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.