Business Owners Seeking SBA Relief: Everything You Need to Know about the Government Relief Programs

Cares Act

So, let’s talk about it here. The Cares Act, which was signed into law last week, represents a little over $2 trillion.

Now, to give you perspective on that, the government surplus program, the stimulus package that was done in 08’-09’ was $500 billion.

This $2 trillion is being allocated by the government. $377 billion is being allocated to small business stimulus. $500 billion is being allocated to big corporations. Who’s going to get that? The airlines are going to get that. The hotels are going to get that. Boeing is going to get that. $560 billion is being allocated to individuals. I’m going to touch on that in just a second.

Stimulus Package

$153 billion is being allocated to public health and $339 billion is being allocated to State and Local governments. $43 billion is being allocated to education. They’re putting a little safety net in of $26 billion, add it all together it’s just north of $2 trillion in the stimulus package called the Cares Act.

Now I want to talk briefly about individuals, because this impacts just about all of us.

Remember, please invite your friends and family if think they would have questions, and it’s probably very beneficial to the rest of the people. So, if it’s good for the goose, it’s good for the Gander.

Individuals

I do believe that I’m going to give you a very good summary of what’s going on and what is available to you and how you can understand it.

Let’s talk briefly about the individual piece. The government is giving $1,200 per person. Everyone should begin to see that soon. It will be $2,400 as part of the stimulus package for a married couple, and $500 per qualifying child. So that’s outside of your business.

The government should be giving that to you. There are a few caveats individuals making less than $75,000 a year as who this primarily is for, and that income level of $75,000 will be based on your 2018 or 2019 tax return.

Tax Returns, Married Couple & Income

If you haven’t filed your 2019’s tax return, it will be based on your 2018’s tax return.

Married couples making less than $150,000 up to 150,000. We’ll get that $2,400, and these amounts will be adjusted based on your income.

If you are single earning over $99,000, you won’t get your $1200 bucks and if you’re married making more than $198,000, you won’t get your $2,400 bucks.

There is something else that has been extended that I think is pretty amazing. I actually have to give the government some credit here because I think they actually have created a pretty good stimulus package here, but as it relates to unemployment benefits, unemployment benefits are handled by the state in which the employees are employed in the national average for unemployment is $340 a week. That’s what the State pays people when they file for unemployment.

The government, the federal government is throwing in an extra $600 bucks a week and employee unemployment benefits, which takes the average to $940 that will go on for a period of four months.

There is a part of the stimulus package that increases the unemployment benefits to people who are laid off at this time.

Business Economic Decisions

I offer you this for those employers who are struggling and determining whether or not you should lay people off or not lay people off. There is a part of the stimulus package that increases the unemployment benefits to people who are laid off at this time, and so if the average is $340 bucks and the federal

government throws another $600 on it for four months, the people that you lay off may be getting up to

$940 maybe more in their unemployment benefits.

There is stimulus for those who are being laid off. There are two primary programs that we need to talk about today in this SBA Cares Act Stimulus package. The first is what’s called the PPP program. Many of you probably already heard about this. It’s called the Paycheck Protection Program. The second is EIDL. it stands for Economic Injury Disaster Loans, and I’m going to talk about both of those today.

Remember that if you have questions or comments, please let us know.

SBA Programs

Disclaimer: I’ll be happy to answer them to the best of my ability and as we really dig into this now, I remind everybody I’m not your CPA, do not take what I’m telling you is the gospel.

You must communicate with your CPA or banker or SBA lender to really verify everything. I am just trying to give everybody an overview as we at Commercial Fleet understands as it sits today, it has changed a lot over just the last week.

Let’s get into the PPP program, the paycheck protection program. It’s a heck of a stimulus package that’s available to business owners. A few specifics on it. Number one, the PPP program is administered by SBA approved banks. It’s different than the EIDL program, which is administered by the SBA program. A few things that are extremely beneficial on this.

Paycheck Protection Program (PPP) – Loan Fees

Number one, all loan fees are waived. Most banks will begin to accept the application starting tomorrow. There is no collateral required on a PPP. There is no personal guarantee required on a PPP loan and these loans are available until June 30th of 2020.

Why June 30th of 2020 because there’s 377 billion allotted to this and they figured that most people that we will burn through that money.

