program through June 30, 2020, fees are waived, payments are deferred by at least six months (but not more than one year), and the SBA's “credit elsewhere” test (the ability to obtain funding from other sources without undue hardship) is waived.

Loans under the program are fully guaranteed by the federal government, which is an increase to the existing guarantee percentages under the current SBA loan program. Collateral and personal guarantees are not required. To be eligible, a borrower must be in operation on February 15, 2020, and have paid employee salaries and payroll taxes.

Loans under the program are eligible for forgiveness up to the aggregate amount of payroll payments, interest payments on mortgage obligations, rent payments and utility payments made during the eight-week period following loan origination as long as the amount does not exceed the original principal. The amount forgiven is lowered by reductions in full-time employment and in situations where total salaries and wages fall by more than 25% from the applicable prior period, but this can be mitigated by rehiring employees. Amounts not forgiven continue to be guaranteed and will have a maximum maturity date of 10 years from the date the borrower applied for loan forgiveness.

New small business owner here...

I applied for and was approved for this.  My bank is saying that for it to be forgiven I have to use it to keep my staff on and paid during this time.  They told me that if I use more than 25% of the loan for non-payroll expenses that I will have to pay a portion of it back.  

Am I understanding this correctly?  I originally thought I could lay them off and then bring them back on and would have the loan forgiven.  A little help would be appreciated.

Edit/Addition:  As this stands I really don't see how this helps us.  Yes, my guys stay off unemployment but that isn't doing me any good.  Our cash flow has gone to zero and my landlord is still going to want to be paid.  What am I missing here?  How does this help small business??

It doesn’t really, except the 25% usable for rent and utilities.

If there’s no work, there’s no work. Basically the government gives you the unemployment dollars to disburse to them.

This.

If we get ours, we are going to pay our colorado staff (they can't work in ks right now without all of us going into 14 day quarantine) and treat it like an advance. If its forgiven by the government (im skeptical, ever heard of the student loan forgiveness program that is never forgiven?) Then the advance will be partially (50%, 75%? Not sure yet) forgiven to the employee.

Otherwise, we'll pay extra paychecks to the owners to keep our payroll up.  But i think it could be good for our guys sitting at home to keep them going.  

Make no mistake.  The government has no money.  They only have the money we give them to give back to us.

I submitted my application for PPP (Sole proprietor) April 2nd late evening, and the loan officer submitted it Friday afternoon.

Received the email late this afternoon that my loan request was approved, and I’ll receive closing documents next week.

we closed our PPP today and was funded

Not a word on the EIDL though

No personal trump bucks yet either

Riddle me this.  If there's no work,  pay yourself.  Your payroll stays the same,  you pocket the money and it gets forgiven.  

That falls within their rules unless they change them.

No, short answer to this: The number of full time employees on February 15 needs to be the same as the 8 week period following disbursement date of the PPP loan in order for it to be forgiven. Dollar amount of payroll is only part of the forgiveness process.

So a combo maybe.  

If we get it,  we are going to do it as an advance to the employees and partially forgive it if we get ours forgive.

We are on the state line so our Colorado employees can't work.  If they show up the state of ks wants us all to quarantine for 14 days.

Any more updated info on this since its been a couple of months. I'd like to hear from guys that have gotten it and what they are doing to maximize the "forgivness" part of it.

1)  I gave all employees temporary $6 per hour raises to make 100% sure we used all the money during the covered period
2)  I paid my annual profit sharing during the covered period (counts as payroll cost, but is not subject to the $100k per employee annualized limit)
3)  Any utilities/healthcare costs/loan interest payments where either delayed until the covered period started or brought forward before it ended.

And of course you have to make sure you maintain your prior level of employees, hours, and pay at minimum to avoid having your forgiveness amount get factored down.

I'm not entirely educated on the new flexibility that they passed this week on the PPP loans.  I planned my 8 weeks based on the original rules and I'm applying for forgiveness next week.

Nothing special.  I paid payroll and other qualifying expenses.

Its math,  i meet the threshold they listed so no maximization required.

I am a government contractor. I have a small contract with a reserve base that I maintain by doing janitor duties and lawn maintenance. I usually make 5k a month and I am the only "employee" as I sub-contract the lawn maintenance out and it comes from my 5k a month. I haven't been taking care of the property because they have been doing "virtual" drill for the past 2-3 months now. I applied for the SBA PPP seeing as how I was basically "out of work" for three months but they qouted me as being eligable for nearly 41k. I am uneasy taking that much and it seems like a way to "gotcha" kind of deal but I was thinking about just taking it and putting it into a Vanguard Money Market Account and let it grow minus the 15k I would take out to pay myself. My CPA isn't being real helpful about it so I thought to look for more info from others that have been through it already. Take the 41? Or just take the 15k as a safe bet?

Take the 41k. Put it in a side acct. see whats forgiven. Pay back the unforgiven. Keep the balance.

Pretty much this.  Don't lie on your application and you'll be fine.  Don't lie on your forgiveness and you'll be fine.  A $41k loan is not going to get scrutinized even a little bit.

You DO need to get some good advice though on maximizing forgiveness.  If your CPA can't help you, that's a real shame.  There are tons of past webinars on YouTube that you can watch.  That's where I would start.

First thing I did was read the actual bill.  Then I sat in on every webinar that came up over the past few months even if it meant hearing the same thing twice.

Am i missing something? Spend it on payroll above or equal to the % they list and fill out the paperwork. Am i oversimplifying it?

Honestly, there are so many layers to this that the best thing you can do is what I mentioned above.  You have to get oriented first that way you can narrow down your questions and the best way to do that is to read the bill and watch some presentations.

Another thing you can do is download both the loan application and the forgiveness application as they show how things are calculated.

What layers? What questions?

Spend it on payroll and it's forgiven. What am i missing?