SBA Loans FAQ Part 2 - Cares Act | Incite Tax
In this 50‑minute FAQ session, Ryan Vaughn walks viewers through the two primary SBA relief programs introduced under the CARES Act – the Economic Injury Disaster Loan (EIDL) and the Paycheck Protection Program (PPP). He explains how each loan works, how to apply, eligibility requirements (business size, entity type, payroll thresholds, credit impact), the $10,000 grant attached to the EIDL, and the mechanics of loan forgiveness (payroll, rent, utilities, and eligible contractor payments). The discussion covers practical questions such as the effect of applying on personal credit scores, whether LLCs, independent contractors, or nonprofits can apply, how to calculate the maximum PPP amount (average payroll × 2.5), the role of collateral, interaction with existing SBA loans, tax‑credit considerations, deadlines, required documentation (tax returns, 941s, contractor records), and when to seek professional help. Throughout, Vaughn emphasizes a cautious but proactive approach: apply early, keep funds separate, and use the loans primarily for payroll to maximize forgiveness.
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All right. Welcome, guys. We're going to go ahead and get started. I feel like I have read a lifetime of stuff. Also, in a new environment today, we shut down our offices. So I apologize for kind of the crazy lighting here. In fact, maybe I'll shift it a little bit. That doesn't help at all. Anyways, let me first start again with just kind of a recap of the 2 different types of loans. And then we'll get into the questions I didn't get to yesterday, which there may be some crossover with what I answered in yesterday's thing. I also, also found the resource from the SBA that did talk in a lot more detail regarding the EIDL loans, because those are older. Okay. So you have the 2 types of loans that we're dealing with, the Economic Injury Disaster Loans, EIDLs. Those are the ones that you can currently apply for right now. Through the SBA's website. And with that in mind, you probably want to do that right now. They switched the application, and so it's much simpler than it was last week. And at the end of the application, there is a box that says you want the $10,000 grant, and then they ask for your bank deposit info. So I would recommend doing that regardless of what route you want to go, because you can always choose to not take a loan if you're approved. Or you can choose to roll it into the PPP loan. The PPP loan is what I think most people are kind of excited about because it's the one that allows the potential of 100% debt forgiveness. Now, keep in mind, sometimes we just have to understand why the government is doing a program like this. It's called the Paycheck Protection Program, meaning they're trying to protect Americans' paychecks. And if you use the funds for paying payroll and for— or for keeping your basically business roof over your head, whether that's mortgage interest, your lease obligation, or utilities, then they're going to forgive the amount. And that forgiveness comes later down the road when you have to effectively prove what you use the funds for. So that's a general overview. Let me get directly into the questions and then I will post this link of this SBA resource I found regarding kind of what you're allowed to use the EIDL loans for and what you're not allowed to use it for. Okay. First question, will applying for the SBA loan negatively affect my credit score for buying a new home? So it is another loan. And based on what I've read, it does sound like they're going to pull your credit. Their lending requirements are much looser on these EIDL loans. Therefore, Um, you might not need good credit to qualify, but I imagine your credit score is going to show an additional inquiry. And based on how many inquiries you have, I'm not completely familiar with how credit scores work, but I know the number of inquiries you've had over a certain amount of time can reduce your score. Um, it is a business loan, the EIDL and the PPP loan. Generally, other than taking the hit on your credit score, business loans do not show up on your personal credit score. So, um, it may affect your credit score, but I don't think it would affect your ability to buy the home. Do we do this through our bank or directly through the SBA? So the EIDL is applied through directly through the SBA's website. Your PPP loans are going to be done through And even as of this morning, I have not seen any bank emails saying that they're currently processing the loan, these loans, because I don't think they've yet received full guidance on what they're supposed to be doing. And just as an example, the, the first bill or law that was signed was a few weeks ago, and it took about 7 days for the SBA to come out with the guidance on the EIDL loans. So I'm expecting something similar in this regard. I would, I would say optimistically, maybe we hear more info from PPP loans by Friday. And probably for sure by Monday. Can individual entities that have been set up for independent contractors apply to the SBA for the PPP loan? So, again, PPP loans are through your banks. The EIDL loans are through the SBA. But yes, if you're looking for the PPP loan and you're an individual as an independent contractor, you qualify for the loan. So fill out the application whenever the banks release those for you. I am wondering how I fill it out for an LLC, or do I just put other and type LLC? So Potentially this question came before they switched the application. Right now on the application, it just says organization type, and so you could put LLC in there. It's a field, so you