Now, the secretary of the treasury came out this week and said that the government will put more money to these programs if needed, and while I’m not an economist or an expert, I would for sure say that we will run out of the money very quickly on this.

We want to get your application in as quickly as possible. The other thing on the PPP is there will be no payments due for a minimum of six months. Let’s talk about who qualifies for the PPP program and I apologize if it’s a little bit on the on the boring side, but it’s really important for everybody to understand the nuts and bolts.

The PPP is the Stimulus Package to keep payroll running, to keep people employed.

Paycheck Protection Program (PPP) – Qualifications

Who qualifies for the PPP program? A small business with fewer than 500 employees that was in business on or before February 15th of 2020 here’s what’s really unique. This can be an S corporation, a C corporation, an LLC or a Sole Proprietorship or an Independent Contractor.

Very unusual that this is available and some of our clients at Commercial Fleet are not Corporations. They are Sole Proprietorships. That’s your Name, DBA, the name of your business, and a lot of times that’s harder for you to get approved in this situation. You’re perfectly qualified to get a PPP loan.

The PPP loan also includes certain nonprofits and tribal groups and veteran groups. When applying for the PPP loan, you need to verify that your business was economically affected or that economic uncertainty makes the loan necessary. I need you to hear that because it’s really fascinating. You will self-declare; you literally don’t even have to prove it. You just have to certify that your business has been affected by the Corona virus and that could be enough for you to qualify for the PPP.

Let’s talk about what you can use the PPP for because there is the provision of forgiveness in which the PPP loan you will be forgiven if you do certain things, you will not have to pay it back. So let’s get into a few of those details.

Paycheck Protection Program (PPP) – Payroll

The PPP is the Stimulus Package to keep payroll running, to keep people employed. So to determine monthly payroll costs, includes salary, wages, commissions, vacation pay, sick pay, leave, pay, medical pay, payment to IRA contributions, group healthcare coverages and local and state taxes. In other words, all of the payroll expense can be used for the PPP program for you to qualify. Um, it does not include federal taxes and it also does not include payroll for those making more than a $100,000 a year.

This is very, very important. If you’re applying for the PPP and you’re trying out what can you get? How much can you qualify for? You have to stop at $100,000 so the first $100,000 is included, but anything in excess is not included in determining the average monthly payroll.

So you could say to yourself, if you had someone in your office making $100,000 a year, they’re going to take the trailing 12 months.

If they’re going to divide that by 12, so call that $8,333 and you can get 2.5 times the $8,333 as a loan per employee. So, I hope everybody understood how that math gets calculated.

You’re taking the average over the last 12 months and the maximum that you can receive is 2.5 times the average payroll over the last 12 months under $100,000 caps out at $100,000 for as many employees as you have.

Very, very powerful stimulus package called the PPP.

Now what can we use the money for? The money can be used for payroll for you, your employees, but you can also use the money for rent. Mortgage obligations, utilities and other obligations you may have.

Stick to that because I’m going to come back to that in just a second. If you don’t use the money, the PPP money for the intended purpose of what I just outlined, you can use the money at an extremely low interest rate. 0.5% is what they expect it to be.

Half a percent and you will have a payback period that will range from 2 years to 10 years on that.

Even if you didn’t use it to keep your staff employed you can get it forgiven because if you use it for the intended purpose, which is to keep people on your payroll, you can get that loan forgiven. It means you pay nothing for that stimulus.

I like what they’re doing there, but even if you took the money and you didn’t use it for what it was intended, it can convert to a half a percent loan to you. Now when do you have to pay it back? The loan term specified by the treasury guidance is 2 years, so 2 years could be they extend it. If it’s not for the purpose design, it could extend the term and loan payments are deferred for the first six months.

Paycheck Protection Program (PPP) – Loan Details

If you take the PPP, you don’t have to pay it. You have 6 months of deferment. There is no prepayment penalty and if it’s used in the proper way, it can be forgiven and waived.

Now I’ve had a number of customers ask us this question because this happened to people in 2008 and 2009 were perhaps their mortgages were forgiven, a portion of their mortgages were forgiven, and they were then issued a 1099 for the difference which became taxable and in the Cares Act it is not allowed to be treated as taxable income.

