You Winning Life Podcast Ep. 45 with guest Gerri Detweiler- What you need to know about EIDL & PPP

Number one, thank you for coming back. I know right now it's such a difficult time with everything going on in the world, and business owners are getting probably some of the most erratic and inconsistent answers about their questions. And maybe they don't even know what questions—

that's true—

ask. So we might as well just get right into it because I know the last time we spoke was at least 6 months ago, and, um, I know that we talked a lot about getting your business up and getting your business going and what types of credit to look for and stuff like that. But right now, I think the big thing on people's minds that you've been doing a lot of, um, time educating business owners on is specifically the CARES Act.

That's right, that's right. So the COVID relief loan programs that are available for those who are self-employed and also pandemic unemployment, which is an option for some self-employed individuals as well. And it's been, it's been been just utterly confusing. So just to give you a brief example, on Friday evening, SBA and Treasury finally released the application for forgiveness of a PPP loan. And so I've spent my weekend going through this. It's 11 pages of dense fine print. It jumps back and forth. And I've been working on this for— well, since the CARES Act passed, right? March 27th. And I was still pulling my hair out and thinking, how is the average small business owner going to navigate this? And unfortunately, it's rough, and there's plenty of problems we can talk about. But I also want to, of course, talk about what, you know, business owners can do.

So let's get right into that, right? So I know that there's people who did apply for things, right? And I want to break down the difference because I know some people got something directly deposited into their bank account, and the way that it was actually put into— the wording is very confusing, and you have to go Google that phrasing, and you're being, I had this issue last week. I'm like, wait, so was that my this? Was it that? What's the difference? What do I have to pay back? What can I use it for? What can't I use it for? I got maybe more than what I thought I was going to get. Maybe they messed up. So like right now, me, it's sitting in a bank account. It's not being touched. I don't know what the hell to do with it. So, so if there's some people out there like me being like, okay, like, can I use it for rent in my office? Can I use it to take care of my bills? Can I use it for marketing? Like, so can we walk through maybe each of the things that— like I said, there were two main things that people applied for, right?

It was PPP.—

and EIDL. So could we walk through just the basic understanding of what the difference is between the two? What do they have to use each one for? How do they prove that they used it for? What can't they use it for? And if they got— maybe they overapplied, what might they even have to give back eventually to the government?

Sure, sure. So let's go to the EIDL first. That's the Economic Injury Disaster Loan, and that program has actually been around for years. It's part of the SBA's disaster loan program, and Typically that program is used when there's a physical disaster, so a hurricane, a flood, a fire, whatever, businesses are impacted and as a result they can apply for a low interest rate loan and it's actually a pretty attractive loan that can help them get through the disasters, they can get their business back on its feet. And one of the reasons that program exists, like all the SBA loan programs, is there's a recognition when there's a disaster and your business has been impacted, you're not gonna probably be able to go to your bank to get financing, right? Because your business has come to a halt and businesses wanna see that you're making money. So these, the SBA loan programs are generally designed for businesses when other funding isn't readily available or available at similar terms other than, you know, maybe predatory loans. So the EIDL became available, the Economic Injury Disaster Loan became available for small businesses impacted by coronavirus in early March. And initially it started out like all disaster loans where they have to declare a disaster area and then your state, once that was approved, then you could apply. Very quickly they recognized, hey, this is gonna be nationwide, everyone's gonna need this. So they rolled out the application for the disaster loan in March to everyone in all 50 states impacted by coronavirus, their business. And then the CARES Act passed on March 27th.

Okay.

And one thing we were seeing with EIDL, and one thing we've seen in the past with disaster loans, is these are not fast loans because the SBA takes all the applications and the SBA makes all the loans. So everything has to go through the SBA. They have to gear up. And so in past disasters like Hurricane Harvey or Hurricane Florence, for example, it has taken anywhere from 20 1 to 45 days on average to get these funds in the hands of small business owners. So the CARES Act said, hey, how can we get some money to these small business owners very quickly? And what they did was they created this grant or advance that people have heard about, the EIDL grant, the EIDL advance. And the way it was written in the legislation, it looked like you're going to get $10,000 in your bank account in 3 days. That's pretty much what the legislation said. Uh, very quickly we discovered that was not the case. So The SBA somehow behind the scenes made a determination that they were going to base that grant or advance on $1,000 per employee. So, you know, you, Jason Wasser, if you have 5 employees, you get $5,000. If it's just you yourself, you get $1,000. And it didn't happen in 3 days like the legislation stated. The earliest we saw people getting the grants was about 3 weeks after their date of application.

