Monthly Archives: April 2020


We Received the PPP Loan – What Do We Do Now?


by on Apr 29, 2020 3:45 PM

We Received the PPP Loan - What Do We Do Now

The second wave of funding for the PPP loan has been approved. This has many of our customers asking, “We Received the PPP Loan – What Do We Do Now?” This week’s Trilogy Town Hall Call focused on what companies should do after receiving the PPP loan.

To offer guidance, Trilogy invited the following professional advisors to join our call:

  • Joel Greenwald, Managing Partner – Greenwald Doherty | jg@greenwaldllp.com
  • Brian Mills, Shareholder – Maselli Warren, P.C. | bmills@maselliwarren.com
  • Mark Lenski, Partner – Tarlow & Co., CPA’s | mlenski@tarlow.com

Q&A:

I have received the PPP for my business. I’m told that the loan forgiveness will be granted if I use 75% of the proceeds for payroll. In applying for the loan, my bank asked for my business expenses (e.g. rent, utilities, lease payments, etc.). When I finally was approved, the amount deposited took into account my business and was not just 2.5 times my payroll expenses. Because I received an amount greater than 2.5 times payroll, won’t it make it harder for loan forgiveness?

  • Call the bank to determine how they calculated the loan. Since you signed the application, you may be required to pay back
  • If you keep the full amount, calculate if 75% of the loan would cover 8 weeks of payroll
    For amount not forgiven, there is 1% interest on the loan with 6-month deferral on first payment

Can more than 75% go toward payroll?

  • Yes, but must be paid within 8 weeks

I recently applied for State of New Jersey unemployment as I lost appreciable income from my subcontractor work. Did I make the right decision in not applying for the second round of PPP money as a subcontractor?

  • Compare payroll calculation for PPP vs. Unemployment to make the best decision

PPP forgiveness calculations – what formula will be used for calculating total full-time equivalents from part-time hourly workers will be used?

  • Not yet clear. Statutes say 30 hours/week
  • Waiting for guidance to define

Do you advise moving to a weekly payroll?

  • It could be beneficial since forgiveness may be based on what is incurred and paid in 8-week time period

Is the payroll forgiveness timing cash or accrual based? I have a payroll due with only 3 of 14 days after the loan funded.

  • See response above, use cash basis as must be paid & incurred in 8 weeks

Do I need to calculate the 75% hurdle on each of 35 employees and not the aggregate total?

  • No, you can base on the aggregate

Can you explain key calculations (for example, for employees making over $100K) since PPP is for 8 weeks, not 2 months?

  • Forgiveness capped at 100K: $100,000/52 weeks = $1923.07/week x 8 weeks = $15,384.62
  • For anyone making over $100K, you can elect to pay full salary and only receive forgiveness for up to $100K
  • Recommend opening a bank account for PPP funds

What is covered in payroll calculation? 

  • State & Local employer portion of taxes, 401K, group medical contributions
  • Medical, sick leave, PTO may or may not be covered depending what is included in FFCRA
  • Worker’s comp not included since this is paid from an insurance plan

Any guidance with respect to payback provisions that are to be issued on April 27th?

  • No provisions yet re: 4/27 funding

We have not paid our 2019 401k contribution, yet.  Can we use the PPP we were awarded, and does it qualify for forgiveness?

  • Do not think it qualifies for forgiveness. Still some confusion around provisions but understanding is that it needs to be incurred and paid during 8-week period.

What is the significance of Loan #?

  • SBA provides a loan # for tracking

While salaries were limited to $100,000 annually for determining the calculation for the loan amount, are the same limitations in place for determining loan forgiveness?

  • See Question #8 re: salaries over $100K
  • Recouping money for owners & partners – capped at $100,000
  • LLC: up to $100K of 2019 net profit that is subject to self-employment tax (could be in the form of guaranteed payment)
  • SCorp: up to $100K of 2019 W2 Salary (limited to the wages you are taxed on)
  • owner draws, distributions, or loans to shareholders, are not included in calculation because none of these transactions are subject to payroll or self-employment tax

Methods for Maximizing the forgiveness on PPP? Are there any templates or tracking tools that have been developed you are aware of?