just type in what you want. So I would type in LLC under organization type. If my business had a big loss in 2019, could that go against my chances in getting an SBA loan or Whether it's the PPP or EIDL, because I may not have the means to pay back the loan due to recent forced temporary business closures. Yeah, I have not seen anything where they're actually asking for net income or net losses yet. They ask for gross revenue. If you have cost of goods sold, they ask for that. There's a whole section in the middle that can be confusing to people, but they are not required answers because they relate to nonprofits. You can skip all those questions. So having a big loss does not eliminate you from getting the loan. And again, the PPP loan, the goal there with the government is for people to keep their paychecks. So assuming you use it for that, that purpose, then your debt's going to be forgiven anyway, so you wouldn't have to pay anything back. I do believe with the EIDL loans, they likely are going to Probably end up requiring or requesting information of your losses and how much they loan to you will be based on their thought on how well you can pay back that loan. Okay. If the moon were made of cheese, would you eat it? No, because that much cheese sounds gross. But if it were made of chocolate, for sure, I would, I'd pound that. I applied for the federal relief funds. How much money should I ask for, or is it based on revenue? So I'm assuming they're referring to the EIDL loans because that's the only thing you can apply for right now. The application currently, other than checking the box that you want the $10,000 sent to you within 3 days, it doesn't ask for how much money you're requesting. And I'm assuming the total amount that they end up giving you will be based on revenue. Again, if I have a $100,000 business, they're probably not going to give me $1 million. They're going to give you something reasonable. I'm assuming they're going to likely use similar things that other loans, things like maybe 60% debt-to-income or things like that. Is it guaranteed? So, I didn't know if this question meant, do you have to personally guarantee it? Which the answer is no. Or is the loan guaranteed? Like, if I apply, I for sure am going to get one? It is not guaranteed in that regard. So you do need to apply. I don't— all I've heard is that their lending requirements are much looser than you would see on anything else. But again, guarantee is— that's a hard word. How do we qualify for this loan? If your business is less than 500 employees, If you're a sole proprietor, self-employed individual, or an independent contractor, those qualify. There's a few other lists that don't typically apply to our audience here, but like nonprofits can qualify as well. If I have personal funds or enough cash for a few months, should I use that instead of this program? I love this question because one, it shows you're a financially responsible person. Now, that being said, I'm, I'm personally looking at my personal funds as the protection for my family, not for my business. In fact, if I have to get to the point where I'm using my personal funds to keep my business open, that's going to make me have a lot of difficult decisions regarding the business. Because I have to protect my family first and foremost. So I would say get or apply for a PPP loan. That way you're not having to use your personal funds. Save your personal funds in case all hell breaks loose and you're going to need that for yourself and not the business. And I get it. Like, we have relationships with our team members. But at the end of the day, you have to protect yourself first because there needs to be a business to come back to when all this is said and done. And if that means you have to go back down to just yourself for a little bit for that to happen, that's the better move than using your personal funds to help your other team members without then protecting your own self. Can you talk about how the temporary layoffs that we have had to do will affect my to receive an SBA loan? So the short answer is it should not affect it. The way the PPP loan works is they're, they're looking for your average payroll over the last year, and they're going to take 2.5 times that average payroll. That's the max loan amount you're likely going to receive. Then when you're talking about how much of that loan could be forgiven, They're going to compare your pre-payroll before getting the loan, pre-loan payroll to post-loan payroll. So if you're able to then bring those people back that you've temporarily laid off, you would qualify for 100% loan forgiveness on that, assuming you have the proper documentation. Which other than saying— So I'll just answer that. 941s, payroll filings, checks to independent contractors, if you issued those contractors 1099s for 2019. Right now, those look like the evidence that they're going to be requiring. I'm assuming they'll come out with more guidance on that when they give additional guidance to the banks. One SBA application seems easy, and I've seen more difficult. Are there more than one kind? No, there are not more than one kind. You likely are seeing the applications from a week ago compared to the ones that have been updated for this week. But right now, the current application is pretty simple. Most people can probably fill it out within 30 minutes at most. Is there an official form To furlough somebody. So furlough is when, as a business, you basically are forcing your team members to either take a lower pay rate, a lower salary, or you're cutting their hours or telling them not to work. That is a legal question though. I would