And these are employees, not independent contractors?

They can be both. They can, they can be both. So you can be an independent contractor or you can be an employer, but the key is that you file some sort of tax return that indicates that you have self-employment income. So for a lot of us who— and I say us, I actually had an S corp when I was self-employed for many years— but a lot of self-employed individuals, what they do is they file the normal Form 1040 that all of us file to the IRS with our taxes, but they add what's called Schedule C, and that's the schedule that said, here's how much money I made from my business last year, and here's— that's where they calculate your self-employment tax, et cetera. So Schedule C is really key here, and when it comes to PPP, I'll explain why it's absolutely the number you're going to use to apply for PPP. But EIDL basically, at this point, that they got overwhelmed. It's taking a long time. So if you saw money deposited in your account, Jason, and any notation on it had the letters SBA in it, that came from the SBA and that was EIDL because only SBA makes EIDL loans and grants.

Got it.

So if it just showed up in your bank account and you were one-person business and you got $1,000, that's probably your grant, right? The loan comes later. So the EIDL loan comes after the fact. And one thing I want, one big, big, big tip I wanna give for anyone who's still waiting on their EIDL loan is check your spam folder. I can't tell you how many people have come back to me after I've given this tip and said, "I did, and there was an email from the SBA that I didn't see." So make sure that you check your spam folder, but then also make sure it's really coming from the SBA, 'cause obviously scams are abounding, right? So sba.gov is the website. Website for the SBA. If there's any variation of that, like, you know, I don't know, whatever, SBA-loan-idle, you know, it might be a fake site. So just be very, very careful that you're getting it from them. So then the loan is separate, and the loan is money that has to be repaid. So the grant doesn't have to be repaid, the loan does. 3.75% interest, the repayment period is up to, uh, 30 years. So look at your loan documents. Now, if you get less than $25,000 from the SBA, there's no collateral required and no personal guarantee. So that's good, right? That's pretty good terms for an SBA loan because usually there is collateral if there's— it's available, and usually there is a personal guarantee of the owners. So that's good to know as well. If you get more than $25,000 from the SBA though, keep in mind that they will look for available collateral, and that could even extend to your home equity in your home. So for larger loans, you really want to read the paperwork and understand what you're getting. Now you can say to the SBA, you know what, I don't want more than $25,000. I just want the $25,000 loan. You could say I don't want the loan at all. You could just take the grant. I am starting to hear from people who want to get back the grant, which is a whole other, you know, ball of wax that I, I don't have an answer yet how you do that. But you can, you can say to the SBA, I don't want it. And if he— if you took it and then you change your buy, you can pay it back with no prepayment penalty. So that's the basic premise of EIDL, and it does have some interaction with PPP. We can talk about it a minute, but that's the overview of how it works. Does that, does that make sense?

Yeah. So in the payback time frame without any penalty or without any interest is from when to when?

It has no prepayment penalty ever. Now interest will begin to accrue, um, I think it's— I'm pretty sure it starts to accrue right away. Yes, in fact I did research that for a question. So interest will start to accrue when you take the EIDL loan, the grant The grant doesn't have interest because, you know, it doesn't need to be repaid. Now, there's one big question I have about the EIDL grant that I have not found a satisfactory answer to, and I'm a little concerned. And that is that so far, everything I can tell, the IRS, if you have debt that you don't— or if you have debt that's canceled, or if you get a grant, let's say you apply for the NAV grant, we have a quarterly $10,000 grant, you get it, you have to pay taxes on that money, including canceled debts. But they— and PPP, they've gone ahead and said no, no tax on that, but the forgiven amount. But for the EIDL grant, we do not have an answer yet whether that is taxable. I suspect the intent is for it not to be, but this is a major issue because there's a difference between, right, money that you get without a tax implication, money that you get with a tax implication. And right now you have to actually sort of roll that grant into PPP, and PPP is forgivable, but EIDL grant isn't. So there's just a— there's so many questions, Jason, as you mentioned at the beginning, right? So many questions that we need answers to, and that is certainly one of them. So if that's something you've happened to think about, I don't have an answer for you yet. Hopefully we'll get one from the— hopefully the IRS will come out with guidance and say we're not going to tax those EIDL grants.

