Question 1

Small Businesses

Mike Cummings · Accepted Answer

Update: As of 4/16, the SBA and White House announced that the first round of appropriated funds for PPP & EIDL have been exhausted. That’s right, all $350 billion of it, in two weeks. There is an additional stimulus on the docket right now. Due to the demand, I hope they come to a resolution quickly, but that will take a few more days possibly weeks.

Question: We own a restaurant and had to close temporarily last week and layoff 39 employees. We want to re-open when things settle down as we’ve been in business almost 30 years. My question is if we haven’t kept our employees on the payroll can we take advantage of getting the utilities and rent assistance? Answer: In order for the loan amounts to be forgiven, the business must maintain the same number of employees (equivalents) from February 15, 2020 through June 30, 2020 as it did during either the same period in 2019 or from January 1, 2020 until February 15, 2020. To the extent this requirement is not met, the amount eligible for forgiveness will be reduced, ratably. Additional reductions in the amount to be forgiven will be incurred if employees with under $100,000 of compensation have their compensation cut by more than 25% as compared to the most recent quarter. HOWEVER – there is flexibility for business that re-hire workers that were previously laid off. Declines in headcount or wages between February 15, 2020 and April 26, 2020 will not trigger a reduction in loan forgiveness if the business reverses the decline and returns to pre-decline levels by June 30, 2020. Loan forgiveness will not be included in a business’s taxable income.

Question: What is the fewest amount of employees a small business can have to qualify for these SBA PPP loans? Answer: Sole proprietorships, independent contractors, and other self-employed individuals are eligible. The limit is on the maximum number of employees, which is 500 (per physical location in the case of food services).

Question: As a Realtor (sole proprietor/independent contractor), is it better to apply for the emergency grant (up to $10,000), a PPP loan, or PUA? Answer: Click here for an article we posted on wesmoss.com comparing these three options:

Paycheck Protection Program (PPP)
Economic Injury Disaster Loan (EIDL)
Pandemic Unemployment Assistance (PUA)

Which is the best choice for you will really boil down to your specific situation. It will really boil down to:

How much you qualify for under each option.
How quickly do you need the funds.
Your expectations for forgiveness/taxation.

Assuming your average monthly payroll costs are $8,333.33 per month ($100,000.00 per year, capped at $100K per individual), you would qualify for roughly $20,833 under PPP which would be forgiven as long as you keep yourself employed. If you have a current lender for your real estate business, I would reach out to him/her as this might be your fastest option. If you don’t have a current banking relationship you can use this link to find an eligible SBA lender by zip code (we have heard Synchrony and Fifth/Third are taking applications). If you don’t have a banking relationship your next best option would be to apply directly through SBA here for EIDL. Just keep in mind that, unlike the PPP loan, only up to $10,000 of the EIDL is forgivable. Applying for PUA here will likely take the longest to confirm eligibility and this is also 100% taxable. But that’s the order I would likely recommend for your case:

Option 1: PPP if you have a current lender (forgiveness)
Option 2: EIDL if you don’t have a current lender (only $10K eligible for forgiveness)
Option 3: PUA if you are denied options 1 & 2

Question: I can't find anywhere whether part time employees can be paid through PPP. I know you are supposed to use their figures in applying. But do you know if there is loan forgiveness for keeping them on and paying their salaries? Not 1099 just W 2 part time. Answer: You are correct in that part-time W-2 employee salary/wages (not 1099 contractors) are included in your Payroll Cost calculation. As part of your Paycheck Protection Program Borrower Application, applicants are required to provide:

Number of employees (top right page 1)
Documentation certifying the number of full-time equivalent (FTE) employees on the Applicant’s payroll (page 2, Certifications, item 4)

Here is where “loan forgiveness” comes into play. The amount of loan forgiveness will be reduced by the average of FTE employees for the eight (8) week period from the start of the loan (FTE Post PPP Loan) divided by one of the following (FTE Loan Pre PPP):

Average FTE employees from 2/15/19 to 6/30/19
Average FTE employees from 1/1/20 to 2/29/20 (new business operating prior to 2/15/20)