  • Accounting firms and banks are creating workbooks to help in calculations.

Will the second wave of funds have a similar 8-week period to measure use of funds?

  • Yes, 8 weeks begin when your loan is deposited into your account
    Current forgiveness date is June 30th. Waiting on provisions to see if date is extended for one or both rounds of funding

What do you do if you have to rehire people and there is no work?

  • If there is no work, you must consider these 3 important aspects, based on the amount that you want to have forgiven, not the amount of the loan:
  • you must use 75% for payroll
  • If your full-time equivalents drop below last year (i.e., FTE’s only 90% of 2019, you may not be forgiven for 10% of the loan)
  • forgiveness will be reduced if salaries are reduced more than 25%
    Also, employees must be on the payroll by June 30th

Do we need to go through the full rehire paperwork for old employees coming back to work treating them as fresh new hires?

  • Terminated: Yes
  • Furloughed: No

For QSR (quick service restaurant) employees, staying home outperforms the benefits of coming back to work. Is there any provision where we can show/prove our efforts to re-hire but where employees refuse to come back to work?

  • This is a first for employers as we have never had to ask employees to work during a pandemic
  • Need to ensure that you are providing a safe work environment
  • Can share with employee that they will need to be replaced or may not hired back but opening door for lawsuits; consult with a labor attorney
  • The intent of the PPP is to pay employees for 8 weeks – to keep money flowing

What happens if the world is not up to full employment speed by end of 8 weeks and economy and COVID does not allow full return to work?

  • PPP intent is to make sure that employee payroll is covered for 8-weeks

I received my PPP Loan but am not allowed to open my non-essential business. Should I pay my employees to not work from home?

  • See answer to #19. Alternative is to furlough employees, allow them to collect employment, and payback the loan

If we follow calculations and do not use our entire loan amount, are we allowed to prepay salaries, healthcare, profit sharing rent, mortgage, utilities as part of the forgiveness?

  • Not recommended, not in the spirit of the program

Are real estate taxes included?

  • Mortgage interest included
  • Not clear if taxes and other “triple net” expenses paid by a tenant to a landlord are deemed “rent” for purposes of permitted and forgivable uses of PPP funds

What is definition of utilities?

  • Electricity, gas, water, internet, phone

What happens if you have an operating company that pays rent to one company, that then pays to a lease to a real estate holding company?

  • Rent payment would be forgiven so long as contract started prior to 2/15/20 and you have been paying it all along

About Hal Levenson

Hal Levenson is the Founder and Chief Visionary Officer at Trilogy Partners. Trilogy Partners is an advisory & implementation firm whose mission is to help companies grow and transform.  We accomplish this by focusing on 3 critical business areas: Financial, Strategy & People.

 

DISCLAIMER: Please check with your trusted professionals prior to acting for your business. This Q & A recap should not replace professional services from legal, financial, payroll, HR, insurance, or consulting professionals. If you need a resource in one of these areas, please reach out to Hal Levenson at hlevenson@gettrilogypartners.com or contact Trilogy Partners at 609-688-0428.

Also, as expressed by the professionals on the call, it is critical that you do a personal examination of the many factors of your business to make the best decision for you and your employees.

My Company Did Not Get a PPP Loan, Now What?


by on Apr 22, 2020 2:02 PM

My Company Did Not Get a PPP Loan, Now What

As of this week, the PPP loan & the EIDL $10K Grant have officially run out of funds. Some businesses have been approved and received their money while others have not. Below is a list of questions we explored on Tuesday’s call regarding the overall handling of the PPP funds for companies WHO WERE NOT approved and/or funded.