So when people are getting so worried, I was pulling out the exact languaging of what showed up in my bank account, and it says SBAD Treasury 310, right? And when you look that at that up, it says, what is an IRS Treasury 310 refund? It's your normal automatic clearinghouse direct deposit after you do a filed return and you get it back. However, there are also others that are saying that this is your pandemic return as well, like something for the Treasury, but it's SBA.

Okay, okay, okay. So was it an even $1,000 or $2,000?

It was twice as much. It was about 4.

Okay. And do you have 4 employees?

I have 4 independent contractors.

Okay. When you filled out the EIDL application, did you put them as employees?

Not that I'm aware of.

Okay, then it's probably something else. It could— I don't— I guess share that language and let's, let's research it a little bit more. I do know what the SBA EIDL grant comes in as. I just don't remember it off the top of my head.

Right. So for people out there that are listening, right, to make sure when you go and you see automatically deposited in your bank account to know, right? This is really what we want to help people, because there's so many different keywords and phrases, and, and is it, you know, to know which one is which so you can be clear with if you are going to send this money back where— because there's no like, okay, now you send this money back. I get— it's like, wow, wait, this is not what I want. Who the heck do I put to send this money back to? To my number? Am I going to be now taxed on $4,000 that I may not use? That it's not the grant, it's the loan. I don't want to take the loan and I want to send it back. Right. So I want to make sure that everybody else knows.

Yes.

In these phrases very specifically so that you might send back or you might not even—

right.

You may ask for a smaller number and you might get a bigger number. And all of a sudden the government has a way of taxing you. But like, sorry, too bad we put it in your bank account. Now you got to pay the percentage on more than what you thought.

Yes.

Then you end up losing money on this package. Right. So, yes. That's what I want to avoid, help people avoid.

Yes, yes. And I'm double-checking to see if I can get that information right away. If not, we can definitely put it in the show notes. So, um, it's a great question because unemployment, for example, is considered taxable, right? So if you applied for pandemic unemployment, you got pandemic unemployment, that is taxable. Um, the stimulus checks, no, it's— those are not taxed. So we've got all this money coming through now. For, um, for PPP, that money comes from your lender, so you'll get a deposit from the lender. But it, it is confusing, and, and some of these you can get multiple, right? You can get multiple assistance. So you could get EIDL and PPP, for example. Unemployment is a little less clear as to how the interaction works, but what we do know is we know Congress is trying to avoid what they would call a windfall, which is sometimes insulting given the amount of money that people are getting. But for example, they don't want you to be using PPP money to pay pay yourself during the same time period that you're getting unemployment. So presumably— we don't have clear guidance on this yet— presumably you could apply for pandemic unemployment, then you get PPP, you pay yourself with PPP for 8 weeks, and then after that you go back on unemployment, you know, if you don't have work that's coming into your business. So there's, there's a lot of questions like that that get very confusing for small business owners. And honestly, I wish they had just come— I wish they just sent people money. I think it would have been a lot easier than creating all these different programs with all these different requirements. But we're dealing with what we have right now, right? So, so understand that. So do you want to shift a little to PPP, or—

yeah, please.