ask an attorney, which I am not. I did try to look it up briefly last night. But you know, the Google isn't always the best resource. resource for something like that. And I didn't see any official forms. It just seemed like a lot of people were suggesting types of letters that you would send out. But again, double-check with an attorney on the proper steps for that, someone who's probably familiar with HR law specifically in your state, because generally those laws are state-to-state specific. Okay, so one guy gave his scenario. He has 9 employees, 2 of them are remote, and For our 1099s, will all of that qualify for the stimulus money? All of those would qualify for the PPP loans, which, if you're using the loan proceeds to pay team members, you want to go the PPP route because then the debt will get forgiven. The EIDL loans are not going to be forgiven. You will have to pay that back. It's great terms, a great interest rate. But you will have to pay that back. Do we continue to pay our employees? Will we actually get paid back? So, um, you would— if you got the PPP loans, you would continue to pay your employees. Will you actually get paid back? It's— in this case, if you're getting the money first, then you're going to prove to the government that you used it for a specific reason that they said, hey, that's why we wanted you to use it, AKA paying payroll, then they just say, okay, you don't have to pay it back to us. So there's not a getting paid back type of scenario. I don't know if you're asking, like, if I pay my employees this month, but it takes another 4 weeks for me to get the PPP proceeds, am I going to get reimbursed for this month's payroll? I, I feel like it's kind of sixes, as they say, because at the end of the day, whatever amount you get from the government, if you used it for payroll, that amount gets forgiven. Okay. What are the qualifications for an SBA loan? Again, it's less than 500 people. If you're a sole proprietor, self-employed, or independent contractor, those seem to be the only qualifications. Should I file for the EIDL as well as the PPP and use the PPP to pay back the EIDL? I am told this is possible. Yes, that is possible. If you qualify for an EIDL and even take funds and then you apply for the PPP and you get approved, they basically will just recategorize your EIDL loan into a PPP loan. Meaning you have the possibility to have the debt forgiven. So in that case, it's the one area where you can effectively refinance a debt. Um, it's only if it's— you're using the PPP funds to pay back the EIDL and then get the debt forgiveness. So if you're not familiar, our firm teaches a tax strategy, um, Called corporate rent. It's a way for the business owner to get an additional rent expense bonus. It decreases their taxes without them having to pay extra tax on the rent income. So this question is related to that. Will using the corporate rent tax strategy, paying that rent, will that be a forgivable expense? No, that is not going to be a forgivable expense. But again, it, it kind of doesn't matter because if I get $30,000 from the government and I use that $30,000 to pay my employees, that's $30,000 of other money that I didn't have to use to pay my employees. So, um, I don't know if I'm making sense. I'm trying to verbally process this out loud. Hence verbally out loud. That's stupid. The Department of Redundancy. Um, anyway, so it's a matter of I can get a loan from the government and they're going to forgive it. I don't have to pay it back. That means I don't have to use other business funds to pay the payroll. So I'm not worried about the fact that my corporate rent strategy can't be forgiven. I'm still ahead and financially in a better spot if I can get this loan and then get it forgiven. If I'm the only employee of my S corporation, am I still eligible to apply for a loan that will be forgiven? Yes. If you're the only employee, you still qualify. What is unclear to me though is I for sure am confident that the W-2 amount you pay yourself as the employee of your S corp Will be part of the PPP calculation. We do not know how they are going to handle distributions to owners from an S corp. The language of the law currently says wages, commissions, and similar compensation. I'm hoping they clarify that similar compensation refers to distributions. But if not, look, it's still the W-2 amount. Something's better than nothing. What do I put on Form 4506-T? So depending on the type of loan you are getting, the SBA or the bank may ask you to fill out this form. What the form is, is saying you're authorizing that lender to contact the IRS and get a copy of your tax returns. What do you put on the form? Because in this case, the person that's asking is, they're saying, this is their first year in business. And so they don't actually have past tax returns. You still just put your business information on it. And most of the time the lender will fill out the rest. They know what they're requesting. If you're a brand new business and they're requesting the past 3 years of tax returns, you've already told them you're a brand new business. So they're not going to have any tax returns that the IRS is going to give them. So you just, you just follow the lender's instructions on that. I have a full-time job outside my other business. Is it even worth applying for SBA loan? Is there a threshold? Yeah, I think it is worth applying because we're— you have a full-time job and that supports your family, but you have a business and these loans are to protect your business and your ability to pay your team members. So I definitely would say apply. Even if you have another full-time job. Can