SBA LOANS FAQ's - Cares Act & Frequently Asked Questions | Incite Tax
In this 40‑minute webinar, Ryan Vaughn of Insight Tax fields over 100 live questions about the two primary COVID‑19 relief loans administered by the Small Business Administration: the Economic Injury Disaster Loan (EIDL) and the Paycheck Protection Program (PPP). He explains the fundamental differences between the loans, who can apply (including sole proprietors, S‑corp owners, independent contractors, and businesses with up to 500 employees), how to submit applications (EIDL through the SBA website, PPP through a bank), the loan amounts, interest rates, repayment periods, and the $10,000 grant attached to the EIDL. A large portion of the session is devoted to the PPP forgiveness rules – eligible expenses (payroll, rent, utilities, mortgage interest, tipped employee wages), the 2.5 × payroll calculation, full‑time‑equivalent employee counting, and documentation required to prove use of funds. Vaughn also clarifies common confusions: whether a business can hold both loans, how the law treats duplicate purposes, the impact of prior SBA loans, the role of S‑corp wages versus distributions, and the treatment of 1099 contractors. He outlines the paperwork needed (last two tax returns, payroll reports, rent/utility invoices, cleared checks) and notes Insight Tax’s fee‑based assistance for completing applications. Throughout, he emphasizes the urgency of applying while funds last, the uncertainty around program exhaustion, and the importance of timely forgiveness applications.
Chapters
Okay guys, we are going to get started. Thank you for being here. We, in the last 30 minutes, have accumulated more than 100 questions. So what I'm going to try to do here is answer these as quickly and efficiently as possible. And if you have any questions, I have a few team members listening in. That if I don't get to them, they'll make a note. I'm going to start with the ones that we had submitted. And again, I'm just kind of going to go through this as efficiently as possible. All right. Enter your participant ID. And then when you do come on, I'm going to try my best to make sure— because I can force mute you guys, but if you guys can just stay muted yourself, that'd be great. All right. SBA loan, which one to apply for? What can they be used for? Repayment terms. So what we're talking about here are 2 different loans. You have the Economic Injury Disaster Loan, the EIDLs as they're calling them, and you have the Payment Protection Program loans or PPP. So right now, the only thing you can actually apply for is the EIDLs. Those you apply for directly through the SBA website. Those get funded by the US Treasury. The PPP loans, which are part of the bill that passed and became law on Friday, no one can actually apply for those right now because banks don't even know what the freak to do. So in some regard, let me just say that as a way to maybe If any of you are feeling anxiety, to lessen that anxiety, no one is able to apply for these right now because the banks aren't currently taking applications because they don't have enough guidance from the government yet on some of the things. So in general, though, you have the PPP loans, which are going to allow you to have a forgivable component to the loan itself. And that's going to be if you use it for wages, rent, utilities, mortgage interest. If you use the PPP loans for those expenses, you have a good chance of getting those forgiven. The forgivable amount is going to be— they're going to calculate if it's less than 100%, it's going to be based on How many full-time employees you had, like the equivalent full-time employees you had before you took the loan, and how many you have 8 weeks after. The Economic Injury Disaster Loans, those can be used for anything else. Think of those as more traditional loans, just with really great interest rates and payment terms. So, okay. So when— back to the question, which one do you apply for? It really depends on what you need it for. If you're planning on using the funds for payroll or rent or utility expenses, then I would go with the PPP loan because having a forgivable loan sounds really good. If you're using it for— if you need it for other things. Then you might want to look at the Economic Injury Disaster Loan, the EIDLs, because that potentially will give you even more of a loan amount and you'll be able to use it for those other things. As far as the repayment terms go, once you get through the period of requesting if part of your loan or all of your loan for the PPPs get forgiven, You then— well, it'll be 10 years of the remaining amount, and the PPPs are 4%. The EIDLs, all it says is can be up to 30-year repayment terms, and the interest rate can be somewhere between 2-point-something and 3.75%. So there's that. Okay. If you have a previous SBA loan, would you be disqualified? No. You can have— this doesn't affect any SBA loans you currently have. It doesn't affect your ability to get future SBA loans. Now, one of the things that's important to note here is in the law itself, it's been stipulating that you can't use You can't have another loan application even for the same amount and for the same purpose. And right now, that's in my mind one of the most confusing things about what they've been talking about because, um, Yeah. Some banks are giving advice saying you can have both as long as you're using the funds As long as you're using the funds of the loans for different things. So they're saying, yeah, you can get an EIDL. And if you used it for operating expenses that aren't for the payroll things, then you can also get a PPP loan specifically for payroll. I am not going to say that that is an actual fact yet because I have not seen guidance on it. Right now, the only thing I can tell you is the law says you cannot have a duplicative, a duplicative loan for the same amount. And they do not— they have not clarified what the crap that means. What is the effect on companies that primarily use 1099 employees? What about related expenses other than wages? So you can This does qualify if you have independent contractor payments. You will use your 1099s that you reported to— that you filed as evidence that you had 1099 wages. So it doesn't have to be W-2. 