Okay, so PPP, the Paycheck Protection Program, uh, PPP loans, this is part of the SBA again. It's part of the 7 program. This was actually created in the CARES Act, so the law created it. And it was created pretty hastily, so there's a lot of questions that have arisen that have created issues. But we're getting, you know, slowly by dribs and drabs, you know, they keep releasing these interim final rules that will answer one question, and then they'll release something that will answer another question, and it's slowly coming out. But there's still questions about it. But basically, here's the overall premise. The overall premise is you're supposed to use this money to keep people on payroll. And that could be your employees, it could be you yourself, but it basically is— it seems to be that it's trying to keep people on payroll so they don't have to either be unemployed or go into the unemployment system, which is a whole other mess, right? So the premise is you as an employer— and again, this could be for you, you're the only person who works in your business, you get paid by 1099, or you just file Schedule C, whatever it is You apply for a loan based on 2.5 times your average monthly payroll, and we'll talk about for self-employed, it's a little different. And then when you get that money, you spend it in the 8 weeks after you get the loan— pretty closely as 8 weeks— on mainly payroll, payroll. And then you apply to the lender where you got the money and say, here, I spent the money like you— like I was told to do. I need forgiveness, and then ideally they forgive it. So it's kind of— it's a payroll substitute that is funded by the federal government, right? So this has created a lot of confusion because what I've heard from employers is, well, I don't understand, my workers can't come into work, you know, my restaurant's closed or my office is closed and I'm going to pay people, I don't have other work for them to do. But that's really what it was designed to do.

So, so it's a little confusing there, or, right, small business owners do not have to lay off their workers. They can keep them at some level of payment even if there's nothing for them to do, so that when it returns to back to normal, whatever level of normal is, or businesses open back up, they can just resume as they were doing.

Yes, correct, correct. So, um, so A number of issues, but let's talk about the self-employed because I— that's a large part of your audience, right? Folks who filing Schedule C. So their calculation didn't come out till later, and it was pretty confusing, to be honest. But, but what we've— what Treasury has finally said is you, you also apply at 2.5 times average monthly payroll. But a lot of self-employed people don't really pay themselves payroll, right? They just take money out of their business when they make money, and so there's not a formal payroll there. So what they said for those folks is you take your Schedule Schedule C for 2019. Now you don't have to have filed it, but you have to complete it. And now remember that the IRS has given us an extension on those, so a lot of people haven't finished theirs yet, but you're supposed to complete it to apply. And then you divide that net profit on line 31. So let's say your net profit after all your expenses and everything was, you know, I don't know, $10,000. You divide that by 12 to get your monthly average, and then you multiply it by 2.5. So that's essentially a similar but different calculation. Now here's where the big problem comes in for people who are self-employed. What do they do? They try to minimize their tax bill, right? So they expense a lot of things, so their net profit is small, but they've expensed these other things. And then they go to apply for PPP and it's like, sorry, you don't qualify for much. Or maybe they didn't make a profit yet, maybe they just started their business, and the IRA— the Treasury has not given us guidance for newer businesses that didn't start. But they have said if you made a loss on your Schedule C 2019, you're out of luck with PPP. Okay, so it does not help you. So I do want to throw that out there. And I also want to suggest that if you're self-employed and your business has dried up, you might look at unemployment and maybe do the calculation between there. The, the challenge, of course, with unemployment is that some states are really good at— not really good, but fairly good, right? Fairly good at processing unemployment for the self-employed. Some states, like the state I live in, Florida, is horrible. I mean, it's just an incomprehensible mess and unnavigatable. It's, it's awful. So you have also to judge that. So for PPP, there is some money still available. I really thought, given how fast the first round was depleted, that the second round would go very quickly. But what we're seeing is a lot of bigger small businesses that qualified, maybe they're franchise-related business with lots of locations. Because of the heat, because of the scrutiny, because the PR nightmares, they're either not taking the money, they're giving it back, or they're saying, ah, forget it, this isn't for us, right? So that is an option for those businesses. And then the second round, we're seeing a lot smaller loan amounts. So if you're a smaller small business, maybe you're just self-employed, you might consider, if you haven't already, looking at PPP. It might be a fit for you. Not saying it is, but it might. There's still money there and it might be a fit for you.

