At Virginia Accounting Services, we have been working closely with our business owner clients (and many new business owners who have been reaching out) to cut through the noise and online misinformation about these loans.
Some of this misinformation is innocent, simply because the IRS has been rolling out new and various forms of guidance, and the SBA as well — almost daily.
How To Get A PPP (Forgivable) Loan:
This program allows a lender (such as a bank or credit union) to provide small business owners with a loan that then is “forgiven” when you show that you spent the money on “qualified expenses.”
- Loans can be for up to two months of your average monthly payroll costs from the last year plus an additional 25% of that amount. The loan amount is capped at $10 million. AS OF YESTERDAY: The payroll calculation no longer includes 1099 contractors in the formula
- Loans will be forgiven up to the loan amount for a borrower’s payroll, rent, mortgage, and utility costs incurred and paid during an eight-week period after a loan is originated.
- Loan forgiveness will be reduced to the extent of a) any reduction in employee headcount during this period (as compared to the prior year), and b) any reduction in pay of an employee by more than 25% (as compared to their prior year compensation). Borrowers that rehire workers will not be penalized for paying them less when they are rehired.
“Qualified expenses” include:
- Payroll expenses (including for your own salary, for example, if S corporation shareholder / employee, or your net business income if you’re a sole proprietor)
- Rent for business office (IRS has not clarified yet if home office expenses could qualify)
- Utilities for business office (IRS has not clarified if home office utilities could qualify)
To simplify the concept, this program could give you money to cover those expenses named above, through a loan, and then as long as you can prove you spent the money on those expenses named above, the loan gets forgiven (meaning, the loan doesn’t need to be paid back).
Banks are supposed to be opening up their applications for this program TODAY (Friday, April 3, 2020).
IF you want to get this forgivable loan, we are strongly advising our clients to “get in line” ASAP, because the volume of applications for these loans is going to be huge and funds may run out soon.
Now what does “get in line” mean?
It means preparing to submit an application when the lenders start posting those applications online (which, again, is supposed to be today).
If you have an existing relationship with a bank, we would advise you to start an application with that bank because it should be easier for them to process your paperwork since they already have a lot of the records that will be needed.
You can also find lenders by using this SBA “Lender Match” tool.
If you have an existing business banking relationship, consider starting the process by speaking to your existing banking contact. Since that bank will already have your business records, it likely will be easier and faster for them to process and approve this type of loan, if you need one.
Get familiar with the requirements for the loan, as follows:
- Click here to see the “Borrower Information Sheet.” This describes the rules for getting the loan.
- And then click here to see a “Sample PPP Loan Application.” This is not a real application with a real bank, but you could fill this out ahead of time and possibly contact a bank and get the process started.
Again, the first time when banks will start accepting applications from companies (with an Employer ID Number as your Tax ID Number) is when I’m writing this, today (Friday, April 3rd).
Then on Friday, April 10th, the banks will start accepting applications from self-employed people (working under your own Social as your Tax ID Number).
REMINDER: MAKE SURE YOU UNDERSTAND THE TERMS OF ANY LOAN THAT YOU TAKE. THE FACT THAT WE ARE KEEPING YOU UPDATED ON THIS DOES NOT MEAN THAT WE RECOMMEND ANY PARTICULAR LOAN FOR ANY PARTICULAR PERSON OR BUSINESS.
WE ARE OFFERING THIS AS AN INFORMATIONAL SERVICE AND YOU SHOULD ALWAYS PERFORM YOUR OWN DUE DILIGENCE AND CONSULT WITH TRUSTWORTHY ADVISORS DIRECTLY WHEN NEEDED (such as your Virginia Accounting Services Team!) BEFORE ENTERING INTO ANY FINANCIAL TRANSACTION.
Let Us Help You Navigate These Waters.
If you want help from experts who get it, and who have YOUR best interests in mind…
… you know where to find us.
Virginia Accounting Services