1099s totally work. As far as other related expenses other than wages, If you're looking for the amount to be forgiven, then you need to— it needs to be payroll costs, interest on mortgage obligation, rent on a lease agreement, payments on utilities, which is electricity, gas, water, transportation, telephone, or internet. And then if you have tipped employees, the additional wages you pay to the tipped employees. If it's one of those expenses, you can have the amount forgiven. Some— now this is again, it's all new, so I don't have the exact answer on other related expenses. I have read— What's up? I have read from one resource saying you're still able to spend the money on other things, it just won't be forgiven. And I've also read That if you don't use it for one of those purposes, then you'll get in trouble for using the loan on anything other than those exact items. So I would say if you have other expenses that aren't those that I just listed, you may want to consider the EIDL, which is what you can apply for currently on the SBA website. Which loans can we fill out at this time? The EIDLs are the ones that you can get through the SBA website. The PPPs you would get through a bank. We would recommend going with a local bank or a bank that you already have a relationship with, assuming that they're going to be able to do it. The assumption right now is most commercial lenders are going to be able to offer these, but the new ones, the forgivable loans, those are the ones that no one's applying for yet because the banks don't have enough information. My guess is you'll start to see the banks coming out with stuff By the end of the week. Okay, we talked about how to apply. Will Insight Tax assist you with the application? So that is a good question. I— we definitely want to help our clients stay in business, but I also can't let our business go out of business by helping you stay in business. And so we will definitely help But depending on the involvement, we certainly can actually fill out the applications for you. We will charge a fee, and that fee may be anywhere from $1,000 to $2,500. We definitely wouldn't go higher than $2,500 to fill out the application because that's what the loan actually has as a box saying like, why did your professional charge more than $2,500? But we just— it's not a service we can do for free. We just don't have the capacity and I do need to keep my business open as well. I have a new business that is only a year old. Will I still qualify? As long as you're in business as of January of this year, there are no problems with qualifying for this loan. I do consulting work that requires me to be on site with my clients. So is the lockdown enough of a reason for me to qualify? Absolutely. I would say based on what's going on, I think every business in America that is under 500 employees probably has somewhere they can show that they're going to have economic loss or possible economic loss due to all this stuff going on. How do I evidence to the SBA that I have a need since I am essentially a one-man band? I think you just claim, you know, the reasons why you predict income will decrease. Exactly. And usually that, that should be enough because there is— so people are a little confused on this. A business under 500 qualifies, but also sole proprietors, independent contractors, and self-employed individuals. All of those also qualify. So even being a one-man band, based on the law that I've read, You still qualify. There's not a lot of evidence you need to provide other than your business is being affected. Okay. We've talked about the SBA versus the EIDL versus the PPP. Honestly, I can't tell you which one is better for you. That's up to you. I would say look at what you're going to use the loan proceeds for. And that'll tell you which one makes the most sense. If I'm looking at getting my payroll costs covered while I'm not sure what income is going to be looking like, this Payment Protection Program loan, it looks like the most appealing because if I use it specifically for that, I don't have to pay it back. But if you need the funds for other things and potentially a higher dollar amount, Than what the PPP loan is going to allow you to do, then you may need to look at the EIDL. Okay. Which one should we apply for? Yeah, there's— we got 107 responses that we sent out, so some of these are going to be duplicates. So bear with me as I try to find the next relevant question. All right. I have a commercial building and pay myself. Can I still apply for the loan? Yes. Yeah, like I said, self-employed individuals, one-man bands, all qualify. I filled out the disaster loan application and it was so much simpler than the first time I tried. How can I be sure I filled out the right one? Well, theoretically, you should be able to check on their website, but the website has been inundated and people are saying they're not seeing their loan portions or their loan applications showing up. So, I would call your local SBA center. Let me mute. Don't forget to mute yourself if you are coming in. There, just so you know, most areas have like a small business developmental center that's tied to the SBA. So you likely have something local that you can call, because obviously you probably can't