Covid-19 CARES ACT. What everyone needs to know!

Pizza Shop Talk The Think Tank
1

Hi all,
I hope everyone is doing ok and staying healthy & safe.
Read bellow if interested, for some important information regarding the assistance every small business can receive due to Covid-19.

There are at least 3 types of funds/loans available for all small businesses, affected by Covid-19.

1)
The first and the one everyone should apply for is the “COVID-19 ECONOMIC INJURY DISASTER LOAN APPLICATION”. This link will take you to the SBA website so can fill out and submit your application.
This application is for the SBA Loan/Grant, up-to $10,000 , which you don’t have to pay back!
So go ahead, read and apply to find out if you qualify!
Click the following link to the SBA website , if you’d like to know more details about the program:

EMERGENCY ADVANCE LOAN

2)
Payroll Protection Program: (LINK TO SBA WEBSITE)
This is a loan that you will have to apply with a bank. The bank you’re doing business with will be most likely the way to go. This loan can give you funds equal up-to 2½ of your average monthly payroll.
This comes with an APR of 1% as stated on the SBA Website and up to 4% as stated on different other sites. You will have the option to request a “forgiveness” for all or some portions of your loan, depending on the usage of the funds and as long as the criteria are met.
However, each bank will require specific requirements for eligibility. While Bank of America, has posted the following, other banks might have different requirements. Check with your bank to find out the details.

" Application information

To apply for the Paycheck Protection Program through our bank, you must have a Small Business lending and Small Business checking relationship with Bank of America as of February 15, 2020 or a Small Business checking account open no later than February 15, 2020 and not have a business credit or borrowing relationship with another bank. A Business Credit Card, line of credit or loan may be the lending product used.

At Bank of America, the federal Paycheck Protection Program will be administered online only.

*Clients must have a Business Online Banking account. If you do not currently have an online account, you must enroll in Business Online Banking as soon as possible. *

After completing the application process, you will receive online confirmation of the submission.

Bank of America will process your application as soon as possible.

*We will contact you with next steps and to collect any required documents. Do not proactively deliver or send documents to our Financial Centers or banking teams. *

Information about your application status will NOT be available through our Financial Centers or Contact Centers – due to the nature of this loan process and the steps involved.

You will be notified of the status of your loan application through email communications.

3)
Economic Injury Disaster Loan Assistance:
There is a 3rd option that offers funds in form of a loan, with 4% APR, 6-12 months deferred payments, and up to 10 years repayment. While this was an option to apply for, listed on March 27th, now it has been incorporated to the Advance Loan Application.
You could reach out to SBA Directly for more info on this specific loan at the SBA disaster assistance customer service center at 1-800-659-2955 (TTY: 1-800-877-8339) or e-mail disastercustomerservice@sba.gov

Whatever you choose to do or not to do, I would advise to go through the SBA first and do your homework before reaching out to any lenders.
I hope this helps and I wish the best to all of you!
Steve.

2

I applied for this EDL loan and grant. I never received any confirmation. I voluntarily closed my business, it’s been 5 weeks. I have to go back. I feel that loan assistance is going to take a long time. This has been a very stressful time for everyone. My business was thriving. My employees were scared to work. I have second guessed my decision to close, I wonder if there is any one else out there with this dilemma.

3

Unfortunately, you’re not alone. I had customers who closed their businesses for 2-3 weeks and they opened back up. It’s a tough time for everyone, that’s for sure.
I tried to provide as much information as possible, so anyone could take advantage of such programs.
I applied for the EIDL on March 27th, and then I received an email from SBA on March 30th, that I had to re-apply with their updated online application. I received a confirmation number (see attached below), and I even called them yesterday Friday, April 10th. to check the status of the application and they told that it hasn’t even been assigned yet to a loan officer! Btw, if anyone tries to call SBA, be prepared to be on hold for at least 2-3 hours! I was #1635 caller in-line when I called!
Bottom-line, so far nothing yet from anything regarding any funds, including everyone I know who already applied.

APPLICATION NUMBER SBA - Disaster_Loan_Assistance
APPLICATION NUMBER SBA - Disaster_Loan_Assistance3508×4958 614 KB

4

We have received PPP loans for 2 of our stores, waiting on a third. They are separate companies so we are doing one application for each store.