So where do people go to apply? Because there's been a lot of confusion that you either go directly to a website or you have to do it through your bank. If you do it through your bank, it might be faster. Some banks apparently had much more access to being able to process this much more efficiently than other banks. So I heard, I've heard again a bunch of different things that were going on with that and a lot of confusion in that regards.

Yes, so if you applied at sba.gov, you applied for EIDL. If you applied through a lender, whether it's an online lender or your bank, whatever, you apply for PPP, right? So that's an important distinction, and you only can apply through PPP, for PPP, through a lender. Now initially, most people went to the bank where they have their business bank account if they had that relationship. And you're right, that first round was so frustrating for so many reasons, but one of which was if you didn't have a bank relationship, you were sort of— because you didn't have a business bank account, you were sort of left out. And then some of the banks were prioritizing customers who already had loans with them or already had, you know, a credit card with them or other things, which From the bank standpoint, I can't read their minds, but you think about it, they want to make sure that their customers who owe them money are not going to go out of business and default. So that may be part of the logic. It also had to do with just how much easier it is for them to deal with businesses they've already vetted, because they don't want to give money to fraudulent businesses. So that's also an issue. So in round 2, what we saw that was positive was more online fintech lenders getting into this PPP loan process. And that was good for, especially for those who don't have a strong banking relationship with a banker or who need smaller loan amounts that maybe not just— we know banks just tend not to be that interested. You and I talked about this last year, right? We talked about the fact that they just don't tend to work with smaller small businesses. They're for bigger small businesses or the small-medium-sized business. And so that option did give more availability. We have at NAB been matching borrowers to PPP lenders, and we continue to do that. And there are some that still have capacity. Some of them have tapped out, so some of them have reached the limit of how much they can, they could do for PPP. So you do have to look around. If you have a great banking relationship with your bank and they're still taking PPP applications, just, you know, that might be an option for you. You could certainly come to NAB, and we'll be happy to match you to PPP lenders as well.

So one of the other things I was wondering is when it comes to small business owners that do not already have established an LLC, an S-Corp business banking, and I'm finding this a lot, especially as I'm working with, you know, those self-proclaimed entrepreneurs or business owners who have said, no, my accountant just said it's okay, I can wait. I can still do this out of my personal account. I only have, you know, I have my personal credit card, commingling of funds, right? One, we can talk about the liability of self-protection of their own personal assets and themselves from, God forbid, a lawsuit. But I'm finding that this is happening more often than not, that people aren't taking the right steps to make themselves an actual company or an actual business in the eyes of the government, right? And therefore, they're not having access to this in a time of crisis. So how do we rectify that? And what advice can we give people who are like, well, it's going to cost me $300 to register with, let's say, I made Florida Sunbiz, it's $150, and then I have to start doing payroll and I have to start— how do we, how do we help someone navigate that when it's an overwhelming topic in the first place?

Yes, it is overwhelming. Uh, first of all, you could do it something simple like an LLC, and you're the only member of the LLC and your money passes through, uh, to your bank account. But I would say, I— this has been just huge, Jason, this has just been huge. We have seen so many business owners who don't understand the basics. And I'll give you an example. I've gotten so many comments from business owners who say I have 4 1099 employees, and I have to tell them, if you pay them with 1099, they are not employees, they are independent contractors. And they were really upset that they couldn't get PPP for those. Now, I don't disagree that there might have been a better approach, but, um, but they are not your employees if you don't W-2 them, right? And withhold taxes. The IRS— what the IRS wants you to do is withhold tax taxes, right? So, the same thing is when I had my own business, I still have my S corp, I keep it active, but for over 10 years, I was full-time self-employed. And what I did was I paid payroll to myself every month, a fixed amount. And then in months when my business did well, I might take out owner's draw or distributions. So, I'd have money on top of that. Well, there are businesses, unfortunately, who are just paying themselves owner's draw. So they're not paying a penny in FICA taxes, which the IRS has said for a long time this is a huge no-no. You need to pay yourself a reasonable salary. Well, when it came to getting PPP, those folks were shut out because the— because the SBA said we're not going to count owner's draw from, you know, an S corp. So these things, these things I've talked about for a long time, but but I think they've come just into stark focus now that if you want to be a business, you need to invest in those resources. And I know this is a hard time to say that when people are really struggling, but you really, you need a business bank account. And there are business bank accounts there you can get with zero minimum deposit. You're not going to pay fees each month. Those, they do exist. We've blogged about them at the NAV blog. You really need to consider some business structure.