drive in because no one's physically going to be there, but they might be able to help you figure out if your application went through or if it was the right one. What information will we need to provide the lender? Right now it looks like there's just an application. I mean, everything that I'm reading is saying they're effectively going to go on good faith, which is crazy. You will definitely, definitely need your last 2 filed tax returns. And it is also very likely you're going to need evidence of your payroll wages. So if you have W-2 employees, Those are going to be on your 941 filings. If you don't have W-2 employees, you're going to look at the 1099s that you issued for 2019. And I would probably be pulling a report from my accounting software that shows the independent contractors that I've paid so far this year, because you are going to have to come up with what is your average monthly payroll cost. And in this case, when they say average monthly payroll costs, they are referring to salaries, commissions. Let me tell you the exact language. If I can find it quickly. Salary, wage, commission, or similar compensation. Now, that's an interesting phrase because they need to define that for us. I'm hoping what they mean by similar compensation is distributions to owners. But I'm not entirely sure. Leave it to them to write 800 pages and still require someone to have to interpret it after the fact, because apparently 800 pages wasn't enough for them to clearly explain something. All right. If you own a rental LLC and there are no employees, can you still apply? You know, if you are losing business, as far as everything I've read, if you're losing business due to all this going down, so in this case, if you've lost rental income, then yeah, you can apply. Now, if you don't, if you don't have any employees, then what you're applying for is basically the self-employment, sole proprietor, independent contractor portion. And again, they haven't given us quite clear guidance on what that— how you calculate that and what that means. We do know, regardless of whether it's going to be an independent contractor scenario or business owner or employee, they are not looking at anybody who gets paid more than $100,000 a year. They definitely are very clear on that. Okay, this is— how much money can we get? What are the rates? What are the qualifications? What are the stipulations? The PPP loans are going to basically be capped at 2.5 times Your average monthly payroll costs. So if I calculate my average monthly cost to be $10,000, the most they'll lend to me is $25,000. Now again, that amount can be forgiven. When it comes to the EIDL loans, you can apply for up to $2 million. There's, there's no formula to determine how much you're capped at. Obviously, there's going to be an underwriting process. So they're going to look at the information you submit. I mean, if you're a $100,000 business and you ask for a million-dollar loan, I doubt they're going to give it to you. So there is going to be elements of that. The rates, that's 4% for the PPP loan and 3.75% for the EIDL loans. But I have heard some people say that They're planning on it being much lower than 3.75%, but I haven't, I haven't seen anybody actually get one yet. All I know is people who've applied. So I don't know when these funds are going to start hitting the world. And as far as repayments go, both have a deferment period. It's like 6 to 12 months. I don't know how they're going to determine The amount of months, but it does seem like both, uh, you, you will definitely have at least 3 months of not needing to make payments. I'm guessing 6 is probably going to be where it ends up averaging out for most people. Can we apply for SBA and EIDL? So technically that's the same thing. The EIDL is through the SBA, your PPP loans While it's an SBA loan, you're going to go through your bank to get those. Only the PPP loan is forgivable. That's the loan you get through the bank. Uh, what's the best way to apply right now? Um, the only way to apply for an EIDL is through the SBA website. And to apply for a PPP loan, you need to contact the bank you're planning on getting the loan through. And they will give you instructions because every bank will be different. How long will it take to come through? Man, there is— with the EIDL loans, when you apply for that, you can request a $10,000 grant. And when you get that $10,000 grant, whether they give you the loan or not, you basically get to keep the $10,000. That, as far as I know, is the fastest you're going to get money. The actual loan, the actual SBA loans and the actual PPP loans, I am guessing, man, even if they streamline it, I'm just trying to be realistic here. Optimistically, you're probably 4 weeks out. Most SBA loans in a non-crisis scenario take 3 to 4 months. To finish. It's supposed to be streamlined, which means I'm expecting the application process to be simpler. But man, I don't know. It's the same thing with the stimulus tax checks that everyone's talking about. I don't think you guys see those for at least another month. What is the best strategy? Use the loan to pay staff or pay rent and have staff claim the extra on unemployment? Oh, that's a good question. Uh, I think it depends on your state. I think it depends on your staff. Um, well, and I guess as I'm verbally processing this out loud, in order for the PPP loan to be forgivable, you have to have basically the same amount of payroll expense 3 months from now that you did when you applied for the loan. So if you put all your staff on unemployment, your payroll costs will be down, therefore all the loan amount will not be forgiven. I mean, to some degree, if you think about it, this is almost a way to alleviate the burden that the unemployment