you obtain the $10,000 emergency funding on both loan types? No, the $10,000 emergency funding is just through the EIDL. And if you do not get accepted for an EIDL, the $10,000 became a grant that you do not have to pay back. If you end up getting accepted, they will decrease the amount they send you because they already sent you $10,000. Same with the PPP. If you got this $10,000 for applying for the EIDL and then you also qualified for the PPP loan, they will just decrease what they send you. They'll decrease it by $10,000 because they already sent that to you. But again, on the PPP side, all that's going to be forgiven. Should I have an accountant fill out my form? I do not have the knowledge for technical financial stuff. You certainly can have an accountant fill out the form for you. I mean, in full honesty, looking at the application that existed a week ago, in my mind, it would make sense to hire an accountant to fill that out for you. Looking at the form right now as it is online, there's like 5, 4 or 5 different blocks and really simple questions. I do not think you need an accountant to help you do that. You can pull most of the information off of your past filed tax return. At the top of your business return will have the EIN number and those— and like the date your business started. And then you need your revenue information, which you would have to give to your accountant anyways because they'll need that from you. So they really have simplified the application process for the EIDLs. I have not seen the PPP Applications yet because no banks are putting those out yet. I do not know how complicated those will be, but certainly if they are similar to the last week EIDL applications, you may want to hire an accountant to do that. Okay, we haven't experienced a significant loss of memberships or customers or income yet. Should we still apply? I like better safe than sorry. Now, I know that there are other professionals out there that are very nervous about this because they feel like there's this possibility that business owners could get themselves in trouble with these loans. The EIDLs have to be paid back. It's a loan like anything else. But in my mind, because there's no prepayment penalties, I'd rather be safe. So I'm going to apply for the loan. If I get accepted, but I didn't end up needing it, that loan is just going to sit in a bank account. And once I'm confident and the world maybe gets back to some sort of norm that, you know, I'm not going to need it, I'll just pay it back. So again, no prepayment penalty. So generally, the general rule is you apply for loans when you don't need them, not when you do need them. So that, that's kind of my personal opinion on that, but I don't have any problem with people who say, if you don't need it, don't apply for it. That's fine. I'm just sharing. That's a personal opinion response there. Okay, if I have a pending SBA loan for the building of a new gym last year, does my application for an EIDL grant affect my original loan in any way? If you have an existing loan, this EIDL stuff is separate. It would not affect any of your Existing loans. I'm not sure what you mean by pending SBA loan. It is March 31st of this year. And if you built the gym last year, my assumption is you would have closed on that loan by now. If not, you want to talk to the SBA person you've been dealing with and ask that question to them, because I don't know the exact, the exact answer. All I know is that the EIDL is a separate loan from existing loans, and getting the EIDL does not affect your ability to get other SBA loans now or in the future. What effect, if any, does the EIDL or 7 loan have on the business tax credits? So the most common business tax credits are related to if you have a team member who has to be quarantined because of the coronavirus Or because they're taking care of a family member who's quarantined, or you can get a tax credit if your team member has to be at home because their kids aren't able to go to school right now. You are not allowed to include— like, you would not include their— sorry, how do I say it? The amount of payroll you pay those people will not be a forgivable part because you're already getting a credit for it. Which already covers that amount you're paying them anyways. So to some degree, the Business Tax Credit is really a forgivable loan on the payments to those employees that hit those 3 categories I just mentioned. Okay. Frankly, SBA loans are only extended to those who don't need an SBA loan. Yes, in general, that's true. I.e., they have solid collateral, they have a booming business, they have a high credit score. Will the EIDL loans be any more lenient with the qualification guidelines? Yes, they will be more lenient. Um, the EIDL loans, the SBA stuff, which will be in a link, will include, um, either I'll have Ryan post it into the Facebook group and we'll email it out as well. From what I read there, the SBA, if your loan amount you end up getting is $25,000 or less, they are not going to require collateral. If it's more than $25,000, they are requiring collateral. But then later on they say if there's not any collateral to provide, they're basically going to ask to have whatever you can offer. But it doesn't sound like there's a requirement that it has to be dollar for dollar. Usually if you get a loan and they have collateral, if I have a $100,000 loan, They want $150,000 of collateral. They, you know, they're in the business of making money and protecting themselves. So they have the money, they set the rules. That's the golden rule, right? He who has the gold sets the rules. Well, lending is no different. So the