COVID-19 Call-in Day

Frequently Asked Questions & Answers

SBA LOAN PROCESS:

1. Are the SBA loans only benefitting business impacted by the COVID-19 pandemic?
   1. Yes, and only small businesses. Eligible small businesses (generally those with less than 500 employees) must acknowledge in their application any “covered small business concerns” such as disruptions in supply chains, technology, staffing, gross receipts or customers, and closure. Depending on which loan program is applied for, substantiation and documentation is required to support damage due to economic conditions caused by the pandemic.
2. I am a closely held S- Corp with only one employee, am I eligible for a loan?
   1. Yes, there are two loan programs to consider, the Economic Injury Disaster Loan (EIDL) and the Payroll Protection Plan (PPP) just created under the recently passed CARES Act.   The Economic Injury Disaster Loan (EIDL) Emergency Grant is a good option for closely held S Corporations with only one employee whose business has been impacted by COVID-19.  An application for a $10,000 emergency grant may be made at: https://covid19relief.sba.gov/#/
3. Are employee salaries >$100k excluded entirely or included up to $100k for the PPP payroll cost calculation?
   1. Salaries greater than $100k are included but only to a maximum of $100k.  For example, if an employee had a salary of $120,000 that amounts to average monthly pay of $10,000 per month.  Under the PPP, you can only include a max of $100k or $8,333 per month.  In this example, the company would reduce average monthly payroll by $1,667 and only include $8,333 in the calculation of the average monthly payroll and not the full $10,000.
4. If a company applies for the Payroll Protection Program, can employees file for unemployment insurance?
   1. Yes, employees can file for unemployment and the company can still be eligible to receive the PPP forgivable loan. The intention of the PPP is that the money will be used for specific purposes and that at least 75% of the loan proceeds will be spent keeping people employed and paying payroll. In order to qualify for loan forgiveness which will be measured based upon headcounts of people still employed, in the 8 weeks after obtaining the funding, businesses should try to obtain the same head count as you had before February 15, 2020, and pay personnel at least 75% of what they were paid before. These rules are not tied to whether the employee claimed temporary, partial, or permanent unemployment.
5. What are the steps if you’re an Owner/Employee? We are co-owners as well as the only two employees.
   • The PPP is also available to self-employed and independent contractors.  This was put in the bill to help those like Uber drivers, musicians, or similar workers in the “gig economy”.  You can apply through your local bank SBA lender like any other small business.
6. What is the process of applying for the SBA  7(a) CARES loan and what documentation is required? Describe the payback and forgiveness provisions of the loan.
   • The process will be to fill out an application with a local bank SBA lender.  Most banks have SBA departments and you should be able to call your bank and get the right person to talk to.  Once the bank has the application, they will submit to the SBA, who guarantees the loan, and then funds the loan to the borrower.  The loan will have no payments for six months and then it becomes a 2-year loan with a .5% interest rate.  Loan proceeds may be “forgiven” and you will not have to repay the loan if you keep people employed at your business as the forgiveness will be measured on the headcount of your business at the end of June 2020 as compared to headcount of employees in February of 2020.
7. Define utility costs as a covered expense? Electricity, Water and Sewer, what about Natural Gas? Are payroll taxes included as payroll costs when calculating the average monthly payroll costs?
   • Yes, payroll taxes are included in the total payroll cost for qualifying for the loan. While we are waiting on final SBA definitions and rules, we think yes – natural gas is a utility.
8. Need survival advice: 100% LLC owner & its sole employee. Lost 75% business on 3/16?
   • The PPP is available to self-employed and independent contractors.  This was put in the bill to help folks like Uber drivers, musicians, or similar workers in the “gig economy”.  You can apply through your local bank SBA lender like any other small business.
9. Can an SBA loan be used to raise our home on Tybee? It is a STVR. Flood insurance has tripled.
   • We are not aware of provisions in the bill to assist real estate investors. Our understanding is that the loans are geared toward keeping people employed and therefore are based upon average monthly payroll.  Since investment property real estate generally has no employees, there would be no funds available for that use.
10. What is the timeline to receive a grant from submission date? My county has business closed until 4/30, and even then, may not open. How to make 2.5X average payroll cover 3/20-5/20? Should I get a loan?
    1. Banks can start taking applications and funding loans on April 3, 2020.  The time to get actual funds is expected to be very quick, within a few days, but will depend upon bank volume of activity and resources.  You may apply for funds in April whether your business is operating or not, the intent is to help you cover payroll and other costs during the down period.
11. For commercial/residential property leases where tenants are not paying, is there SBA help for that?
    1. We are not aware of provisions in the bill to assist real estate investors. Our understanding is that the loans are geared toward keeping people employed and therefore are based upon average monthly payroll.  Since investment property real estate generally has no employees, there would be no funds available for that use.  However, many banks are allowing deferral of principal and interest payments on mortgage loans for properties as they are aware that landlords are not receiving rents.  We recommend you reach out to your banker for assistance.
12. What is included in the Paycheck Protection Program loan? Gross pay? Payroll tax? Bonus checks? What do we use to calculate the amount needed for our business? What loan is best to maintain business expenses? What do we use to calculate the amount needed for our business?
    • There are two loan programs that are generally being discussed right now.  The one that is right for your business depends on the circumstances.   Generally, if your challenge is meeting payroll and keeping people employed, the PPP is the preferred method. If your challenge is significant equipment expenses such as a manufacturing facility with leased equipment payments due each month, the EIDL may be a better option.   Some businesses will apply for both the EIDL and the PPP.  Every business has different factors to consider. We recommend you should learn what you can and make the right choice for your business.
    • SBA offers an EIDL loan, which may be used for capital equipment and working capital.  This loan program is up to a maximum of $2 million and you apply directly to the SBA.
    • For the PPP, the maximum loan size is $10 million, and you can apply with your local bank.
    • The calculation is as follows:
      • 2.5x the average monthly “payroll” costs, measured over the 12 months preceding the loan origination date. A seasonal business may use the period February 15, 2019 – June 30, 2019 or March 1, 2019 – June 30, 2019 to calculate the average payroll.
      • If you took out the EIDL loan between February 15, 2020 and June 30, 2020 and you want to refinance that loan into a PPP loan, you would add the outstanding loan amount to the “payroll” sum.
      • Payroll costs includes salaries, commissions, tips, certain employee benefits (including health insurance and retirement benefits), state and local taxes and certain types of compensation to sole proprietors or independent contractors. Payroll costs specifically exclude compensation of an individual employee in excess of an annual salary of $100,000, foreign employees, FICA and income tax withholdings.
13. After the covered period end for a loan through the CARES Act, are you able to use any leftover proceeds from paying forgivable expenses to pay down any debt from before the covered period that started 2/15/20? Would you be able to use it to pay down high interest credit or another SBA loan? I know interest payments are allowable, but can you do principal after the covered period?
    1. The PPP loan amount is based upon a 2.5 times average monthly payroll.  In order to qualify for the forgiveness, you will need to show that you spent the proceeds on payroll costs, interest and other allowable items as defined, which generally excludes principal on loans.  The amount not forgiven, will be paid back over 2 years and that portion of the loan proceeds presumably can be spent on any item the business owner chooses. 
14. Would a lawn service qualify for the loan program? My business has been affected as I lost several large commercial clients this month because they shut down their businesses due to COVID 19.
    1. If a company’s clients were affected and therefore revenue dropped as a result of COVID 19, the company would likely qualify.  This loan is very broadly defined, we believe many businesses of all different sorts will apply.