system is going to have while helping people maybe have a guaranteed job when all this ends. So I would say the best strategy is to get the loan, pay your staff, So they would stay off of unemployment. And there's no rule that says you can't make money or add new clients during this time period. So if that happens, that's great. But I would use a PPP loan to pay my staff, not do unemployment. We already applied. Just want to make sure we did it right. I— okay. Not a question there, but I hope you did it right as well. Good job. My 2018-2019 business taxes along with 2018-2019 taxes are not completed. Will this affect my ability? Yes, you will want to get those completed. Um, they're going to want at least the last tax— 2 tax years from my understanding. And on the stimulus check, it's either going to be your 2018 return or your 2019 tax return. One or the other. So because neither of those are filed for you, you're going to want to get on that. What purposes are funds available for and what interest rates? So we've, we've talked about that. On the PPP loan, the best way to estimate how much you need, I would just use the 2.5 times and ask for the full amount because none of these have any penalties. If you pre— if you pay it off early, prepayment penalties, none of them have prepayment penalties. So if I end up applying and getting a $50,000 loan, but I didn't actually need it and I didn't actually use it for any of the forgivable debt reasons, I'll just pay it back. No harm. The SBA is waiving all their fees for the application. So if you do have any fees, it's going to be through the bank, which is likely going to be really small anyways. To me, I like the peace of mind. So that's not a bad strategy. If you're not sure if you're going to need it or not, might as well apply. Can we apply for both? Okay, you can apply for both. But if you get both, you can't keep both for the same purpose. That's what the law says. Duplicative— you can't have duplicative purpose. Which, whatever the hell that means, because even Word doesn't— my spell check said that's not a real word, but they put it in there. If you get an— if you have an EIDL loan or you're going to get one and then you qualify for a PPP, you basically can take the EIDL amount and roll it into the PPP loan. So it's basically like a way for them to say, oh, we're just going to recharacterize this as a different type of loan. And that's the route you'd probably go if you realize you like the PPP better. What documentation should I start gathering? Get copies of tax returns. I'd start trying to calculate what my average payroll costs are. Just have that available. I've looked at the application briefly. You're going to need to know your gross revenue. As well. So make sure basically that your books are clean. Well, that's annoying. My list just popped up all the way to the top. Let me go back down to where I was. What is the benefit of going directly through SBA? So there's no benefit that we're talking about. It's literally just the mechanics of the loan. If I want an EIDL, I have to go to the SBA website. If I want a PPP loan, I need to go through a bank. Someone got an email from their bank saying SBA will be paying 6 months' worth on current SBA loans. I do not know anything about that. Will all small businesses qualify or is it only if you have employees? So for these 2 loans we're talking about, all businesses qualify, even if you're a sole proprietor, independent contractor. We've answered you can apply for both, but you're not going to be able to keep both if you're using it for the same purpose. Okay, so this one is, how does this apply for me if I'm an S corp and pay myself through dividends? It is unclear. They have not clarified that, which is not surprising. Typically they leave that complicated stuff till the end. I don't know why. The thing— the rules say salary, wage, commission, or similar compensation. And then they say for sole proprietors, independent contractors, and self-employed individuals, they're looking at the sum of payments of any compensation to or income of a sole proprietor or independent contractor. That is a wage, a commission, income, net earnings from self-employment, Or similar compensation. So I am hoping somewhere in there the S corp distributions that because I take them as well, that that's going to fall under income or similar compensation. But again, no one has the specifics on how that those phrases are going to be interpreted. In the past, they have not typically screwed. People just because they have S corps. But we'll see how that goes. So I'm trying to be optimistic. Yeah, this is really annoying. Let's see. I'm going to create a new spreadsheet because it keeps popping me up and I lose my spot. Let me answer some of these questions that came in in Zoom. And I see that some of these are Private messages. I'll make a note of the private messages and we will answer you privately. Okay. Is it only if we have full-time employees? No. So what they do is they, they're looking at full-time equivalents, which is just a fancy way to say if you have 2 part-time people, that's one full-time equivalent. They actually look at hours. So you basically add up how many hours are worked amongst all your team and you divide that by 40 and that's your full-time equivalent. And that's the number that they're looking at. Okay. I got this in an Excel file now. So, oh, there are a lot of questions and we're not even halfway through, but some of these are duplicates. So if I, As we get going on here, they'll be— this will go faster. What is the difference between the SBA loans and the CARES Act? So the CARES Act is what it was called when it went through the Senate. They changed the name. So right now the world is calling them