qualification guidelines are more lenient on these EIDLs, and I'm guessing on the PPPs. loans as well. What are our first steps? I was told COVID19relief.sba.gov first and then wait for my banker to tell me next steps. Does this sound correct? Kind of. First steps, I would go to the SBA website and apply for the $10,000 grant, the EIDL loan, and request the $10,000. I would do that. I'm going to do that personally. And then waiting for your banker to tell you next steps, Not necessarily. Your banker is not connected to the EIDL SBA loan. Your banker is going to be connected to the PPP loan. So I don't know how the SBA is going to reach back out to the people who are applying. Supposedly you have an account on their website and they're going to notify you when they're processing the loans. There's a spot you put in your email information. I guess they're probably going to email you first. But what's scary in my mind is that their system is so bombarded that people aren't getting even notifications that their application was accepted. So it's kind of like fill out the application and hope and see that it went through. Your banker, if you've already let them know you're interested in the, interested in the PPP loans, I'm hoping will be proactive and respond to you when they have the guidelines for what their bank is going to do. So those— that is, in my mind, the first steps. Fill out the application on the SBA website for the EIDL, request the $10,000, contact a banker, let them know you have a PPP loan for— a desire for a PPP loan. Do we need to submit a business plan when applying? No. In business for 2 and a half years and my business has not been profitable for some time. Can I still apply and expect to get something? Yes, you can still apply, expect to get something. Again, profitability is not something that I have seen in their qualifications. When you refer to not covering people making over $100,000, is that within one entity or total individual income? So it's total individual income per team member. So Insight Tax, we're a pretty big firm. Uh, we have 20 team members. And so our, my average payroll is more than that a month. I am not disqualified because of that. It's the team members who make more than $100,000 in an annual year. They're the ones that I can't include in how much I'm allowed to borrow. And if, um, they're the ones that won't be included as far as like having my Payments to them forgiven. I applied for the EIDL loan but have not heard back from the SBA, even a simple received your documents. Is this normal to not hear from them? Yeah, from what I'm reading, that is normal. It's scary because then you're like, well, how long do I wait before I reapply? I don't know the answer to that. That's kind of why I like the $10,000 thing that they have now. Because if you end up getting $10,000 in your bank account in the next week after applying, you know that they received your documents. Do you think artist fees could be added into our payroll calculation? So I'm pretty sure that question came from a really great guy that is hilarious who has like event venues. And in that case, I know that he 1099s, those artists. And so those artists are independent contractors, and independent contractor payments are included in the payroll calculation. I already filled mine out. I hope I did it right. Is there any way you can see my application and help me make any corrections that are needed? As far as I know, there's no portal for professionals like me to log into to check these types of things. Supposedly there's supposed to be a portal for you to be able to check the documents you've submitted. But again, in reference to the other question, it's the same thing. They're really kind of just not letting people know right now because I don't think— I mean, no one planned for this. So they didn't have this plan in place like, oh, the government just issued these new loans that are super cool and everybody wants them. Oh crap, we're now under— we're, we're over capacity by 7,000%. They just weren't planning on it. I think we just have to be patient. It is my understanding that independent contractors can receive the loan amount and an additional $600 a week. Is this on the Express Loan or the SBA loan? So I feel like the $600 a week is related to the unemployment scenario. I, I just don't have enough information on that to answer that question. I know that independent contractors can get a loan through the PPP program. I know that, uh, well, and that's, that's pretty much all I know about that. I don't know if the additional $600 a week, if that relates to the PPP loan or how you would go about getting that. I'm not entirely sure. Hopefully, maybe the guidance that they provide to us will answer that question. Do you have to have a specific income in order to apply? No, no specific income required. What happens if your business is affected down the line and not specifically now? I would apply now and have it just in case. Personally, I like— we follow the Profit First model. If you haven't heard about it, I even wrote a book for MicroGyms, Profit First for MicroGyms. And in the system, we encourage additional bank accounts. So if it were me, I would create a new bank account and put all the money in that account. So it's not sitting in my operating account. So that if I don't end up needing it, no harm, no foul. I pay it back, no premium, no prepayment penalty. Great. But if something were affected down the road, because none of us at this point Even know how long this is going to last. There's some reports. I mean, at this point with social media and the news, I feel like no one's telling both. There's