UNEMPLOYMENT

1. Can 1099 type workers apply for unemployment?  Where should you apply?
   • Yes.  Go to your state’s department of labor website.
2. I drive for Uber and Lyft; can I apply to file for unemployment?
   • Yes.  Go to your state’s department of labor website.
3. Can a sole proprietor apply for GA Unemployment? If no, what do you recommend they do?
   • Depends on how your business was set up and how you paid yourself.  The PPP is available for self employed people, you may consider applying for PPP loan.

FRANCHISE

1. I have an LLC with a S-Corp operating 3 franchise locations. I already have some access to private funding. Am I still eligible for these new loans/ grants / tax deferments?
   • Yes, the PPP is available even if you have other sources of funding.  This is an investment in small business by our government to encourage small business to keep people employed.

TAX

1. I own my buildings outside of my business. Can I include rent in my calculations for the CARES act?
   • The PPP loan amount is based upon payroll, not rent or other expenses.  The proceeds may be spent on payroll and some other items including rent, utilities, and interest.  We believe rent paid to a building you own should be eligible if it is a normal rate and market based.
2. How are you advising independent physician practices, small hospitals and other healthcare providers?
   • A physician practice qualifies as a small business and the PPP is available to them.  Many practices are not seeing patients for any elective procedures through this quarantine period and therefore have been affected.
3. The credit for employees not performing services…what if they were first repurposed to clean?
   • The bill is focused upon headcount and total wages paid.  If you repurpose employees and keep them employed and do not cut their pay below 75% of the prior wage, you should qualify for the loan forgiveness.
4. When will the $600 federal increase to Georgia unemployment go into effect?
   • We expect this very quickly, within weeks.
5. When will the payroll tax credit for FMLA employees be received? Will the process for this be handled by my payroll company?
   • The tax credit will be received on your next payroll tax filing (presumably quarterly 941). Yes, your payroll provider should be able to handle the paperwork on this process for you. 
6. If my retired mother doesn’t file a tax return because her sole income is social security, will the IRS mail her a stimulus check?
   • Yes, even if a taxpayer does not file a tax return in 2018, 2019, nor in 2020, the IRS will still mail a stimulus check to the taxpayer if he/ she is registered as a Social Security beneficiary.
7. If I have been on social security disability since 1995 and therefore have not filed a return, will I receive a stimulus check?
   • If you make less than $75,000 and have a valid SSN, our understanding is that you would still receive a check.

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