Paycheck Protection Program loans. And those are the ones, those are the ones we're talking about that are forgivable. The SBA loans are the ones we're calling EIDLs. Those are not forgivable, but they still have really great terms. So like— Check. If you have nothing, an EIDL is pretty good, but I really do like the idea of having my loan amount forgiven, not having to pay I just started coaching business this year. Can I qualify for a loan? Yeah. As long as your business was existent as of January, it's like January 20th or something. When applying for Paycheck— when applying for the PPP loan, If I pay myself payroll check every 2 weeks but take my salary by paying all my bills with my business account, does all that count to be multiplied by the 2.5% of payroll? No. If you are paying business expenses or personal bills out of your business account, those are not going to be part of the calculation for your payroll costs. As a real estate firm with lots of independent contractors, but only a few couple employees, how do we obtain a loan and pay it back? So again, you can have independent contractors. Your payments towards them qualify. And it doesn't matter what lender you go with. They're all going to be the same. We, I mean, the recommendation typically is with a local branch because it's, Local and maybe someone you have a relationship with already. What do I apply for? You're probably going to be applying for the 2.5 times your payroll amount. If you need an EIDL loan, which is up to $2 million, I would guess you're just going to pick a number. that you can justify as to why you need it. Most of the time, that's the case. So I, I just got a HELOC last week. And even on that, they wanted to know exactly what I planned on using the proceeds for, even though I told them, I actually don't need to use this right now. I just want to have a line of credit open in case I need it. And they still made me lay out how I'm planning on using it. I imagine that's going to be the same process. With the EIDLs, they're going to want to know what you're going to use the funds for. Okay. Sole owner of a C corp works as a consultant. I would apply for the loan from my business because as the sole owner of a C corp, you should be on a W-2. So you should be able to have— it should be your payroll costs. If you don't have a 2017 or '18 tax return done yet and you owe back taxes, can you still apply? Yeah, as far as I know, I did not read a single thing that says you're ineligible if you have back taxes. But you do need your tax returns filed. Sorry, it's a long one. I'm just trying to read out, pick out the questions. Yeah. Getting an S election on your business is a totally separate event from getting the loans. Getting a loan will not affect that. Uh, he's saying he's having a hard time coming by clients. His income's down 90%. He's wondering if he's actually unemployed or not. Um, well, regardless, if your income is down 90%, then you would qualify for the loan and you should probably apply for it. How quickly should we act on all this? I, as soon as your bank has the process to apply, I would, I would apply. Um, I mean, supposedly they set aside $350 billion, but I mean, I don't know how far that goes. It's a big number, but there's, there's also a big number of small businesses in the world. Um, will Insight be offering frequently asked questions on this process, its benefits, any negative effects it could have on us? We plan on doing things like this. I'm going to try to get on once a week to kind of just give updates on how things have changed in the past week, because good grief, I feel like I've lived a lifetime in the last 2 and a half weeks. And yeah, we'll do our best to keep people updated. And certainly you guys have our email addresses, so we can help. Talked about how do we apply. 2-week-old startup. So if you started in March, you're not going to qualify. Sorry. That's too bad. Does the sole employee count towards my employee total at this point? I did not have my first employee until March. So it's not a matter of hiring your employee. It's a matter of being in business. If you were in business as of January 1st, you qualify regardless of when you hired your first employee. They are going to look at that employee who's part of your business in your total employee count though. So yes, they would count. Do I count as an employee in the If you are on a W-2, as like if you're an S corp owner, you would count. If you're paying yourself a guaranteed payment through a partnership, I would say that's part of this net earnings from self-employment tax. So those, I feel more confident saying those are going to count. The ones that I'm not confident because I don't know how they're going to treat us. Is as an S corp owner, I take a wage and I know that amount will help. I don't know how they're going to handle my distributions. I'm hoping they're going to count it, but, you know, they might not. Could the loan be used for paying other essential bills separate from employee payroll? Yes, it can be used to pay rent. Vendors in general, no, because that wouldn't be forgiven. Contractors, yes, that is considered part of payroll costs as the law is defining this for the loan. And then company vehicle insurance, no. So vendors and vehicle insurance, you're going to— you would want to look at the EIDL loan to cover those. Now again, that's not forgivable, but it's still a loan that could help. Okay. S corp, we asked for, or we've talked about. If I've applied for the EIDL but not received anything, can I still receive the PPP loans without penalty? Yes, I believe so. If you end up getting an EIDL, again, that amount would just be rolled into your PPP loan. I honestly don't know how they're going to do that if the