two sides of the story. I'm hearing reports that China's saying it's actually way worse than it is and they're still affected and they're not getting back to normal. But I also know that there's like other gyms in China that have opened up. We don't know how long this is going to last. The longer it lasts, the more likely something negatively is going to affect the business. So I'd rather apply now and get it and hold on to it. If I don't need it, great, pay it back. When are the deadlines for filling out the application? December 20th, I believe, is the application deadline that I saw. In Arizona, the business owner of an LLC cannot be on the payroll. How can we pay ourselves and still get the forgivable loan? If you are the only employee of the business, then they're likely going to be looking at your net income, your, your profitability. At least that's what I've seen when it comes to how they're treating sole proprietors, independent contractors, and self-employed people. If you have other employees, then again, the loan you're getting is to pay them. And if you pay them with that loan, it will be forgiven. By using a loan to pay them, you are— you then have resources that you were going to use to pay them that you didn't have to use. So now they're available for other things like paying yourself. So that's the way I look at it. The focus is on getting the amount forgiven because you paid your team members. How do you deal with employees, owners that exceed the $100,000 per year question? Do you just pay them under that? I mean, for owners, that's going to be tough because I think they're going to ask for some profit and loss information. And I think they're probably going to go off your net income versus what you distribute or don't distribute when it comes to that question. Yeah. I don't know other than that how they're going to deal with it. Maybe we'll get additional guidance when banks receive it. If you owe back taxes but are current with the IRS, will this affect your ability to get a loan? So what I think what that person is saying is they owe taxes from past years, but in the current years they've paid their taxes. Owing back taxes, I have not seen anything that says that's going to affect you getting the loan. What will affect you is if you didn't file a tax return at all, because they are, they are going to look at your 2019 or 2018 tax returns. That's just standard loan stuff. So you definitely want to have your returns filed. If you take the $10,000 advance and then also qualify for the PPP loan, can you turn that into an EIDL? You can, but I think it's reverse. Like, if I qualify for the $10,000 advance, I could also qualify for the PPP. I'd want to probably turn my EIDL into the PPP. Because that's the amount that's going to be forgiven. What if I had a W-2 employee on salary that was demoted end of '19 in December and then brought back to 1099? When I submit my information of the amount of W-2 employees, will they assume I laid them off now and disqualify us for getting a loan repayment? No, because both W-2 payments and 1099 payments are part of the calculation. So you still would likely have around the same dollar amount. You're not going to get disqualified for that. All right. That was the end of the initial questions submitted. So let me jump to the Zoom questions and then I'll check the Facebook feed. My employees just filed for unemployment. If I apply for PPP and take them off right away, I'm concerned it'll take a few weeks to find out if I don't get approved. Yeah, I just spent money on payroll I didn't have. Or would I keep them on unemployment and then take them off? I think they stay on unemployment. As soon as you get the loan, you take them off because the forgiveness language that I've seen, they're going to look at— I mean, you're looking at your average payroll over the last year. And then they're going to be looking at, were you able to basically get back to that amount by the end of their 8-week period of getting the loan? So that's— I get it. If you don't have the money to spend on payroll, you, you don't have the money to spend. And again, like I said before, you have to protect yourself first and foremost. So having them on unemployment sounds like the best Move for all, and then if you get the PPP loan, hire them back. Going back to the loan question, is there a deadline to file for the $10K grant? I close in 2 weeks. Again, it's December. I don't, I don't know if they've set, if the government set aside enough money for everybody to get a $10,000 grant. So I don't know what to tell you, what the world is gonna look like in 2 weeks. But you do have until December to apply. You just may not end up getting a grant depending on how many people apply and if they use all the things. Can nonprofits apply for the PPP? Yes, John, they can. Because again, it's payroll. And nonprofits have payroll. So they're trying to protect that. Can you explain how to calculate the PPP loan amount? Do I take an average of each month's payroll from last year and multiply that by 2.5? Yes. Also, when I am calculating that average, do I include my contractors in that figure? Yes. I use Profit First. Nice. And I put money for myself in owner's pay and owner's profit account. Can I include the owner's pay in this figure? And if so, is my owner's pay also included in the forgivable amount for the PPP loan? That is the unclear part. I know that if you're paying yourself a portion that is W-2, that amount for sure is going to be Included. I don't know how they're going to handle distributions. Yeah. Would $10,000 be subtracted from what you receive from the PPP? Yes. It would also be