***UPDATE 5.15.2020***

The SBA has released the application for PPP loan forgiveness. However, there may be a few surprises for some…

One of the first issues is that while loan amounts are based on either 2.5 times average monthly payroll costs for 2019 or the trailing 12 months (up to $10 million), the window to use it is only eight weeks.

The loan amount is also based on prior staffing levels – before many small businesses laid people off or reduced salaries. Therefore, it may be even more difficult for business owners to use at least 75 percent of their loan on payroll.

Forgiveness will be prorated if payroll isn’t maintained at levels seen before Feb. 15 – so it will be reduced proportionally to how many jobs were cut or the amount by which salaries were reduced. It will also be reduced if you don’t follow the allocation specifications.

To apply, fill out the application, and submit it to your lender, who will ultimately be responsible for assessing forgiveness.

***UPDATE 4.16.2020***

The SBA has announced that they have run out of funds for the PPP, and will not be accepting new applications. This is subject to change with any Congressional action.

CARES ACT information for plumbing or HVAC companies

On March 31, 2020, the U.S. Department of the Treasury and the Small Business Administration (SBA) released the application form for businesses to apply for and obtain loans under the Paycheck Protection Program. This program, established under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), provides $349 billion for small business loans to cover qualified payroll costs, rent, utilities, and interest on mortgage and other debt obligations. To obtain a loan, a qualifying small business should submit an application through an SBA- and Treasury- approved bank, credit union, or nonbank lender.

Here’s some of the nitty gritty.

In terms not usually associated with a government program, The CARES Act is moving at lightning speed.

Many of the details are still being formulated and the banks are still working on their side of the portals, but the application process for the Payroll Protection Program (PPP) opens on April 3rd, 2020! Even though the government and the banks do not quite have everything completely lined out, they have provided the application forms and a list of documents that the applicant needs to have ready to submit.

The Small Business Administration (SBA) is offering 2 types of assistance:

Even though $350 Billion have been earmarked for the PPP, it is suggested that business owners apply for this program as quickly as possible. There is a serious concern that this money will run out quickly with all the businesses that have been affected by this crisis.

Here’s some more info about the details of the programs:

Paycheck Protection Program (PPP)

Designed by the SBA, but funded by banks
Apply through any SBA lender
2-page application – very lax on information required compared to normal loan standards
No Guarantees, No Collateral Required
Forgivable if you meet the same Employee Count on June 30th , 2020
Business gets to choose the date that best suits their situation – the number of employees on
Either February 15, 2020 or Date of the Loan
Must have same number of employees on June 30th
If a business has “laid them off” so the employee can file for unemployment, the business can hire them back.
Calculated on 2.5 months of “fully loaded payroll expenses” and 25% of rent/mortgage interest (not principal) and utilities for that 8-week period
“Fully loaded payroll expenses” include vacation, healthcare costs, taxes, owner’s salary (if on payroll and only up to $100K)
Uses of Loan – if the loan is used for these then the loan will be “forgiven”: Rent/Mortgage, Utilities, Pre-existing debt
**SPOILER** This program uses your Form 941s for the previous 12 months in its calculation. If you’re a sole proprietor that was not on payroll, or if you did not have much payroll expenses during 2019, you will find this program may not be advantageous for you.

Economic Injury Disaster Loan (EIDL)

Funded by SBA. Apply at sba.gov
This is a loan and not “forgivable”.
This is to “compensate for losses” for the business. If PPP funds are received, those expenses CANNOT be included in the “losses” amount. There is NO DOUBLE DIPPING!
The normal loan approval standards are going to be very lax on this program.
Amount of loss
Determined by the SBA when comparing 2019 12 months of sales to 2020’s first few months of sales.
February 15th – June 30th are the dates that loss will be calculated.
SBA will determine the loss calculation for the loan amount.
The business owner can interject that a large job was lost due to closures, etc.
Terms:
4% interest (but the Treasury Department is saying only .5% interest).
Up to 4 years of payment deferral
Up to 30-year term
No Guarantees, No Collateral up to $200,000
Can get “grant” advances up to $10,000 within 3 business days
Must apply for the loan and ask for the advance of $10,000.
If the SBA approves this $10,000 and the applicant gets denied the loan, the applicant does not have to pay it back….it becomes a grant.
Paperwork/Documents to have ready:
Tax Documents (2019’s can be influx)
Signed IRS Form -T
Personal Financial Statement (SBA Form 413)
Schedule of Liabilities (SBA Form 2022)
2019/20 Balance Sheets and Profit & Loss Statements
“Payroll” calculations
Employee counts of number in place and plan to retain same amount
Lease/Mortgage and utility costs
Ownership Info – who owns what percentage
Information is not for guarantee purposes but in case of fraud

DO NOT APPLY MULTIPLE TIMES.

WARNING!

IF YOU FEEL LIKE IT IS MOVING TOO SLOW, DO NOT APPLY MULTIPLE TIMES OR TO DIFFERENT BANKS. You will be disqualified.

We did hear that if you owe in Child Support or are behind in filing your taxes (not 2019’s), you will not be qualified to receive assistance. It has been advised to apply for PPP first and DO NOT check the box that you are applying to the EIDL. Once you hear an answer on the PPP, then you can apply for the EIDL minus any payroll assistance you are receiving.

There is NO DOUBLE DIPPING between the two programs. If the owner receives the PPP, he must not include those expenses when applying for the EIDL.

Things are moving quickly, and details are still emerging.

Please note that many banks aren’t yet fully made aware of the details of the program from the SBA, so some details may still be coming out. We’ll do our best to keep the post current with the information about the CARES Act as we learn about it.