To offer guidance, Trilogy invited the following professional advisors to join our call:

  • Rachel Stark, Shareholder: Stark & Stark, a full-service law firm serving PA & NJ.
  • Jim Colitsas, CPA: Princeton Financial Group specializing in Tax, Assurance and Accounting, and Consultative & Planning Services
  • Matt Putnam, Business Lending Specialist: Dogwood State Bank
  • Matt Flannery, Senior Vice President, Team Leader SBA Lending: Provident Bank

Q&A:

The PPP application has you certify that you have not applied elsewhere.  We cannot get through to speak to a live person at our bank regarding our application.  We have only received an email, from an address we cannot respond to, advising us that the PPP funds are exhausted and the SBA is no longer accepting applications but the bank will continue to review our application for completeness in the event that additional PPP funds become available and the SBA starts accepting applications.  A CPA is advising us to submit a 2nd application with another bank.  If we get approved through one of the banks, we are to notify the other one immediately to pull our application.  Is this legal? 

  • While not illegal, you should only apply to one bank at one time.
  • Recommend that you stay with your 1st application – banks have a queue set up and you won’t want to lose your place in line. Lack of response or inability to talk to a live person from bank is creating fear but you may not get funding if you start over.
  • Stay with the bank you know; try to reach out to your personal banker who may be able to help you with the requirements of the application.
  • Counter to expert advice, one business owner did not get any response from larger bank, went to smaller bank and got funding. Bankers on call acknowledged that there is a risk to doing this and recommend that you fully understand the bank’s process moving through the PPP. Don’t want to risk being on the end of the queue at the new bank.
  • Advise that if you submit to a new bank that you send an email to document withdrawal from original lender. Be transparent with new bank that you had an application on previously submitted.

I founded my S Corp just last year and have not yet set up payroll, therefore have not been paying into unemployment insurance since I do not have any employees on payroll. As the owner and only “employee”, I have been taking distributions as my source of income until setting myself up to receive paychecks. My business has been temporarily shut down since March 17, 2020 due to COVID-19. Am I eligible for PUA?

  •  Yes, you are eligible for PUA (Pandemic Unemployment Assistance).

The PPP Loan states that it also applies to Solopreneurs and Single Consultancies. However, when applying, the list of required documentation included some materials that a single solo operation would not have. We do not run a payroll. I do not have employees but rather 1099 subs. I do not have any records of paying health insurance or benefits —especially as I myself am covered through my spouse’s job. Consequently, when I applied, I submitted my taxes and proof of quarterlies paid.  I stated what my salary draw was per month and multiplies that by 2.5 for the amount.

I was notified first that my bank did not submit my application in time before hearing the SBA had run out of funds. And it stated it was incomplete since it did not have all the docs they require. What is my recourse?

  •  This is where having a relationship with a banker is helpful. A lender’s early reaction might be to kick this application out but, with rules changing daily, a good relationship with a bank might help. Option to use 2019 Schedule C to calculate payroll. Try to call the bank and have a conversation otherwise, explore other options.

How likely is it that the government will provide more funding for the PPP loan and the EIDL grant?

  •  EIDL Grant: Unlikely
  • If you have not received a request for additional information, it is highly unlikely you will receive any funding for the EIDL $10K grant.
  • PPP loan: May be more funding by end of week
  • Possible that some loans are still in the queue. Some participants shared that they heard late Friday that their loans were approved, finalized loans yesterday, and received the funds today.

If more funding is approved, do I need to re-apply with my bank or with the SBA?

  •  No need to reapply.

If the PPP is extended, will the rules for using the money be different? If so, how?

  • Not likely that the rules will be different than current loan terms.

If we did not get the loan, can we lay off/furlough our employees or should we wait to see if the government provides more funding?

  •  Recommend that you speak with your accountant and/or labor attorney. Strategic decision that will be different for every business.

If we do eventually get approved for the PPP loan, do we have to re-hire the same employees that we let go or can we hire new employees?

  •  You may hire new employees.

What happens if a former employee does not want to be re-hired? How does that affect the PPP loan?

  •  Between Family First Legislation and additional $600 unemployment, some employees won’t want to come back, especially if they feel their safety is at risk. Advisors on the call don’t recommend hard lining by threatening to take away unemployment benefits. One suggested “Hazard Pay” to entice employees to return. It’s critical, especially with smaller teams to communicate. Also, consult a labor attorney if you have any questions.