EIDL amount you would have gotten is more than what you could get for the PPP loan. They have not given guidance on that. I have an SBA loan for a building. That is not going to affect these loans. You rent the building to Jim, his gym, the rent comes out to be about 80% of his income. Yeah, I thought the same thing. I don't know the answer. He's wondering if because he owns the commercial building and his operating business pays the rent, if that rent payment will be forgiven because he's also the owner. I don't know, because I have the same structure here with the space we have Here, I'm going to make an assumption and say no. Because typically just in past tax laws, that would be considered self-dealing. And that, that's be— that'd be effectively them just giving me straight up money as the owner and it staying in my pocket, which is not the purpose of the loan. The purpose, the purpose of this program in general is to help business owners keep Their employees hired, having a job. That's why it's called Paycheck Protection Program, because they're trying to protect people's paychecks. And they just, they don't look at us that way. It's a good strategy, but I don't think the rent's going to work for you. Again, independent contractors qualify. How do you file for unemployment for reduced commissions? Unemployment is specifically related to if you are a W-2 employee. If you get a 1099, it's very rare that you're going to qualify for unemployment. Now, I do know some states make you pay unemployment on your contractors, but I've also never heard of them actually giving out unemployment to contractors. Now, if your commissions go down to zero, then you'd have an argument that you're unemployed. But if it's just a reduction, I don't think unemployment is going to help you, but the PPP loan would. So you would want to go that route. Okay. I am halfway through the questions and we've been on here for about 40 minutes. I'm gonna make a note where I'm at and then I'm gonna read through these this evening and summarize them so that I don't— 'cause some of these are pretty lengthy, they're almost like full emails. Um, I don't wanna waste your time. Watching me read. That would be terrible. So I'll, we'll make— I'll do another video tomorrow with the other 50 questions that are on the form we sent out. Let me just scroll through this Zoom chat here and see if I can answer any more of these if I haven't already. And then my trusty sidekick is letting me know there's Facebook Live questions as well, which I don't know where I'm going to see those. You can see those in our voice box. So, Ryan, I'm just going to ask that you maybe take a screenshot of those and I'll answer those later as well. I feel like at this point almost all the questions I'm seeing are duplicates anyways. But I want to make sure that I get them answered. We just— I don't need you on here for 3 hours tonight with me. I'll do the work and then I'll come back tomorrow and do another concise video. Okay, so we answered the question about 1099s. Those qualify. If we have rent, do we get the grant forgiven amount for rent in the future, or are we talking about this month only? The, the forgiven— the grant amount is $10,000 when you apply for the EIDL. And from what I've seen, you can use that on whatever. They don't have any stipulations on the $10,000. So whatever you use that for, they're just going to forgive it. If you end up getting a PPP loan and they gave you a grant, They're just going to reduce your PPP loan amount by the $10,000 that they gave you. Just started payroll for 2 employees around the middle of January. Yeah. Whenever you started, whenever you started paying your employees, it's not a big deal. They're going to look at how many full-time employees you had when you got the loan. And how many do you have after effectively 3 months? That's what they're going to compare to see how much of your loan amount is forgiven. If you haven't done— if you haven't paid yourself yet a W-2 and you're an S corp, then you should do that. Okay. How do I— how do you prove to the lender, SBA, that your loan went to paying rent? They're going to ask for evidence. So, it could be cleared checks, it could be transactions. Honestly, that's really where the bigger amount of time, work, time, effort, and work is going to be because, you know, well, maybe you don't know. My assumption is they're going to try to screw all of us. And so, you know, they're going to want really good evidence documents on That the loan went to those amounts. Likely there's going to be cleared checks. If you have payroll, your 941s are going to be your evidence. How do you prove— will one be easier to qualify for than another? Honestly, I don't know, Brooke. Brooks? Could be. The PPP is supposed to be streamlined and really easy. The EIDLs have been in existence for at least 2 and a half weeks, and I don't think they've issued— I mean, I don't know anyone who's issued, who's applied, who's been issued one that has applied. So I would say that's not streamlined. So Since there are only a certain amount of funds available, do you anticipate the program will run out of money? Yeah, I do. I think it will run out of money. But the thing is this, when I say that, I don't— I think they're going to issue as many loans as they want. It's the forgivable loan amount, which you don't have to give evidence for until after the time period. to prove that you used it for the things they wanted you to. I think that's when the, what they're forgiving goes against the amount that the law stipulates. I think that's when they're going to run out of money. And I believe when they run out of money, if you got the loan, which they happily gave you, they're just not going to forgive it and you'll need