Example:

Company (2019) has 10 employees: 5 full-time (40 hours per week) and 5 part-time (20 hours per week)
- FTE employees (FTE Loan Pre PPP) = 7.5
Company is approved for $100,000 PPP Loan
During the eight (8) week period from the start of the loan, company terminates 1 full-time and 1 part-time employee
- FTE employees (FTE Loan Post PPP) = 6.0
FTE Post PPP Loan / FTE Pre PPP Loan = 0.80
Forgivable Loan = $80,000 (0.80 x $100,000)

So as long as the Borrower maintains employee head count (full-time and part-time) and pays their salaries, the full loan will be forgiven as long as:

The Borrower does not reduce salaries by more than 25%
The Borrower spends 75% of the loan funds on payroll costs (remaining 25% on rent, utilities, mortgage interest)

Question: Need PPP help, I own a 35-year-old business. I bank at Wells Fargo who is not taking any more PPP loan apps, nor is any other lender it seems. What do we do? Answer: We have had a few clients hit the same wall with Wells Fargo. Wells Fargo referred them to Synchrony and they were able to open a business account and submit an application successfully for PPP. In addition to Synchrony, the SBA has published a website (click here) where you can search by zip code for eligible lenders in your area (I would check this site after contacting Synchrony). As a third option, you can apply directly through the SBA for an Economic Injury Disaster Loan (EIDL). Here is the link to apply directly through SBA (click here).

With the EIDL you can receive an emergency grant up to $10,000 which has forgiveness feature similar to PPP
Once approved an EIDL can be refinanced into a PPP loan

So at this time, those are the three options:

See if you can open business account and get approved through Synchrony
If you hit the wall with Synchrony, try the SBA site
If you hit the wall there, go for the EIDL and refinance to PPP

Question: Here's where I'm confused. I'm a "solo act", S-Corp consultant. I teach leadership and team building/staffing. My wonderful business, since 1988, easily weathers all economic climates EXCEPT a pandemic where, over night, with the shutting of many practices I'm out of work. My CPA (who is not pleasant or helpful these days), has my paycheck issued every quarter for an annual sum of $30,000. The rest of my income comes from draws I make. With my payroll being so small (and, working in a tiny out-building on my hobby farm), it seems more logical to me for me to file employer assisted unemployment with the GA DOL rather than tossing my hat into the PPP loan/forgiveness program. Yet, the last brief exchange with my CPA is an across the board "all of you who are self-employed should file for the PPP". Am I missing something? First of all, I won't be generating an income again on June 30. Offices I typically work with, if they are even open, will be in survival mode and my work will be for gratis and good karma. My work will resume once offices have need to staff for new employees and have money for marketing and skill development. We are a ways from that. Answer: The CARES Act provides multiple relief options for small businesses (operational prior to February 15, 2020) including:

Paycheck Protection Program (PPP)
Economic Injury Disaster Loan (EIDL)
Express Bridge Loan (EBL)
Pandemic Unemployment Assistance (PUA)

Think of PPP as a short-term forgivable grant to cover salaries (capped at $100,000 per employee), benefits, mortgage interest payments, rent, utilities. So while I don’t know the annual expense of your health benefits, covered leave, rent, utilities etc., I do know from your question that your annual salary is approximately $41,000. So based on salary alone under PPP you would be eligible for:

$30,000 / 12 = $2,500/mo
$2,500 x 2.5 = $6,250
Forgivable as long as you maintain your solo act through June 30, 2020 and loan proceeds are documented for allowable use

So in this case, PPP might not be the best fit for you. EIDL is for long-term non-forgivable financing based on half of your gross profit = gross revenue – cost of goods sold (up to $2 million with a max interest rate and term of 3.75% up to 30 years). EIDL offers an advance up to$10,000 that does not have to be repaid, but the EIDL (if approved) will have to be repaid. In addition to payroll, EIDL can be used to cover accounts payable and other expenses that can’t be paid because of the COVID-19 disaster impact.