Have businesses suffering a shut down or near shut down in Q2 explored the benefits of the ERC (Employee Retention Credit), if expecting at least a partial ramp up of business in Q3 and Q4?

  •  Cannot receive PPP and ERC. Advisors are not recommending ERC.

How have you currently changed your business model?

  •  Using technology and social media in new ways to connect and stay in front of customers.
  • Giving back, a lot of goodwill.

Will benchmark of volume required for loan forgiveness be reimagined for June 30th if our revenue is dependent on other businesses?

  • Lender should have taken into consideration when application went in to allow for loan forgiveness.

About Hal Levenson

Hal Levenson is the Founder and Chief Visionary Officer at Trilogy Partners. Trilogy Partners is an advisory & implementation firm whose mission is to help companies grow and transform.  We accomplish this by focusing on 3 critical business areas: Financial, Strategy & People.

 

DISCLOSURE: Please check with your trusted professionals prior to acting for your business. This Q & A recap should not replace professional services from legal, financial, payroll, HR, insurance, or consulting professionals. If you need a resource in one of these areas, please reach out to Hal Levenson at hlevenson@gettrilogypartners.com or contact Trilogy Partners at 609-688-0428.

Also, as expressed by the professionals on the call, it is critical that you do a personal examination of the many factors of your business to make the best decision for you and your employees.

What is Your “New Business Normal”?


by on Apr 15, 2020 5:11 PM

New Business Normal

Most businesses are now 4 weeks into working remotely and even essential businesses have been impacted by the shutdown. In some way, we all are working under a “new business normal”. On Tuesday, April 14th, Trilogy Partners hosted our 4th Navigating Covid-19 Town Hall call where we had an exchange around some common themes we’ve heard from our network. Thank you to our call participants for sharing how you are handling your “new business normal.”

What tools and/or methods are you using to stay in touch with your team?

  • Slack.com – video chat, text chat, create channels & groups of people for internal and external meetings
  • Monday.com Project Management Tool & Communication tool complete with Dashboards & Integrations
  • Vonage: Group chat for company/department. Some companies set up chat rooms for “Water Cooler” talk
  • Slack.com & Monday.com for inner office
  • Zoom.com

What tools and/or methods are you using to stay in touch with your Clients?

  • Randomly touching base via email to check in
  • Email blast to clients with general updates and/or helpful resources
  • Phone calls – Business Owner to Business Owner

What tools and/or methods are you using to stay in touch with your Vendors?

  • Slack.com

Are you handling A/R, A/P, payroll differently? If so, how?

  • Using bill.com for electronic payments; more efficient solution.
  • AR: Receiving requests from extended terms and granting on a case by case basis.
  • AR: Wave credit card fee; gets cash in the bank.
  • AP: Most important thing is communication. Paying critical vendors first with credit card to extend terms. Vendors will remember who paid when times get better.
  • AP: Contact vendors to extend terms.
  • Payroll: Some have done salary cuts across the board. Must be careful during PPP 8 week-period since you will not get forgiveness if money does not meet criteria.

How are you approaching business development and sales and How is it different now?

  • Telehealth platform: Physitrack.com
  • Mailing to population – letting them know that business is open and the steps that they are taking to ensure a healthy environment. Some of insurance providers are relaxing measures based on challenging times.
  • Reluctant to approach new clients – messaging is tricky.
  • Host webinar to demonstrate leadership with new/existing clients.
  • Be the helper by providing valuable information.
  • Marketing to current situation – be content oriented. This may lead to something down than the road.
  • Chat rooms that are blacklisting companies that are trying to capitalize on COVID19.
  • Great value in webinars – for example, SBA has frequent updates that are communicated by reliable sources.

What new technology have you used to help with daily work?

  • Asana – task & project management
  • Microsoft teams
  • DocuSign
  • Zoom – Meetings & Webinars

What duties, if any, have you outsourced?

