Insights

Top Ten EIDL and PPP Questions

April 10, 2020

Outside of my normal work, I spent today reading more about the available rescue packages and updates from various State and Federal Agencies.  I also listened to the NFIB Coronavirus Part V – SBA’s EIDL and PPP Loan Programs.  They reviewed a top ten question list which I thought was worth sharing.  If you get a chance, please review the slides and listen to the webcast here.

NFIB Top Ten List

#10 – EIDL or PPP, which do you recommend, or should I do both?

The short answer is you can apply for both, but you cannot use the money for the same purposes; I also learned that EIDLs would be capped at $15k per application if you have not received approval yet.  It looks like $2,000,000 is not an option right now for the EIDL.  PPP is the only program where applicants are receiving approvals and funds from what we have heard recently.  Also, if you are in the Ag business, you are eligible for the PPP loan program, but are not eligible for the EIDL

#9 – Speaking of EIDL, what’s up with the $10,000 grant?  I thought it was coming in 3 days.

There is no word on when these grants will be funded.  However, we learned that these grants will be limited to $1,000 per employee up to the $10,000 maximum.

#8 – I’m going to apply for a PPP loan.  How do I calculate payroll costs for employees who make more than $100,000?

You are capped at $100,000.  Anything above that is not counted.

#7 – Could they make this any more confusing?  My head is spinning.  Once again, can you explain the formula for PPPL forgiveness?

You have 8 weeks to spend the money from the loan funding date for payroll and approved expenses (e.g., rent, mortgage, utilities).  If you don’t use the full money during that time for the approved forgivable expenses, the balance converts into a low interest loan.  However, if you bring your employment back up to pre-crisis levels from the expiration of the 8 weeks until June 30, 2020, you can hold off on applying for forgiveness until you hit that level or the time expiration, whichever is earlier.

#6 – What kind of documentation will I need for PPP loan forgiveness?  

You need documents that verify the # of full time equivalents (FTEs), their pay rates, mortgage payments, utility payments and/or rent payments.  The lender then has 60 days to approve or deny the forgiveness.  Also, keep in mind that if you reduced salaries by more than 25% after 2/15, you need to bring them back up to the pre-crisis level to get the full forgiveness amount.  You will also need to bring FTEs back up to pre-crisis levels to get full forgiveness.  Anything below these amounts will proportionately reduce your amount of loan forgiveness.

#5 – I got the PPP Loan.  But, what if I need to terminate employees or someone quits, or I can’t keep the business open after June 30th or my 8-week forgiveness window?  Is this going to impact my loan forgiveness eligibility?  

If you terminate or someone quits in the 8 week window, you have until 6/30/2020 to get your FTE back up to the pre-crisis levels.  It does not need to be the same person rehired as well.  After the 8 week window, there is no owner responsibility to keep the FTE at the pre-crisis levels or keep the business open in order to qualify for the forgiveness.

#4 – What if I can’t reopen my business until mid-May (or June here in Virginia)?  

You can wait to apply for the loan until it makes sense.  You have to apply before June 30, 2020.  Please remember that the program is first come first serve.  If you are approved, receive the funds and cannot open, you have a 1%, 2 year loan.  You do have until 6/30/2020 to get back to pre-crisis employment level in order to qualify for loan forgiveness.

#3 – Banks are confused about the program and mine is not participating.  Where can I apply for the PPP Loan?  

Go to your bank as the initial starting point.  (From Me:  Check out the linked list if your bank does not participate).

View The List

#2 – I had to layoff most of my employees last month and they have now filed for unemployment.  Should I still consider a PPP loan?  What if they don’t want to come back to work (unemployment pays well these days)? 

The PPP loan is still a viable option if you plan to rehire to pre-crisis levels.  You do not have to rehire the same people back.

#1 – I applied for an EIDL, and for the emergency grant, and for a PPP loan.  When the heck will I see money in my bank account?!? HELP!  

For the EIDL and the emergency grant, the processing is extremely backlogged, which has resulted in the reduction in the amount that is available per applicant (see #9 above).  There has been no guidance from the SBA on this program.  For the PPP loan program, there was a bottleneck because the bank’s did not know what documents to use to close the loans.  With the recent guidance from the SBA & Dept. of Treasury that banks can use their own documents to close loans, the funds should start flowing.  Remember, that SBA lenders have 10 days to fund the loan from the date of approval.

Bonus Questions:

Are phone and internet considered utilities for PPP loan forgiveness?  Yes

Is the Fed buying up PPP loans?  Yes, they are buying the loans from the banks in the secondary market which will keep banks from hitting their lending limits.  So, the issue that Wells Fargo announced earlier in the week is not an issue any longer.

I don’t have employees, but have utilities, rent and/or mortgage.  Given the issues with EIDL, can I apply for a PPP loan?  For the PPP, you need to use 75% or more of the loan proceeds for payroll and the remainder for the other approved expenses.  There has not been any guidance given as to the penalties if you do not meet this breakdown.  This applies to the usage of the proceeds over the life of the loan, not just the amount you are applying for forgiveness.

Here are some other items that I think may be of importance for you and your business: 

  • PPP Program Rollout, Not so Smooth:  That is definitely an understatement.  Check out the linked article from the Central Penn Business Journal for some interesting stats and anecdotes.

 Various Program Updates (I received these from Chad Bumbaugh at Stambaugh Ness.  I could not have written it any better….thanks!)

    • Main Street Lending Program Announced by Federal Reserve
      • Aims to provide funds to small and medium sized businesses
      • Would provide loans for businesses with up to 10,000 employees / $2.5 billion in 2019 revenues (4 years loans with no forgiveness provisions)
      • Loan “fact sheet” provides key terms – note that businesses can participate in both this program and the PPP.   Certainly will be more details to follow.
    • IRS Extensions
      • The IRS announced additional due date extensions yesterday.  This effectively extended the due date for almost all federal tax filings to July 15th (and most states have followed suit)
      • The extensions of the due date for second quarter estimated tax payments from June 15th to July 15th will likely impact the most individuals.  Fortunately this clarification ends the bizarre scenario of having the first quarter estimate being due (7/15) after the second quarter estimate (6/15).
  • NJ Small Business Loan Program Application Program Starts April 13th:  Small businesses with annual revenue of up to $5M are eligible for up to $100k loans at 0% interest for 5 years.  The application is available here.  (Thank you to Larry Moskowitz of Certified Financial Services for bringing this to our attention)

 Other Useful Resources

 Happy Easter, Happy Passover and Happy (any other holiday I am missing this week) to you and your family! 

Please see all of our updates at the following link:  https://mpl-law.com/resource-center/

As always, please don’t hesitate to email myself, Andy Miller (amiller@mpl-law.com) or Christian Miller (cmiller@mpl-law.com) or anyone in our office with any questions or comments. 

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