I believe the reason that we are moving fast is our solid relationships with our bankers. Both banks are only working with customers that had a relationship with us prior to April 1, 2020. We have long-term relationships with both. I can’t stress enough how important this has been. We’ve had loans with both banks: never late with payments and no issues.

I couldn’t apply for the disaster loan as you couldn’t have access to other credit. With a personal guarantee I more than likely could have received credit. The grant would have gone against the PPP forgiveness anyway so would not have benefited us much.

My strategy with the PPP loans is to keep moving forward with our reduced hours and staff and see where we are at the end of the 60 days. Then we’ll know how much will be forgiven. Then decide if we need to keep the balance to make it through this crazy time.

Stay safe!

5

Talk to your accountant. You need to use above 75% off loan proceeds towards payroll and keep employee count above 75% from what you stated you had on your application for any of the loan to be forgiven.

6

Well, here are some updates for things I learned over the last few days.
First of all, there are no more applications submitted anywhere for either the PPP or the SBA EIDL, since the programs run out of money!
In more details, only 4% of the 11k approved businesses received funding for the PPP, while only 3% received funding for the EIDL program.

For those who received any funding through the PPP:
For your own good, make sure you keep a detailed record of spending and at least 75% of that funding must go towards the payroll to have any portion or all of that loan forgivable.
It would be wise to use a separate bank account for the PPP funds so can have an accurate record of your spending.

MAKE SURE to apply for the loan forgiveness, as soon as it becomes available (ask your bank for details), as it can take up to 2 months to get a response. Meanwhile, you will have to make payments on that loan.

KNOW THAT the PPP loan, has a due date of 2 years with 1% interest rate.
That means that if your loan is not forgivable for any reason (whole or a portion of it), you have only 2 years to pay it back!
Even if you defer payments for 6-12 months, the due date DOES NOT CHANGE!
So if you initially have 2 years to pay it back and you defer payments for one year, then you will end up with only 1 year to pay back the entire thing!

Make sure you do read your contracts VERY carefully and don’t rely on any promises.
Don’t let yourselves get caught off-guard and have to deal with unexpected “surprises”. Do your homework so you know what you’re getting into.

Best of luck to all of you.

7

how exactly does everyone keeps track of 75 percent of ppp going to payroll? I do banking out of same biz account from which all utilities/insurances/food cost…is auto deducted and payroll comes out of same account… would creating different account to draw payroll from …is it what everyone doing to “keep track”?

8

Has anyone had any luck applying for PPP loan thru Lendio or paypal or any other approved nontraditional institution?

9

My recommendation would be to open a separate account for the PPP loan so you can use it for payroll and have accurate tracking of your spending.
As for any other institutions, the only one I know that accepts PPP applications is the Workers Credit Union.
You can find all the related information about the process here.
I hope this helps!

10

Money is fungible, keeping accurate accounting of expenses during the 8 weeks after you receive the funds is what’s important. My bank dumped the loan $ into one of my regular accounts, it’s all co-mingled from the starting gun.

At the end of the 8 weeks you’ll have to provide your lending institution with a record of your payroll, rent/mortgage, and utilities. The percentage of forgiveness will be determined by comparing the Full-Time Equivalents on your payroll during the 8 weeks immediately after receiving the funds to either the first 2 months of 2020 or an 13-week period from 2019 (sorry, can’t remember the exact dates), whichever is more favorable for you. There are a bunch of other guidelines about not cutting salaries too much and the like which can reduce forgiveness also.

Crazy thing is that the rules for all this won’t officially be determined until this weekend. No one is sure whether the Full Time Equivalents number will be calculated like it was with the Affordable Care Act or using some other formula. I’m hoping nothing fundamental changes like the loan terms being reduced from 30 years to 2 years did right out of the gate after the banks pushed back.

11

Brad, whats “keeping accurate accounting of expenses”? is it just keeping all my receipts and bills or is it more than that?
if your money got transferred to your regular account which will probably will happen to most of us… why not you start paying non-payroll expences from some other account so that ratio for payroll-no payroll will be in 75%-25% ratio like mandated by PPP?

12

Ok, so let’s try to clear things up a little bit.
First of all, in the following link is the PAYCHECK-PROTECTION-PROGRAM-PPP BILL, for anyone that hasn’t looked it up yet. I strongly suggest that you do!