EBL is available to small businesses who currently have a relationship with an SBA Express Lender and allows access up to $25,000 in advance (instead of $10,000)

EIDL is likely the best fit for you. You can apply directly for EIDL through SBA here. PUA provides the following:

additional supplement of $600/week (in addition to regular state unemployment benefits which is $365/week in GA) until July 31, 2020
extends the state unemployment benefits by 13 weeks (39 weeks instead of 26 weeks) until December 31, 2020
expands eligibility to self-employed individuals and independent contractors
Click here for Georgia Department of Labor overview
So if you were approved for the PUA max benefit on April 17^th you would be eligible for:
- $365/week + $600/week = $965/week for 15 weeks (until July 31, 2020) = $14,475.00
- $365/week for 12 more weeks (until December 31, 2020) = $4,380.00
- $18,855.00 total (which would give you more than PPP, although this is non-forgivable)

Question: A few questions regarding the article in Sundays' AJC regarding the PPP and Care's program. We applied for the PPP with Truist, and as of yet it has not been processed. I need to terminate an employee for a legitimate reason, will this affect our repayment of the possible loan? Answer: The SBA Paycheck Protection Borrower Application Form updated 4/2/20 (here) requests the following information:

Number of employees (page 1)
Documentation certifying the number of full-time equivalent (FTE) employees on the Applicant’s payroll (page 2, Certifications, item 4)

I have not seen the specific Truist PPP application form, but I would assume similar information is requested. The information for borrowers on the U.S. Department of Treasury website (here) states the following on page 3, bullet 3 under “How much of my loan will be forgiven?”:

“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.”

So while on its face it appears that if an employer were to terminate an employee before April 26, 2020, they would still be eligible forgiveness provided that full-time employment per their submitted application was restored before June 30, 2020. Although this guidance has been issued by the Treasury Department, I would encourage the applicant to confirm this directly with their lender (in this case, Truist) so there is no question or ambiguity regarding loan provisions for termination, re-hires and loan forgiveness.

Question 2

Small Businesses

Mike Cummings · Accepted Answer

Update: As of 4/16, the SBA and White House announced that the first round of appropriated funds for PPP & EIDL have been exhausted. That’s right, all $350 billion of it, in two weeks. There is an additional stimulus on the docket right now. Due to the demand, I hope they come to a resolution quickly, but that will take a few more days possibly weeks.

Question: We own a restaurant and had to close temporarily last week and layoff 39 employees. We want to re-open when things settle down as we’ve been in business almost 30 years. My question is if we haven’t kept our employees on the payroll can we take advantage of getting the utilities and rent assistance? Answer: In order for the loan amounts to be forgiven, the business must maintain the same number of employees (equivalents) from February 15, 2020 through June 30, 2020 as it did during either the same period in 2019 or from January 1, 2020 until February 15, 2020. To the extent this requirement is not met, the amount eligible for forgiveness will be reduced, ratably. Additional reductions in the amount to be forgiven will be incurred if employees with under $100,000 of compensation have their compensation cut by more than 25% as compared to the most recent quarter. HOWEVER – there is flexibility for business that re-hire workers that were previously laid off. Declines in headcount or wages between February 15, 2020 and April 26, 2020 will not trigger a reduction in loan forgiveness if the business reverses the decline and returns to pre-decline levels by June 30, 2020. Loan forgiveness will not be included in a business’s taxable income.

Question: What is the fewest amount of employees a small business can have to qualify for these SBA PPP loans? Answer: Sole proprietorships, independent contractors, and other self-employed individuals are eligible. The limit is on the maximum number of employees, which is 500 (per physical location in the case of food services).

Question: As a Realtor (sole proprietor/independent contractor), is it better to apply for the emergency grant (up to $10,000), a PPP loan, or PUA? Answer: Click here for an article we posted on wesmoss.com comparing these three options:

Paycheck Protection Program (PPP)
Economic Injury Disaster Loan (EIDL)
Pandemic Unemployment Assistance (PUA)

Which is the best choice for you will really boil down to your specific situation. It will really boil down to:

How much you qualify for under each option.
How quickly do you need the funds.
Your expectations for forgiveness/taxation.