to pay it back. Now that's not the end of the world because— They plead. Honestly, it's, A really great interest rate. So worst case scenario, you got a really good loan. But yeah, to me, I'm— I'd be more worried about being prompt about applying for forgiveness of the debt than I would be right now about getting the actual money. Paul asks, if you applied for a loan prior to PPP was available, should we decline the funds we've been approved for? This is a City of Los Angeles loan. I, I do not believe you are— the Los Angeles loan, I don't think is related to the PPP. I think what they're looking about is the PPP loans or the EIDLs. So if your city is issuing a loan and you got one of those, I don't think that affects your ability to get these other loans. But again, I have not read any of the laws for Los Angeles loans, so you're probably going to want to check on that one. Okay. That's a private message. I will answer that privately. If I work full-time elsewhere, but also run a small business, can I still qualify to help my business itself? Yeah. If you're— even if you have a full-time job, that doesn't preclude you from applying for your small business. So example, I have Insight Tax and then I have CrossFit GSL. We are definitely applying for a loan with CrossFit GSL. And I look at this as like a full-time job here at Insight Tax. We still plan on getting it for our gym. Where should we watch to find out when we can apply for the PPP loans immediately? I would be in contact, Sarah, I'd be in contact with a Banks and get on their lists so that they, the second they're available, I'm sure they're going to email out everybody who said they're interested because even though it's a really great interest loan for us, banks still make money on this stuff. In fact, the SBA is going to, or the government's going to reimburse them somehow. They make money. So getting on their list is probably the best way to find out when they will actually be available. Should we expect to receive an email after applying for EIDL, or how will that work? I think in normal circumstances you'd get an email saying we've received your application. I would not expect one right now unless you are doing it— I've heard basically between like 2:00 AM and 4:00 AM in the morning is the lowest peak time for their system. So I would not expect an email. Does PPP cover contractors? It covers both. Okay. So this is a gym owner question. A few months after the loan is made, when they look at payroll expense, pre and post loan, that it will still be down given that under 4/9. Yeah. Okay. Because it's a variable. Mm-hmm. So, I am asking when they compare the employee expense levels of pre and post, then post will be way down, which means it's a variable lump sum. All right. So, he— there are lots of gyms that follow this model of 4/9. And so, if you're not a gym, maybe you're paying commissions based on a percentage of revenue. That's what this question relates to. If your gross revenue of the business drops, Then by default, the amount that you're paying in commissions is also going to drop. And the loan, in order to be forgiven, is going to look at what your pre-loan amount was versus the post-loan amount 3 months later. He's wondering, does that mean the forgivable amount will be fairly low? Yeah, likely. I think one thing you could probably do Because you got the loan for the purpose of paying it, you know, keeping them employed and giving them a paycheck. Maybe when you figure out what your average payroll amount is, you just agree to pay that coach the same amount that you calculated during this time period so that you get all of it forgiven. And if that amount ends up being more than what they would have earned, Ask them to do some extra stuff. I think they'd be happy for the extra revenue. It allows you to have the amount forgiven. So you're not hurt by doing that. And they might find another thing that they like to do that you're asking them to do in exchange for compensating them a higher amount than the percentage of commissions they earned. Hope that helps. So to clarify, the PPP is based on 2.5 times payroll, but can be used for payroll and rent. That's correct. The amount you can get is limited to the formula of 2.5 times payroll, but you can use the proceeds of the loan for, in addition to payroll, interest on mortgages, rent on your leasing agreements, payments on utilities, or if you have tipped employees for that. So you can use it for any of those things, even though they're limiting it to 2.5 times your payroll. The $10,000 grant from the EIDL, it really is a grant even if you get the loan or not. So if you apply, when you apply, from my understanding, you basically say, I need a $10,000 grant, and you're supposed to get that within 3 days of them processing, starting the process of the loan. If you get that $10,000, it will not need to be paid back. We are recording this and we will send it out. Yes. If I work full-time elsewhere but also run a small business, can I still qualify? You may. Anyone who makes more than $100,000 though, your amounts will not be in the— like, you can't use your amount to come up with your payroll costs and you won't be forgiven if you end up— the amount you use for that won't be forgiven. So it's really Paycheck Protection Program for your team members who earn $100,000 or less. Yeah. Now your question, Josh, you're saying combined you have, you make a lot more money in other jobs combined, but your gym business only makes $60,000. You can, your gym, you can apply for. Absolutely. Because think about this, from that perspective, the benefit of the loan is for your coaches in the gym, not for you. That's why you can apply, because the job is to keep them employed, or the goal is to keep them