  • Website design & updates
  • CFO/COO/Accounting & Bookkeeping

How has your marketing changed in the last 4 weeks (method or messaging)?

  • Content: Blogs that educate, not directly sell services.
  • No direct marketing – offering resources (town hall calls/webinars/How To’s)
  • Private Groups – a resource for all members.
  • Social Media Sharing – Help others by sharing content to cast a wider net (and keeps your brand top of mind as well).
  • Video snippets from webchats – more palatable in short 30-second bursts than replaying an entire webinar.
  • Giving Back to Community – i.e., provide PPE, sponsor a meal for essential workers.

How are you managing work-life balance working from home (family/distractions/interruptions)?

  • Essential and remote work often comes with longer hours and burnout – set parameters to turn business “off”.
  • Even for those who have always worked from home: with everyone home, need to maintain routine but also do something that separates home life and work life.
  • Communicate to have a greater understanding of what everyone’s schedule looks like and set expectations.
  • Silver linings: dog is happy, family dinners, movie night, walks outside

How are leaders helping their employees?

  • Mental health days
  • Company Happy Hour
  • Rotating time off
  • Bonus for going above & beyond
  • A sincere Thank you

Has anyone heard back from their bank regarding the PPP loan?

  • Yes, but no one has received their EIDL or PPP loan yet.
  • Change in EIDL, retroactive to start of application process: the amount of your Advance will be determined by the number of your pre-disaster (i.e., as of January 31, 2020) employees. The Advance will provide $1,000 per employee up to a maximum of $10,000.
  • Applications will take 3-4 weeks to process.  At that point, a representative from the SBA will contact the Company, verify some information and, if approved, the $$ will be deposited into the Company’s bank account within 3 business days.

What information are you sharing with your employees? How transparent are you?

  • Be as honest as possible, focus on values and provide assurance.
  • Do not need to provide concrete numbers but be as transparent as possible without providing false hope. Can share that there is no intention for layoffs but if anything changes, there will be shared responsibility.
  • Keep dialogue open, check in every week with your team.
  • So much depends on how long this will last – want to be very cautious about false hope.

DISCLOSURE: Please check with your trusted professionals prior to acting for your business. This Q & A recap should not replace professional services from legal, financial, payroll, HR, insurance, or consulting professionals. If you need a resource in one of these areas, please reach out to us at https://gettrilogypartners.com/contact/.


About Hal Levenson

Hal Levenson is the Founder and Chief Visionary Officer at Trilogy Partners. Trilogy Partners is an advisory & implementation firm whose mission is to help companies grow and transform.  We accomplish this by focusing on 3 critical business areas: Financial, Strategy & People.

Update on CARES Act and Payroll Protection Program


by on Apr 9, 2020 4:49 PM

Update on CARES Act and Payroll Protection Program

Trilogy Partners hosted our 3rd Navigating Covid-19 town hall conference call on Tuesday, April 7th to address even more questions around the CARES Act. We were fortunate to have the following guests on the call to provide answers and suggestions to our participants:

DISCLOSURE: Please check with your trusted professionals prior to acting for your business. This Q & A recap should not replace professional services from legal, financial, payroll, HR, insurance, or consulting professionals. If you need a resource in one of these areas, please reach out to Hal Levenson at hlevenson@gettrilogypartners.com or contact Trilogy Partners at 609-688-0428.

Also, as expressed by the professionals on the call, it is critical that you do a personal examination of the many factors of your business to make the best decision for you and your employees.

We opened the call by asking our guests the following questions:

Please provide any updates on the PPP loan (different than what was generally known from last week):

  • Confirmed that business owners may apply for both the EIDL and the PPP loan. PPP loan must be used for specific categories and must be tracked.
  • Independent contractors may not be counted as employees and have a separate filing date of 4/10/20.
  • This loan has a maturity of 2 years and an interest rate of 1%.

Is it true that the PPP loan is on a “first-come, first-serve” basis?

  • Yes, and while there is talk about more funding, there has been no confirmation.
  • Contact your attorney or accountant who may be familiar with lender status and can advise which banks are still accepting applications.