Assuming your average monthly payroll costs are $8,333.33 per month ($100,000.00 per year, capped at $100K per individual), you would qualify for roughly $20,833 under PPP which would be forgiven as long as you keep yourself employed. If you have a current lender for your real estate business, I would reach out to him/her as this might be your fastest option. If you don’t have a current banking relationship you can use this link to find an eligible SBA lender by zip code (we have heard Synchrony and Fifth/Third are taking applications). If you don’t have a banking relationship your next best option would be to apply directly through SBA here for EIDL. Just keep in mind that, unlike the PPP loan, only up to $10,000 of the EIDL is forgivable. Applying for PUA here will likely take the longest to confirm eligibility and this is also 100% taxable. But that’s the order I would likely recommend for your case:

Option 1: PPP if you have a current lender (forgiveness)
Option 2: EIDL if you don’t have a current lender (only $10K eligible for forgiveness)
Option 3: PUA if you are denied options 1 & 2

Question: I can't find anywhere whether part time employees can be paid through PPP. I know you are supposed to use their figures in applying. But do you know if there is loan forgiveness for keeping them on and paying their salaries? Not 1099 just W 2 part time. Answer: You are correct in that part-time W-2 employee salary/wages (not 1099 contractors) are included in your Payroll Cost calculation. As part of your Paycheck Protection Program Borrower Application, applicants are required to provide:

Number of employees (top right page 1)
Documentation certifying the number of full-time equivalent (FTE) employees on the Applicant’s payroll (page 2, Certifications, item 4)

Here is where “loan forgiveness” comes into play. The amount of loan forgiveness will be reduced by the average of FTE employees for the eight (8) week period from the start of the loan (FTE Post PPP Loan) divided by one of the following (FTE Loan Pre PPP):

Average FTE employees from 2/15/19 to 6/30/19
Average FTE employees from 1/1/20 to 2/29/20 (new business operating prior to 2/15/20)

Example:

Company (2019) has 10 employees: 5 full-time (40 hours per week) and 5 part-time (20 hours per week)
- FTE employees (FTE Loan Pre PPP) = 7.5
Company is approved for $100,000 PPP Loan
During the eight (8) week period from the start of the loan, company terminates 1 full-time and 1 part-time employee
- FTE employees (FTE Loan Post PPP) = 6.0
FTE Post PPP Loan / FTE Pre PPP Loan = 0.80
Forgivable Loan = $80,000 (0.80 x $100,000)

So as long as the Borrower maintains employee head count (full-time and part-time) and pays their salaries, the full loan will be forgiven as long as:

The Borrower does not reduce salaries by more than 25%
The Borrower spends 75% of the loan funds on payroll costs (remaining 25% on rent, utilities, mortgage interest)

Question: Need PPP help, I own a 35-year-old business. I bank at Wells Fargo who is not taking any more PPP loan apps, nor is any other lender it seems. What do we do? Answer: We have had a few clients hit the same wall with Wells Fargo. Wells Fargo referred them to Synchrony and they were able to open a business account and submit an application successfully for PPP. In addition to Synchrony, the SBA has published a website (click here) where you can search by zip code for eligible lenders in your area (I would check this site after contacting Synchrony). As a third option, you can apply directly through the SBA for an Economic Injury Disaster Loan (EIDL). Here is the link to apply directly through SBA (click here).