I’m going to read you specifically, any portion of the loan that is forgiven is excluded from taxable income. So that means that the government is not going to send you a 1099. If you took out $100,000 or $200,000 the government is not going to send you a 1099 for what they forgave because of that clause. Powerful stuff.

How do you get this loan forgiven? How does it become an opportunity for you to get the loan from the government and not have to pay it back?

Paycheck Protection Program (PPP) Loan – Forgiveness

You are eligible for loan forgiveness for the amounts you spent over the next 8 weeks after receiving the loan for certain qualifying expenses. The qualifying expenses of the business over the 8-week period include payroll costs, rent, interest on mortgage debt and utilities.

Here’s something that’s really important because the PPP is being issued by a bank and not directly from the SBA. It will be the bank’s responsibility within 60 days to approve or deny the forgiveness. Sounds really good. I think there’s a big question mark based on that sentence…

The bank who granted the loan is who will determine the loan forgiveness based on the type of criteria above meeting the documentation that you provide that complies to you using the money for forgiveness.

The business will have to request their forgiveness of the loan with providing evidence to the bank and the bank will have 60 days to approve or deny the loan. The forgiveness rep.

I believe everyone should be applying for the PPP loan.

The EIDL the Economic Injury Disaster Loan is the loan that triggers the $10,000 that everyone’s been talking about, which is basically this concept of free money being given to everybody in $10,000 increments in as little as three days.

You don’t get that $10,000 if you apply directly for the PPP, you have to apply for the EIDL so you will get, if you apply for the EIDL, you will get it as long as there’s enough money, $10,000 relief in 3 days and then you will find out if you were approved for the EIDL loan.

My guess is that by filling out the simple application at sba.gov, you will probably get $10,000 if you do it quickly and then you will probably be contacted and asked for additional information, which I’m going to go through in just a little bit of what we think the additional information that you need to prepare is.

Let’s talk about a few things about the EIDL. Who’s eligible for businesses and nonprofits with no more than 500 employees?

Economic Injury Disaster Loans – Eligibility

Again, sole proprietorship’s with or without employees, independent contractors, all States and political subdivisions qualify as disaster areas so States can actually apply for this as well. Here’s what you need to qualify. Your credit score is needed to qualify and once again you will have to self-certify that you have been affected by the Corona virus and your business has fallen on hard times because of Corona. So it does matter about your credit score.

Even though I’ve read that they are being very delinquent on credit scores for this program. But you will also once again self-certify that your business has been hurt. In other words, you may not have to actually prove it. The maximum loan amount for applicants who demonstrate economic injury and the ability to repay may receive up to $2 million.

Economic Injury Disaster Loans (EIDL) – Details

The EIDL advance of advances up to $10,000 and they will be processed within 3 days and these advances do not have to be repaid. So, if $10,000 helps you right now, you should immediately apply for the ideal a loan and then that will trigger a deeper application process for you.

You must use for the following purposes, providing sick leave to employees, maintaining payroll during business disruptions and slowdowns, meaning increased supply chain costs.

In other words, let’s say you’re in the restaurant business and your normal supplier can’t get you the food or product that you typically would sell, and you have to go to a different provider and they’re more expensive.

That’s the difference in supply chain, making rent or mortgage payments and repaying debts that cannot otherwise be paid due to lost revenues. The EIDL is much more like a traditional SBA loan and it is issued by the SBA, whereas the PPP is issued by SBA approved banks.

Economic Injury Disaster Loans – Terms

The loan terms, the borrower may receive up to 2 million depending on the bar’s demonstrate economic injury ability to repay. The interest rate will be no more than 4% and the loan term will be no more than 30 years.

You can get a relatively low interest rate for a long period of time. Personal guarantees are required unless the EIDL advanced or the loan amount is $200,000 or less. If it’s less than $200,000 that you’re applying for, you do not need to issue your personal guarantee.

If $200,000 is what you need to get through this Corona pandemic, then you don’t even have to put up a personal guarantee. There is a waiver on this, the EIDL program waves the 1 year in business prior to the disaster requirement for businesses and therefore you only need to be in business on February 1st of 2020 and you will have met the requirement for the EILD loan.

If you’re looking for a little bit more of a traditional SBA loan, you can apply for the EIDL program.

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