The government agencies are overwhelmed and understaffed. Most people cannot get through and some banks haven’t received their protocols. Any knowledge of a fix?

  • No knowledge of a fix, however, see point above. Your accountant or attorney can help navigate issues with the banks.

What is the role of the banks vs SBA?

  • Banks: direct lenders who underwrite and forgive the loans.
  • SBA: Provides guidelines to banks and borrowers and guarantees the loans.

(5) There appears to be a diversity in practice by the banks on how they are calculating the Maximum Loan amount? i.e., include or exclude benefits for people over $100,000? Inclusion or exclusion of withholdings.

  • Federal taxes or withholdings are not part of calculation.

What if you made an error on the calculation, is it a good idea to resubmit?

  • Call bank to see if they can help edit the original application. Do not recommend resubmitting since loans are reviewed on a first come-first serve basis.

If you have someone help you prepare the application, do banks pay for their services on your behalf?

  • Preparer can be submitted as an agent and you may request funds to reimburse however, this is not advised.

What do you do if your bank is not yet ready or closed to accept applications for the PPP loan?

  • Contact your attorney or accountant who may be familiar with lender status and can advise which banks are still accepting applications.

Staffing decisions – Pros & Cons (i.e., status quo/reduction in workforce/reduction in salary, etc.)

  • Loan forgiveness is dependent on maintaining staff and will be reduced if criteria is not met.
  • This is a strategic decision; recommend that you speak to your accountant or attorney. Scenarios are on a client by client basis.

Should you open a separate bank account to deposit the EIDL or PPP funds?

  • May be a good idea to track expenses in a separate account. Should make loan forgiveness process less burdensome.

Independent Contractors should apply on their own, correct? Starting April 10th?

  • Yes, contractors apply for PPP on their own beginning April 10th.
  • Still not clear on how to handle K1 distributions.

When is the deadline to apply for the PPP loan?

  • June 30, 2020 but recommendation is to apply as soon as possible while funds are still available.
  • Can only apply one-time.

What is the interest rate on the PPP loan? And is the interest portion forgiven if you meet the SBA’s criteria?

  • Loan percent is 1% and yes, interest in forgiven if you meet criteria.

When should businesses apply for the forgiveness of the PPP loan?

  • The SBA has not provided any guidelines on when to apply for forgiveness, but it will be after 8-week time frame after loan is granted to ensure that funds are used appropriately.

If need be, when would a business be eligible to lay off some of its workforce after receiving the PPP loan?

  • Unknown as SBA has not provided guidelines for loan forgiveness.

Can you advance payments to employees under $100K; rent; and/or utilities using the PPP funds?

  • Unknown as SBA has not provided guidelines for loan forgiveness.
  • Once guidelines are provided, follow closely for full loan forgiveness.

We then turned the call over to our participants, posing the following questions:

Has anyone applied for the EIDL grant or PPP loan? If so, do you have any tips to provide others? What was your experience?

  • May apply for both – Link for EIDL loan: https://covid19relief.sba.gov/#/
  • If your bank is not an approved SBA lender, consider one of the smaller community banks such as Bank of Princeton, First Bank, Quaint Oak Bank. If maintaining a separate account, you might consider opening an account at the bank.

Did anyone receive any money from the EIDL grant or other SBA loans yet?

  • No one received SBA loans yet.
  • EIDL loans are taking longer than the 3 days stated on the website. Some have waiting 7+ days.

Are you paying your employees even if you are not having them work?

  • Participants who spoke are paying employees at more than 75% of current salary even if not working full 40-hour week.

Thoughts on how business in general will change in the long-term.

  • Companies who considered (or resisted) remote options in the past can now move to that model based on this experience

Prediction after the virus – Is your company going to be stronger, weaker or the same? Why?

  • Some participants are finding the silver lining such as an increased demand for marketing or the ability to recruit talent based on remote work set up.