subtracted from the EIDL if you got approved. The only time the $10,000 really becomes a true grant is if you don't qualify or they effectively deny you for the EIDL. What if I paid— oh, it's a private one. Let me read it and take out a general question here. Oh, I did answer that question already, actually. All right. If we already have an SBA loan, do you recommend using the same bank for the PPP application? So again, SBA loan, Well, I guess— oh, you already have an SBA loan? Yeah. I plan on using the same banks I have a good relationship with. So those are the people I want to keep working with. I've done— I've been through a lot of loan processes and as a tax firm, we're involved in hundreds of loans every year because they freaking always want us to sign a letter that says some stupid stuff like, This person has a business. This person makes money. Um, cause they don't believe you cause apparently you're liars. But if you put a CPA at the end of the word, they believe me. If I put it on a piece of paper, it's ridiculous. So I know there are, there have been a lot of unpleasant experiences getting loans. So if you have someone that you've worked with in the past and it went well, that is likely the person you're going to reach out to for the PPP loans. In fact, I would reach out to them today. And say, hey, I'm aware you likely don't have guidelines yet on how to do this. I want to let you know I'm interested though. So if you can add me to whatever list I need to be added to so I get updated the second you guys know, I would appreciate it. I would send an email like that. If I have fewer employees making more money, will that still be 100% forgiven? Uh, it will still be forgiven. So if I have a higher payroll pre-loan and my post-loan payroll is less, some of it can still be forgiven. It just likely isn't going to be 100%. On the $100,000 limitation, does that mean we can't include any of their payroll in the total calculation, or is it just capped at the first $100,000? That's a great question. I have the same question. They have not clarified that. The way I read it right now, they are completely eliminated from the calculation. But it would be super great if the guidelines come back and say you can include it up to $100,000. Because it— I mean, if they don't, it kind of seems like it's favoritism to people who make less than $100,000. So if I make $100,001, now all of a sudden the government won't protect my paycheck, but they will protect everybody else's. It seems— Unfair. So I'm hoping they clarify that it's the first $100,000 on individual payroll. But again, there's no clear guidelines on that yet. On the EIDL online application, what is our business activity as they cross the gym? I put fitness. Also, do we include 1099 employees in our total employee count? Yes. What about myself? If you're paying yourself a W-2, I would include myself. If not, for now I would not. Let's see. Any idea how much detail they will look? So this question is about like how much detail do I think they're going to ask for? I think they're going to ask for enough detail that If you didn't end up doing it, you're not going to have the loan forgiven. So 941s, cleared checks to independent contractors, that's what I'm guessing they're going to ask of us to prove that we used it for payroll. So in this case, like, if there are any employees that are not working for whatever reason, but I pick up the slack and pay myself, so my total payroll for the year of the month is the same. Would they still forgive the debt? I believe if that payroll is a true payroll through a W-2, yes, I believe that is the case. Do you think they will look to see that every contractor was paid the same amount from year to year? I don't, I don't know. Cause like, even as a business during this time, you, You're— you could have changes in personnel. So I feel like the way I'm interpreting it— so this isn't again clear, hopefully we'll get clearer guidelines on this— the way I'm interpreting it is they're looking at dollar amounts. So if I have one team member now and I have to fire that team member, I end up hiring 2 part-time people and it's the same equivalent. I don't think I'm going to be in trouble and I think I'll still get the Forgiveness on that amount that I pay, even though they're different people. Is an independent contract— if an independent contractor does not have an LLC or any sort of personal business setup, can they still apply? Yes. That's considered a sole proprietor, which is specifically listed as approved. And they— you— You just put your Social Security number on the application and they're likely going to ask for your income and expenses at some point, but not on the application because I've seen it a couple times now. All right, let me check Facebook. This will load. All right. I see a few questions. All right, Nikki, is it problematic to switch your employees from a W-2 to 1099? Uh, Look, I'm a big fan of following the rules and I'm not a big fan of just blanket stating that all my team members are W-2 when in fact they could be independent contractors. If they're— if you look at the rules on what the IRS says is W-2 versus 1099, I'm a big fan of just following what those are guiding you to do. So if you're switching them from employees because you've changed the nature of the relationship, I do not think it's problematic at all. And for sure, when it comes to these loans, it's not problematic because both of those payments are included in the payroll cost. Shane, how do we classify rental properties, residential and commercial, only lost rents due to the disaster? Yeah. You qualify for the loans. Loss of rental