Just to be clear, this bill and the information below refer to the PPP that has currently run out of funds.
The additional funding for continuation of the PPP and the new applications might have amendments added which could change payment terms, interest rate, etc.

2: The PPP did not have a term of 30 years repayment. The 30 years repayment plan applies only to the SBA loan which you can apply through the SBA website and not with any other bank or any other institution. Also, this is the application which includes the “Grant”, $1,000/employee up-to $10,000 max!
The PPP had due date of 2 years to begin with, which included the option to defer payments from 6 to 12 months.

3: There is only an 8 week period to spend the money and provide records of the expenses, with an expiration date of June 30th.

4: At the end of the 8 week period or June 30th (whichever comes first), you must submit your records of expenses to request loan forgiveness. The process can take up to an additional 2 months to get a response, so be prepared to make a few payments before you even hear back about the forgiveness and what actually has been forgiven.

5: If opting to defer payments for a year, then you have only ONE YEAR left to make all the payments (for any portion that has not been forgiven).

6: For any portion of the loan to qualify as forgivable, you must keep your employee headcount the same as prior to being affected by the pandemic. In any case that any employees have been laid-off, you must re-hire them in order to qualify. Otherwise, the forgivable term will be calculated based on your remaining employee count (not specified how).

7: Again, the best way to keep accurate records for the spending of the funds, is to open a new account and have the funds deposited there or transfer them there if deposited to your current account.

8: Once more, this only applies to the previous PPP which run out of funds. For the additional funding to PPP (currently in process), make sure to check if it comes with new terms, amendments, etc.

BONUS TIP: (Unrelated to PPP and SBA)
Regarding the Mortgage Forbearance Option:
For any of you that have mortgages on your houses, if you 're thinking of requesting a forbearance with your lender, you better stop thinking about it.
While forbearance protects you from being reported as delinquent on your payments to the Credit Reporting Agencies, it does not stop your lenders from adding a remark on your credit report, which reads as “Account in Forbearance”.
A remark like that can have a huge impact on your account and drop your score up to 75 points if not more!
For any of you that already requested a forbearance, sorry I didn’t have that information earlier. However, even if you did enter into forbearance, you should take action with your lender to see if you can keep up with the payments and have the forbearance status removed.

13

I’m planning on providing the same types of documentation that was used to originate the loan: payroll register & FUTA reports plus utility invoices & rent invoices. I could provide the bank with a check register showing payroll ACH deposits and utility/rent checks that have cleared as well if they want that level of detail.

I’ll have my payroll accountants generate Full-Time Equivalent reports once the rules are finalized so I know my target for the forgiveness period and then again after the 8 weeks is up and whatever else my SBA lender requests.

These are the rules I’ve been reading: https://www.sba.gov/sites/default/files/2020-04/PPP%20Interim%20Final%20Rule_0.pdf

I’d say definitely go with Steve’s idea of opening a separate account if you’re worried about keeping your tracking/accounting of the funds straight.

15

Ah, you’re correct, my mistake. I’ve mixed up the 30-year term and the information I read in this news article Google suggested to me back when I was researching this before a lot of documentation was available: https://www.cnbc.com/2020/04/03/treasury-makes-ppp-loan-terms-more-unfavorable-for-small-businesses.html

[quote]In initial guidance, the Treasury Department had said banks would charge a 0.5% fixed interest rate and that a loan’s unforgiven portion could be repaid over 10 years.

However, loans now carry a higher interest rate — 1% — and come due in a much shorter period — two years — than originally stipulated, according to Treasury guidance released Thursday.

Banks were loath to offer loans under the initial terms and pressured federal officials to change them, according to Roger DaSilva, founder of Realm Startup Advisory, which serves as an outsourced chief financial officer for small businesses.[/quote]

It was 10 years, not 30. I have quarantine brain.

16

I found a way to attache the file. This is a spreadsheet that I created using SBA guidelines. I’m still not sure whether they are requiring FTE Employee count or just a Headcount. Everyone is leaning towards the headcount. Also not sure on the percentage of headcount. I’ve been told if I don’t drop the headcount by more than 25% full loan is forgiven (based on other requirements being met as well)