Trilogy’s next town hall call will be Tuesday, April 14th from 11:30am – 12:30pm EST. If you would like to join us, complete the contact form on our website (https://gettrilogypartners.com/contact/) and include “add to town hall call” in Your Message.


About Hal Levenson

Hal Levenson is the Founder and Chief Visionary Officer at Trilogy Partners. Trilogy Partners is an advisory & implementation firm whose mission is to help companies grow and transform.  We accomplish this by focusing on 3 critical business areas: Financial, Strategy & People.

CARES Act – Coronavirus Aid Relief & Economic Security


by on Apr 2, 2020 11:06 AM

CARES Act - Coronavirus Aid Relief & Economic Security

On March 31st, Trilogy Partners hosted a town hall call with over 50 business owners to discuss the CARES Act. We thank our guests who addressed the legal and tax implications of CARES Act. Below is their contact information as well as links to their respective COVID19 Resource Centers:

Norris McLaughlin, P.A.

Withum Tax & Audit Advisory

DISCLAIMER: Please check with your trusted professionals prior to acting for your business. This Q & A recap should not replace professional services from legal, financial, payroll, HR, insurance, or consulting professionals. If you need a resource in one of these areas, please reach out to Hal Levenson at hlevenson@gettrilogypartners.com or contact Trilogy Partners at 609-688-0428.

Also, as expressed by the professionals on the call, it is critical that you do a personal examination of the many factors of your business to make the best decision for you and your employees.

Coronavirus Aid Relief & Economic Security Act Downloads (CARES Act)

Coronavirus Aid Relief & Economic Security Act Details (CARES Act)

Title I: “Keeping American Workers Paid and Employed Act”
$2Trillion Aid Package $367 Billion to Small Businesses

Key Takeaways for Businesses:

  • Paycheck Protection Program (PPP)
  • Loan Forgiveness
  • Employee Retention Tax Credit (not available to businesses with PPP loan)
  • Payroll Tax “Holiday”

General overview: Please explain the difference between the SBA 7(a) loan vs. the EIDL grant.
SBA 7(a) loan involves:

  • Forgivable loan based on average monthly payroll costs (year prior to loan) – up to $100K for FTE’s
  • Potential loan amount is 2.5x avg. monthly payroll
  • Loan has very specific uses that are different than the EIDL grant (must apply directly with SBA online for grant)
  • Forgiveness based on payroll, rent, mortgage, utilities, for an 8-week period
  • Payroll includes wages, benefits, retirement, tips, commissions
  • Forgiveness is tax free

Q & A regarding SBA 7(a) loan:

1. How do I apply for the loan? 

Apply at an SBA approved lender for a loan (See https://www.sba.gov/)
There will be an application that needs to be completed along with a calculation to determine if you are eligible for loan forgiveness

2. Is there a deadline to apply? 

June 30, 2020

3. Can I apply now?

Application is available now and SBA will begin accepting applications Friday, 4/3.

4. What determines the amount that can be borrowed?

Potential loan amount is 2.5x avg. monthly payroll for one year prior to loan date

5. What if I already furloughed or terminated employees, can I still apply?

Yes, if you reinstate employees by June 30th, you can still qualify for PPP.

6. Why wouldn’t I reduce my payroll until I apply for the loan?

The intent of the Act is to keep employees employed and paid. The loan amount is based on 8 weeks of average prior payroll (www.sba.gov). If you reduce your payroll, your loan will be significantly reduced and may not cover your staff during the 8-week period.

7. How much of the loan will be forgiven and what are the criteria for loan forgiveness?

Borrowers can obtain tax-free loan forgiveness for an amount equal to the sum of the following expenses that are incurred during the 8-week period after the loan is made:
Payroll costs (except compensation over $100,000/year is excluded), Payment of interest on mortgage obligation, Rent payments, and Utility payments.