Structure.

So whether it's an LLC, whether it's an S corp, you know, whatever makes sense for your business, get some advice. But it's not super expensive unless you're in California. California, I think, is like $850 for your annual fee. It's $150 in Florida if you pay on time. But it's so crucial. And I can tell you from my experience, you know, with other lenders, that when it comes to other types of lending, some lenders will not lend to sole proprietorships, those who do not have a formal business structure, because until you have that business structure, you're always borrowing personally, right? Because there is— there's nothing else. There's no— even you can put down the name of your business, you can put down your EIN, but you and your business are the same. So until you separate it, you know, it's— it's— you are the same entity. So it, it just really reinforced to me, looking at the struggles of these small business owners, that you need those 101 basics that, you know, a lot of times you don't get because it's easy to start a business in America. Oh, for sure.

And I do want people to realize just the liability and risk of just when it comes to— if you're a business owner and you don't have any either malpractice insurance or any insurance right on your business in any way, shape, or form, renters insurance, whatever it may be, you yourself are opening yourself— anything of your personal assets. That's the whole reason why there's an LLC, limited liability company. It's a shield at some level. Obviously, they— it changes on different— for different things.— and we can get into this on a whole nother conversation, which I would love to do— is breaking down the difference between LLC and an S corp and an LLC that's filing as an S corp and all those different things. But I hear again people left and right that are just, no, no, I'm running my business. It's from my personal credit card. I separate it out at the end of the year. But I'm like, yeah, but if someone sues you just because you have liability insurance, they can still go after you as a person.

That's right. That's right. And then certainly with loans, there are some loans that will have a personal guarantee and some won't. But I can tell you, if you're you're just a sole prop and you don't have a formal business structure, you're going to personally guarantee everything, right? Because that's who's borrowing the money eventually. You are the business. You and the business are the same entity. So just— and I'll add with PPP, because we're talking about liability here, the PPP also provides no personal guarantee and no collateral. It's a non-recourse loan. As long as you use it for the acceptable purposes. So if you, if you commit fraud— and we've already seen an arrest last week of someone who allegedly used PPP money to buy jewelry and expensive cars and other things— if you're doing that, you know, forget it. But if you're acting in good faith and use it for approved purposes, you know, it's non-recourse. Whatever is left over as a loan on PPP, whatever is not forgiven, becomes a loan at 1% with non-recourse. So that's attractive, really attractive. So I I, you know, I know so many business owners don't want to borrow, but when you look at these two loan programs, PPP and EIDL, and the interest rate they're charging and the, you know, waiver of the personal guarantee on certain loan amounts, it's just, it's really attractive if you do need to borrow. You're not going to get a credit card at 1% for 2 years with no personal guarantee. That's not going to happen, right?

And so, and going back to proving what you're spending it on, how, like, where is that requirement on each of those? Platforms.

So EIDL doesn't really have a proof of something you formally submit. I, I imagine it could be audited, so your EIDL loan could be audited, but EIDL's pretty flexible. It's designed to cover working capital expenses that your business could have paid had the disaster not occurred.

Now, that rent—

we're talking about utilities, business vehicle, um, you know, your vendors that you need to pay, monthly payments on debt. You're not supposed to use it to refinance refinance long-term debt. So you don't want to— you can't use it to just say, I'm going to refinance the high-interest rate loan at 3.75%, but you can make payments on it because you need to make those payments. The other thing that I like about EIDL is you could use it to pay your contractors. So PPP, you couldn't apply including your contractors. So let's say you get money to cover your expenses, right, your, your income that you would have made from PPP, but your contractors, they apply for PPP on their own. But that doesn't mean they have to come work for you for free, right? You still have to pay them. And, and I've talked to so many business owners that rely on independent contractors in their business, so you could pay them out of EIDL money, and that may be a way to keep your business running, you know, during the time of the disaster. So it's a pretty flexible loan. The other thing I would say is, if you really don't understand the EIDL disaster loan, you still have questions, your Small Business Development Center and SCORE they're SBA resource partners and they are trained to work with the SBA loan programs. So you can always tap them for free to get more information about how these loan programs work. And you could run the scenario by them, you know, here's what I want to do with this money, does it, you know, is it, is it acceptable purpose? But there's lots of good resources out there too that can help you from there.