employed. I answered that one. You're welcome. If our coaches are 1099, should we encourage them to apply for any of these loans? I don't see why not. Let's see how they handle it, how the SBA handles it. I mean, it specifically says independent contractors and whatever. Um, they, they all qualify. We'll see. Jason, there might be more things that come out later as they look into this, as far as like, well, your gym is still paying you the same amount, but then you applied here. So you really didn't suffer a loss. because of it. I don't know exactly if they're going to get into that, that nitty-gritty. Does personal credit score matter? I have not seen anything in the law that personal credit score is a factor that they're looking at. I can't imagine they're not going to run your personal credit score though, and they may base, especially on the EIDL side, they might base their their terms they give you off of your credit score. But from what I've read, they won't deny you if you have a bad credit score. Another, again, a question on like unemployment. Should you encourage your employees to file unemployment even if I'm applying for the PPP? If you're, if you're applying for the PPP, you do not want to encourage unemployment because that'll affect how much of the loan is forgiven. If you're applying for the EIDL, you could encourage unemployment because you have to pay back the EIDL amount, all of it. And I have heard people— I haven't read any facts about this, it's just hearsay— some believe that it'll be better for people to get— I'm sorry, I'm sorry. It'll be better for people to get unemployment now Than it will be in 3 months. So if you are gonna— if you can foresee that you might have to put them on unemployment, it's better if you cut them loose right now. Can the money be used towards all crucial business payments? The EIDL can. I'm not sure on the PPP. All I know is if you want the PPP loans to be forgiven, it has to be for one of those 5 expenses that I've I've read off a few times. The $10,000 grant, again, one more time, that relates to if I apply for the EIDL, I can at some point in the application say I need $10,000 immediately. They're supposed to send it to me within 3 days of something. I think when they start processing the loan. If I get that $10,000, that is a grant. Um, if I end up qualifying for a loan, then they'll just reduce how much they're sending me in that loan by the $10,000. If I don't get the loan, I keep the $10,000 and don't have to pay it back. If I pay myself through an S corp, does the EIDL or PPP allow me to get loan forgiveness for my employees as well as myself since I pay myself? I believe it for sure is going to give you loan forgiveness on the W-2 amount you pay yourself. What is unclear, Tyler, so far is, is it going to give us loan forgiveness on the distribution amounts that we pay ourselves? I do not know. For sure on your employees. So worst case scenario, you get the loan and you Are able to pay your employees and you use it solely for that purpose, and therefore the amount gets forgiven. Brooks, how do they determine who gets the grant? I think if you apply, you get it. Like, if you ask for it, you get it. I haven't seen anything that says these are the people who qualify for grants and these are the people who don't. Brandy heard today that the SBA website is giving false submissions. You think it submits but it never goes through. I have heard that. I think that's been an issue for a couple weeks now. Yeah. They are saying the process is to print and mail your application. Have you heard this? When I did it briefly and I looked at the steps, it looked like there was a spot I could upload the application. Now, I didn't spend a lot of time on it. I spent a couple minutes. I couldn't find anywhere where I could actually just print off the full application because that would have been my preference, to print off, fill it out by hand without having to wait on the system and then uploading the PDF file. I would go that route first. As far as mailing in my application, it's possible. I just— gosh, that sucks, you know. Because, look, with— I just know this from the IRS standpoint. They get so much mail. I cannot tell you how many times we send them something, and we do it certified mail so that we know that we sent it and they can't tell us we didn't. They just literally lose mail. I'm pretty sure they have some guy hired and his job is to take every third piece of mail and just throw it away. I just, with the amount of people applying and the SBA now and the stuff they're doing, I would be nervous about having to mail in my application. I'd feel better about being able to upload it electronically. But I have heard things like that, but I heard you could print it and then upload it. You don't have to mail it. I filled out and submitted the EIDL application. There's no language on the application asking me if I needed $10,000. That's interesting. I thought it was odd that they didn't ask me how much I'm requesting. That is also odd. I agree, Matt. That's funny. I mean, if you ever dealt with loans before, I know that there's sometimes steps, but you would imagine that they'd ask for how much money you want. Okay. There are a few private questions on here, and I will answer those later. Other than that, guys, that's it for this one. Again, I'm going to go through the rest of the questions, and I'll post a video tomorrow. We might do another link, so if people want to jump on, They, they can watch me answer those questions, but it'll be more smooth because I'll take the time tonight to actually read through everything and just come up with a list. Hopefully this was helpful, helpful, guys. Have a great evening, stay healthy, and we'll talk to you later. Bye.