The amount of the loan forgiven cannot exceed the amount borrowed

8. What kind of documentation should we have prepared?

For the PPP loans, begin gathering (Source: Tarlow & Co, CPA):

  • 2019 Form 941’s
  • 2019 W-3 and W-2s
  • Payroll records for 2020
  • 2019 1099s
  • Listing of any contractors paid in 2020 and amounts paid

9. Who qualifies for relief? (Source: Withum)

Small businesses, nonprofits, Tribal business concerns, 501(c)(19) veteran’s organizations, and 501(c)(3) nonprofits that were in business on 2/15/2020 and:
Have less than the greater of (i) 500 employees or (ii) the applicable size standard for the industry as provided by SBA; or Are sole proprietors, self-employed individuals, or independent contractors.

Additionally: Restaurants, hotels, or businesses that fall within the North American Industry Classification System (NAICS) code 72, “Accommodation and Food Services,” and that have 500 or fewer employees at each of its locations, are eligible.

10. What are the monetary limits?

The lesser of 250% of the average monthly “payroll costs” during the one-year period ending on the date the loan is made (the measurement period); or $10M

11. Does the entity matter? (C or S-Corp, Partnership?)

No, all are included if less than 500 employees

12. How are owners handled? Definition of owner >5%+ or something else?

Owner is also capped at $100,000

13. If owner has a separate related company that the primary entity pays and they get a W-2 salary from the separate related company, does the owner qualify under the separate or primary entity?

Will be looked at on a case-by-case basis; must guard against double-dipping

14. How are Subcontractors handled in relation to the companies that they work for? Does the company they work for receive the payment or does the Subcontractor receive the payment for their own business?

  • Subcontractors/1099’s do not count as part of your payroll
  • Now that it is clear that independent contractors are excluded from Company level “payroll costs” calculation, it is also clear that sole-proprietors/independent contractors can apply for the PPP based on their net income from self-employment.
  • Subcontractors may be eligible for Pandemic Unemployment Compensation

15. Loans – who does the calculation?

The lender reviews the application and approves the loan

16. What are the tax effects if the forgiveness of the loan?

If a taxpayer receives loan forgiveness, it cannot take advantage of the employer retention tax credit or payroll tax holiday

17. What if you keep everyone as an FTE but reduce their salaries?

You may apply for PPP so long as you do not reduce your workforce or salaries by more than 25%
If you reduce compensation greater than 25%, loan forgiveness will be reduced proportionally
Business cannot reduce compensation below state minimum wage requirement

18. Do Part-Time people qualify?

Part time is part of the calculation of FTE’s

19. If your FTE earns more than $100K/yr. and is capped at $8333.33, can you pay them the difference?

Yes, you can if you have sufficient funds. However, to substantiate use to the lender, this is not advised.

20. If you don’t have a loan or LOC, can you still get an SBA loan or grant money?

Yes

21. Does your balance sheet or cash in the bank matter in the SBA loan forgiveness?

Does not appear to matter

22. If your insurance covers Business Interruption, can you still apply for PPP?

Yes, as they can each cover different aspects of the business. The PPP is very specific about what is included and is designed to keep employees working and paid.

23. If an employees’ duties change as part of COVID19 and they are still employed, does this qualify?

Yes

24. If an employee is out on FMLA, does his/her compensation count as part of PPP?

Yes

25. If home and not working but still employed, does compensation qualify towards PPP?

Yes

26. If one division is impacted and another is not, can you apply as a division?

No, the application is completed as a single company entity

27. Will businesses be expected to show certification of loss of revenue for loan forgiveness?

There is no indication that you will have to certify loss of revenue, however the SBA may decline the loan if revenue has not been impacted.

28. How long do you have to keep employees past 8 weeks in order to qualify for loan forgiveness?

Currently unclear, only thing certain is that you must retain employees for 8 weeks following receipt of loan.

29. How long does the lender have to deny or grant forgiveness?

The lender has 60 days to deny or grant forgiveness following the 8-week period. There will be recourse against the borrower if not used for approved expenses.

 


About Hal Levenson

Hal Levenson is the Founder and Chief Visionary Officer at Trilogy Partners. Trilogy Partners is an advisory & implementation firm whose mission is to help companies grow and transform.  We accomplish this by focusing on 3 critical business areas: Financial, Strategy & People.