It does sound like that if someone is looking to, they've been waiting to do their website site over, and this is something that they were going to do, and they have to hire a contractor to do it, and that's a service that needs to be done for their business. That sounds to me that it would fall within the purview of that.

Yeah, it sounds to me like it would too. Yeah, so, so, uh, it's— and again, you know, what they're— what the, what the SBA here is trying to avoid is fraud, right? And there are some very unacceptable purposes, like you can't pay yourself owners pay out of EIDL for work you didn't do. You know, it's not for owner distribution, it's not for owner enrichment, but if you're working in your business and you need to pay yourself and that's what you normally pay yourself for the services you provide, that's covered. That's part of working capital. So there are— it's, it's just a much more flexible program than PPP, which is really heavily weighted toward payroll and then a little bit on utilities rent and mortgage interest. Those are pretty much the acceptable uses of PPP. So if you have other expenses your business has to pay, and there's a lot of businesses that have high rent costs that just will not get enough relief from PPP and who may be able to get some relief from EIDL. That's not ideal because interest, so it means eventually you pay it back, right, and you, it's gonna cost you more. But, you know, if your business is going to survive and Where else are you going to get money at 3.75%? Right, which is incredible.

Which is great. Is there things out there that people aren't asking or doing the research on right now that they should be?

Yeah, I think the big— well, the big next step is forgiveness. And you alluded to this when you asked about documentation. The forgiveness application, as I mentioned, came out Friday. Uh, if you download it, um, you're gonna freak out because I wish I had it handy to show you. It's 11 pages of fine print, and it's a beast. I spent my weekend going through it, trying to write about it in a coherent and step-by-step way. You start at the beginning with this worksheet, but you can't fill out the worksheet till you fill out this other worksheet. You can't fill out the calculation till you fill out the worksheet. Can't fill out the worksheet till you fill out the second worksheet. And then the instructions are all over the place. So, it's very fun. But, uh, two things I'll add. We have created a PPP forgiveness calculator at NAV that's free and easy to use. So if you're self-employed with no employees, the calculator will walk you through it. I will have an article up today, uh, for the self-employed on the forgiveness, and then another one either today or tomorrow for those who are not self-employed. But they list the documentation that you need. And so basically what they're trying to have you do is confirm and show that you used it for the purposes you're supposed to, right? Payroll, rent, mortgage interest, utilities. And then you document that. And it's pretty— unfortunately, it's pretty restrictive as to the time periods involved. But if you pull it together, you know, you got it together, you should be able to get forgiveness of your loan amount. Now, I will say that for self-employed, they don't say exactly how to document owner's compensation. I've got a lot of questions about this. So based on my understanding, not your attorney, not your financial advisor, not your accountant, but based on my understanding, they're basically going to take your 2019 Schedule C and look at that line 31. So as long as you maintain that, that's what they're going to use to base your owner's compensation on. So don't be too worried about it. I am suggesting that whatever, whatever owner's compensation amount you qualify for, then just go ahead and write yourself a check from your business account account so that you document that you paid yourself for that amount. I know some people do transfers, and I just feel like if you can— if you have a business check, or if you can get online and send yourself a business check from your business bank account, it's just a good idea to do. If you don't have a business bank account, then you're just going to use that tax return. It's, you know, it's not perfect and seamless, but at least they're accommodating those who are self-employed. Thank goodness, because if they weren't, you know, we'd be in trouble, right?