With the EIDL you can receive an emergency grant up to $10,000 which has forgiveness feature similar to PPP
Once approved an EIDL can be refinanced into a PPP loan

So at this time, those are the three options:

See if you can open business account and get approved through Synchrony
If you hit the wall with Synchrony, try the SBA site
If you hit the wall there, go for the EIDL and refinance to PPP

Question: Here's where I'm confused. I'm a "solo act", S-Corp consultant. I teach leadership and team building/staffing. My wonderful business, since 1988, easily weathers all economic climates EXCEPT a pandemic where, over night, with the shutting of many practices I'm out of work. My CPA (who is not pleasant or helpful these days), has my paycheck issued every quarter for an annual sum of $30,000. The rest of my income comes from draws I make. With my payroll being so small (and, working in a tiny out-building on my hobby farm), it seems more logical to me for me to file employer assisted unemployment with the GA DOL rather than tossing my hat into the PPP loan/forgiveness program. Yet, the last brief exchange with my CPA is an across the board "all of you who are self-employed should file for the PPP". Am I missing something? First of all, I won't be generating an income again on June 30. Offices I typically work with, if they are even open, will be in survival mode and my work will be for gratis and good karma. My work will resume once offices have need to staff for new employees and have money for marketing and skill development. We are a ways from that. Answer: The CARES Act provides multiple relief options for small businesses (operational prior to February 15, 2020) including:

Paycheck Protection Program (PPP)
Economic Injury Disaster Loan (EIDL)
Express Bridge Loan (EBL)
Pandemic Unemployment Assistance (PUA)

Think of PPP as a short-term forgivable grant to cover salaries (capped at $100,000 per employee), benefits, mortgage interest payments, rent, utilities. So while I don’t know the annual expense of your health benefits, covered leave, rent, utilities etc., I do know from your question that your annual salary is approximately $41,000. So based on salary alone under PPP you would be eligible for:

$30,000 / 12 = $2,500/mo
$2,500 x 2.5 = $6,250
Forgivable as long as you maintain your solo act through June 30, 2020 and loan proceeds are documented for allowable use

So in this case, PPP might not be the best fit for you. EIDL is for long-term non-forgivable financing based on half of your gross profit = gross revenue – cost of goods sold (up to $2 million with a max interest rate and term of 3.75% up to 30 years). EIDL offers an advance up to$10,000 that does not have to be repaid, but the EIDL (if approved) will have to be repaid. In addition to payroll, EIDL can be used to cover accounts payable and other expenses that can’t be paid because of the COVID-19 disaster impact.

EBL is available to small businesses who currently have a relationship with an SBA Express Lender and allows access up to $25,000 in advance (instead of $10,000)

EIDL is likely the best fit for you. You can apply directly for EIDL through SBA here. PUA provides the following:

additional supplement of $600/week (in addition to regular state unemployment benefits which is $365/week in GA) until July 31, 2020
extends the state unemployment benefits by 13 weeks (39 weeks instead of 26 weeks) until December 31, 2020
expands eligibility to self-employed individuals and independent contractors
Click here for Georgia Department of Labor overview
So if you were approved for the PUA max benefit on April 17^th you would be eligible for:
- $365/week + $600/week = $965/week for 15 weeks (until July 31, 2020) = $14,475.00
- $365/week for 12 more weeks (until December 31, 2020) = $4,380.00
- $18,855.00 total (which would give you more than PPP, although this is non-forgivable)

Question: A few questions regarding the article in Sundays' AJC regarding the PPP and Care's program. We applied for the PPP with Truist, and as of yet it has not been processed. I need to terminate an employee for a legitimate reason, will this affect our repayment of the possible loan? Answer: The SBA Paycheck Protection Borrower Application Form updated 4/2/20 (here) requests the following information:

Number of employees (page 1)
Documentation certifying the number of full-time equivalent (FTE) employees on the Applicant’s payroll (page 2, Certifications, item 4)

I have not seen the specific Truist PPP application form, but I would assume similar information is requested. The information for borrowers on the U.S. Department of Treasury website (here) states the following on page 3, bullet 3 under “How much of my loan will be forgiven?”:

“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.”

So while on its face it appears that if an employer were to terminate an employee before April 26, 2020, they would still be eligible forgiveness provided that full-time employment per their submitted application was restored before June 30, 2020. Although this guidance has been issued by the Treasury Department, I would encourage the applicant to confirm this directly with their lender (in this case, Truist) so there is no question or ambiguity regarding loan provisions for termination, re-hires and loan forgiveness.