income is included. And I would just— I'm thinking through the application, like, you— it asks you what your business does. I would say rental properties. And then you should— the rest of the application is pretty— going to be straightforward. On timeframe for the EIDL, I called the hotline and they said it will likely take between 2 to 3 weeks for a loan officer to reach out to you. The application right now is just a virtual place in line for them to reach out to you. All right. That makes sense. Will the PPP loan non-repayment apply to new employee salaries? I believe so. Again, I look at it as if the government gives me $30,000 for a PPP loan and I used all $30,000 of that for employees' salaries, then it's going to be forgiven. Even if I hired new people and my overall payroll cost is more than $30,000, I'm still going to have at least the amount that I received forgiven. Is that it? I think that's all that I see. All right. Okay. What is the best type of professional to get assistance with on the application process? Again, I'll go back to it. I've looked at that new form now. I don't think anybody needs help filling that out. Certainly a quick email to your accountant. I feel like the only questions the business owner might get stuck on Are just related to like, well, what is my organization type? Which again, I don't think it's a high likelihood that someone's going to get stuck on that. I say, give it a whirl yourself right now on the SBA loans, because it is a, is a much simpler process than it was last week. I don't know what the PPP loans look like. So. I'll see. I mean, we'll see. Every bank might end up coming up with their own application. And so if that is as involved as the first SBA loan application was, you probably want to hire an accountant or a CPA to help you fill that out. I know I have a couple of clients who are attorneys. They're planning on offering assistance, but I think anyone in that world, is likely going to be a good, good option for you. Just know that you're— we're going to charge for it. Like the law firms are charging for it. Other professionals are charging for it. Yeah. Okay. Shelby asked, did I talk about general underwriting process is like for EIDL already? I didn't, 'cause I don't know what the general underwriting process is right now. It's just the application itself. Which is really simple. Um, but as far as once the loan officer reaches out to you, I'm imagining they're going to have to ask similar questions that you would get on other loans. Like, how much do you want to borrow? What do you need it for? They're going to try to verify to the best of their ability you have some sort of ability to pay it back. And if you don't have the ability to pay it back, I imagine they're probably going to still give you something. It just won't be very much. I think the more— more people are probably going to get rejected because their business is healthy enough that they're going to say, we don't think you really are as affected by this as you're applying that you are. I think those are the ones who are likely to get rejected, not the ones who Don't have the ability to repay. I think they'll just get much less. Is the only grant available if you apply for the EIDL? Yeah, yeah, that's the only $10,000 grant. Yeah, you'd rather get the EIDL, but rather— you don't really need the EIDL, but rather the PPP. How do you get the grant? You still apply. Go to the website, apply for the EIDL, click the box at the end that says you want the $10,000 loan. And then if you end up getting accepted before you can start the PPP process, I'm pretty sure you'll be able to say like, I'm also in the PPP process, so I'd rather get that loan. Um, and then just work it out from there. That— but Paul, that's exactly the route I personally plan on going. I don't really need the EIDL either. I like the PPP better, but. I want that grant in case, or at least the $10,000 upfront. Okay. If someone is paid through a 1099 but aren't set up as a sole proprietor with businesses, do they qualify? Yes. So I actually don't know why the government used that language, because theoretically, if you get a 1099, you're already considered a sole proprietor. If you're self-employed, you could be a sole proprietor or an independent contractor. So all 3 of those terms mean the same thing based on tax rules, and all 3 of those things qualify. So they would definitely want to do that. $10,000 grant again has to be used for outside of PPP wages? No, you can use the grant for wages, salaries, utilities. You can use it for that. For sure. All right, guys. That's the end of the list of questions. It's been 50 minutes. We will get this recording out either later today or tomorrow. We, you know, it's a crazy time, and we're going to do our best to keep updating information as we, as we see it coming in. Again, I will share the— there's a link of what is and isn't allowed with the EIDL. So let me just say this, because this was a question yesterday that I didn't have the answer to. I had an assumption, but now I've confirmed it. You cannot use the EIDL loan to refinance other long-term debt. That was my first thought. I have 2 commercial buildings and I thought to myself, oh man, if I could refinance those properties for this, Loan that's 4%, I want to do that all day long. The SBA specifically say that is not an approved reason for the loan and you would get in very big trouble. But anyway, so I'll post that SBA resource that I found. And again, thank you guys. If you have any questions, feel free to reach out to our, our accounting firm or on the Facebook page. Hope you guys have a great day. We will see you all later.