So that's what I'm wondering, like, so let's say a company is still making I don't know, 80 to 90% of what they were doing before. They take these loans and then they now have to prove that they're using that money specifically for— how are they going to determine whether it was coming out of money that was coming in from profit or money that was coming in from, from the government to pay that? Or they're just saying, that's okay, we're just assuming it's going into your commingled funds and you're using that money. Is that the perspective that we're assuming they're taking?

Yeah, there's no guidance that says you have to open a separate bank account. Now, some people are recommending, and I know like with my bank, my credit union, if I want to, I can create a sub-account and I can put money in there and spend out of there, but it is more work. So you might consider that, but you also just, in your accounting, you just keep really good recommendations. I saw this recommendation, really good accounting. I saw this recommendation from an accountant. I liked it. He said, when you enter it into your accounting software, like put in there PPP payroll or PPP utilities so that you go back. Now the application says that you have to keep these records for 6 years. Think about that. Normally you keep your records for tax purposes, what, 3 years maximum, maybe 4 years. I'm trying to go through old documents right now. I'm in quarantine and get rid of stuff, and I'm thinking I have to keep this for 6 years. That's absolutely nuts. So I would recommend, you know, you create an online folder to keep copies Maybe if your accounting software lets you attach, you know, documents, or to have a file folder. But you're going to need a place where you keep this just in case. Again, I don't think they're really that interested in the small borrower who's in good faith trying to stick with the program. What they're interested in is fraud, right?

They're interested in people who are fraudulently applying for this money and going buying jewelry.

Exactly.

But that person was probably from Florida. Florida.

So, um, actually Georgia. Georgia. Yeah, I know, I'm shocked. I live in Florida, so I can say that, right?

So, right, lovely shout out to our state that we live in that's doing so well during this chaos. So yeah, so again, because, because we're really— you and I and many other people are really trying to protect and inform— are not trying to, we are protecting and informing the clients, you know, and our consumers and people that are in our community And there's so much variation of this place says this and this place says this. So I just want to make sure, right, guys? So just so you repeat that, if you're documenting that it's used for these specific things and it's for the business and it's again electricity and utilities and your internet and your phone and your rent and your whatever business Amazonic things for proof showing that you need to, right? So right now, like the perfect example is I haven't been in my office since since the second to last week of March and I'm working at home. So I need to possibly get a better— now that I'm doing everything here, my laptop is outdated. I might need to get a bigger monitor. Those are all things, hypothetically speaking, to run my business right now.

Right.

I could potentially use that loan for. Right.

Yeah. On the EIDL side, not on the PPP side. Right.

Yes.

Yes. So it's working capital again that the business could have paid if the disaster had not occurred.

Had not occurred, right.

Yeah, so you just think about that in that context, and you're trying to get your business up and running. If you don't, you're doing a lot of these Facebook Lives, right? You need the equipment to do that in order to continue your business and to help it grow. So there are some very relatable expenses there. Now I did, by the way, check. We have a Facebook group on the CARES Act, and lots of people weighing in there. I did check, and here's how people reporting their, um, their, uh, the disaster loan deposit. It's coming in as SBAD Trej 310, and then it says type miscellaneous pay, and then it says CO, the company, SBAD Trej. So I don't know if the D stands for disaster. That might be the case. Um, and then there's one that actually has a note that says EIDG. So I don't know what that means. EID— economic injury disaster G grant. Grant, that's what that is. Okay, so this one says EIDG standing for the grant, and this person actually got $10,000. So they got a good deposit there from the grant. So yes, so look for, you know, something SBA D, look for EIDG for the grant. And that probably indicates that that was the money you don't have to repay. But for the loan, you'll get loan documents, and you need to actually respond. You need to tell the SBA, yes, I want the loan. So the grant comes first, and then, as I mentioned, the loan comes later. So you actually get loan documents for the—

got it, right? So what I'm looking at here, SBAD Treasury 310 miscellaneous pay, EIDG.

Yep, so that's your grant.

The grant.

Yep, yep.

That would again— want to make sure that we— everybody gets it— the grant The amount is based on how many employees, or—

Yeah, so when you filled it out, you perhaps you had