The following questions were asked by attendees of the April 6 webcast “What the bailout means for small business owners”. To learn more about Federal Relief Loans for Business Owners, tune in to our weekly Crain’s Small Business Lifeline podcast.
Q. How do I register for the Paycheque Protection Program?
A. PPP applications are made online or over the phone with a small business owner’s bank or a non-bank lender. The US Small Business Administration does not manage the PPP loan fund; he assigned lending and underwriting responsibilities to individual banks across the country. Up to 5,000 institutions, from large banks such as JPMorgan Chase to small commercial banks and non-bank lenders, participate in the program.
Q. When does the PPP repayment start?
A. The repayment of the plan begins no later than six months after the start of the loan. The loan can be repaid over two years at an interest rate of 1%. The payments relate to the parts of the loan which have not been canceled after having been applied to the eligible costs.
Q. How is the loan amount calculated?
A. Any business with fewer than 500 employees that existed before February 15 can access a PPP loan that can be forgiven for up to $ 10 million, although the loan amount is calculated to be twice and a half the average total monthly wage cost for each individual business. Borrowers must certify that they will use the PPP loan for the eligible costs, which are:
- Payroll (up to $ 100,000 per employee)
- Mortgage payments (before February 15)
- Rent payments (before February 15)
- Payments for utilities, including gas, water, heat, electricity, telephone and internet access
Q. Can third party agents be used to apply for the loans?
A. Homeowners who wish to apply for loans from lenders should do so themselves and not use third party agents. It is one thing to have an accounting advisor on the application process, but business owners should not risk applying for loans online using third parties as applications are processed and approved on a first-rate basis. arrived, first served. Any delay or confusion in the application could delay approval.
Q. What is EIDL?
A. The Economic Disaster Lending Program is part of a pre-existing SBA initiative that was structured to provide last resort loans to small businesses affected by environmental or economic disaster in a defined geographic location. Think of the super storm Sandy. The program was set up to handle claims from small businesses suffering economic damage in one disaster location. He did not anticipate an increase in loan applications nationwide. Unlike PPP, the EIDL program does not use banks and non-bank lenders to take out, verify, and distribute loans. It is fully managed by the SBA. Following the coronavirus closings, the EIDL program capped its loans between $ 25,000 and $ 35,000 and changed the immediate grant to $ 1,000 for each small business employee, without exceeding 10 employees. Demand has been overwhelming, with a report setting loan requests at over $ 3 million. Unlike PPP, EIDL loans are not canceled; they must be repaid.
Q. Many of our clients have applied for EIDL loans and have not received any communication from the SBA. How long can we expect it to take for communication? How long will it take for the advance to be deposited into their bank account? Can we get clarification on this lead? Is it $ 10,000 or up to $ 10,000?
A. The initial grant of $ 10,000 has been revised. As noted, this is now an immediate grant of $ 1,000 per employee, with a maximum of 10 employees. The SBA’s response to EIDL loan requests was delayed due to huge demand and the fact that the program was originally designed to be regional and not national. After applying online, companies are expected to be contacted by the SBA within 30 days.
Q. Is there a printable version of EIDL? It would be much easier if you had all the information in front of you before you started the online application.
A. The information can be found on the SBA’s website, sba.gov, which is also where the EIDL application is submitted.
Q. Can you transport both PPP and EIDL?
A. Yes, EIDL and PPP can be used together as long as they don’t both go towards the same cost. For example, a small business owner could use P3 to pay rent and employee payrolls, while an EIDL could fund fixed costs and capital investments. Remember, however, that EIDLs must be refunded.
Q. What is the deadline to get the PPP?
A. It has varied, and there is no clear pattern. It all comes down to the banking relationships of the small business owner, as well as the competence of individual banks. Some business owners have already received the money; others still want to know that their request has been processed. It’s a mixed bag.
Q. I am an S corporation, and I am the only employee. I pay myself a salary. Am I eligible for PPP?
A. Yes. Those who complete their tax form as an S corporation are eligible.
Q. What happened to being able to use P3 to pay rent? Has this changed since the first announcements?
A. It hasn’t changed. A quarter of the PPP loan money that goes towards rent or mortgages signed before February 15th can be forgiven.
Q. Where does the 25% rent come from? Please help me understand what part of the funds can be applied to a mortgage or rent.
A. The 25 percent figure comes from SBA guidance. No more than 25 percent of the repayable portion of the loan can be used for non-wage costs, which include rent and mortgage payments. The primary purpose of the PPP loan is to keep small business employees on the payroll for the first eight weeks of the crisis.
Q. For P3s, does rent only mean real estate, or does it extend to leased or leased equipment?
A. Rent basically refers to the space you are in. Utilities include Internet, telephone, gas and electricity. If you are renting your computers or a tractor, it is not clear whether these costs can be reimbursed. Many lenders expect more advice on qualifying expenses in the future.
Q. My business relies on contract workers. Will I be able to use PPP to pay them? And will this expense be considered part of the payroll and therefore forgiven?
A. Yes. All payments to independent contractors for services are included in the loan amount. In addition, business owners who operate as independent contractors or sole proprietors are eligible; they just need to provide payroll tax returns documenting the data.
Q. Are non-profit organizations eligible for PPP?
A. Yes, associations are eligible.
Q. What if my bank does not lend for this program?
A. Unfortunately, you will then have to find another SBA approved bank to provide the loans.
Q. What if we used the money to pay employees, but after eight weeks the company still couldn’t support all of our employees? Are we firing them again? Are you still getting debt relief for the eight weeks we paid employees?
A. For the first eight weeks, you apply for a loan and then ask for a rebate after the funds are allocated. You must return to your lender and request the remittance of these funds. We don’t know what happens after eight weeks.