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VABuckeye

Surly Thread of Business Owners/Managers, Etc. & Current Business Climate

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That makes sense. I had some clients that were worried about timing of payroll, so that’s covered.

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As an independent contractor, I've created a pay schedule in excel to turn in along with the forgiveness app. I am also including bank statements for the two months prior at the old bank as well as the following two months to show that no income was coming in to the old business account during the time I was depending on the PPP loan. Looks like borrowing 2.5 was a bit much and I'll have to decide whether to take the excess as a 1% loan or just pay back the principal.

I'll run this by you more clever money types, but wouldn't it make sense to just take the 1% loan, continue to pay myself, and just drop that excess into my IRA next year? Seems like that pays for the 1% and then some.

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16 minutes ago, Incredulity said:

Anyone have opinions/perspectives on forgiveness vs. QBI deduction?

 

 

It depends on where they settle on the deductibility of expenses used for forgiveness and then whether they still allow the expense for QBI even if you don’t get the deduction. The IRS has started dialogue by ruling the expenses are not deductible, so we’ll see where it goes from here.

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18 minutes ago, Eastwood said:

As an independent contractor, I've created a pay schedule in excel to turn in along with the forgiveness app. I am also including bank statements for the two months prior at the old bank as well as the following two months to show that no income was coming in to the old business account during the time I was depending on the PPP loan. Looks like borrowing 2.5 was a bit much and I'll have to decide whether to take the excess as a 1% loan or just pay back the principal.

I'll run this by you more clever money types, but wouldn't it make sense to just take the 1% loan, continue to pay myself, and just drop that excess into my IRA next year? Seems like that pays for the 1% and then some.

Pretty much everyone is in the same boat as the loan will exceed forgiveness. If the loan doesn’t bother you then it probably works.

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On 5/16/2020 at 6:48 AM, Brew said:

I need to go back through it this morning, but on the payroll side I read it as paid within the 8 weeks or starting with the first payroll period beginning after funding through 8 weeks. You can calculate it either way.

Is that "paid" or "incurred"? Or does it matter as long as you are consistent? 

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4 minutes ago, Cheeseweasel said:

Is that "paid" or "incurred"? Or does it matter as long as you are consistent? 

You get either one. You can use the payrolls actually paid within the 8 weeks or you can use the alternative method and start with the first payroll period that starts post funding.

Alternative Payroll Covered Period: For administrative convenience, Borrowers with a biweekly (or more frequent) payroll schedule may elect to calculate eligible payroll costs using the eight-week (56-day) period that begins on the first day of their first pay period following their PPP Loan Disbursement Date (the “Alternative Payroll Covered Period”). For example, if the Borrower received its PPP loan proceeds on Monday, April 20, and the first day of its first pay period following its PPP loan disbursement is Sunday, April 26, the first day of the Alternative Payroll Covered Period is April 26 and the last day of the Alternative Payroll Covered Period is Saturday, June 20. 

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Lots of good info on this thread.  I don't know why I'm finding this more confusing than it probably is but can someone help me out here?  I'm a 1099/independent contractor and was eligible -and received- the PPP for the maximum capped amount of $21k. 

I set aside the money in a separate PPP-specific account in order to better track how it's spent but I don't have a clue what I can be doing to "maximize" the forgivable amount. 

As an IC I guess I'm technically payroll so do I simply write myself a check (e.g. move the money to my personal account) every two weeks of an equivalent amount I made over a similar two-week pay period last year?  Since my work-office is closed and I now fully work from home can I be using the funds to pay my mortgage and all utilities?

My profession is directly linked with businesses being open for business so my income the past two months has been almost zero.  My goal is to try and keep as much of this money as I can since my income will likely be near zero for the next few months. 

I'm basically the golden retriever wearing the protective glasses and mixing liquids in the science beakers meme right now.  I have no idea what I'm doing. 

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12 minutes ago, Chet Steadman said:

Lots of good info on this thread.  I don't know why I'm finding this more confusing than it probably is but can someone help me out here?  I'm a 1099/independent contractor and was eligible -and received- the PPP for the maximum capped amount of $21k. 

I set aside the money in a separate PPP-specific account in order to better track how it's spent but I don't have a clue what I can be doing to "maximize" the forgivable amount. 

As an IC I guess I'm technically payroll so do I simply write myself a check (e.g. move the money to my personal account) every two weeks of an equivalent amount I made over a similar two-week pay period last year?  Since my work-office is closed and I now fully work from home can I be using the funds to pay my mortgage and all utilities?

My profession is directly linked with businesses being open for business so my income the past two months has been almost zero.  My goal is to try and keep as much of this money as I can since my income will likely be near zero for the next few months. 

I'm basically the golden retriever wearing the protective glasses and mixing liquids in the science beakers meme right now.  I have no idea what I'm doing. 

Here is excellent guidance on the SBA forgiveness form:

https://www.currentfederaltaxdevelopments.com/blog/2020/5/16/ppp-loan-forgiveness-application-and-instructions-released-by-sba

 I'd use the SBA form as a template for what is permissible and work it backwards for what best suits your needs.

 

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Info from the AICPA website dealing with PPP forgiveness:

https://www.aicpa.org/interestareas/privatecompaniespracticesection/qualityservicesdelivery/sba-paycheck-protection-program-resources-for-cpas.html

About 2/3 of the way down are these choices:

1st is just a link to the application from the treasury dept.

2nd-5th are links to excel based calculators to help walk you through the calculations depending on your specific scenario.

 

Calculators

PPP loan forgiveness calculator
This calculator uses available guidance from the SBA and Treasury to track eligible costs covered by the PPP and provides a look at how much of your PPP loan may be eligible for forgiveness. 

PPP payroll calculators for loan application
The PPP provides three scenarios for calculating maximum loan amounts depending on how long the business has been in operation and whether it’s seasonal. You can add all three to your COVID-19 resource library. They’re designed so that your client can complete them following the steps outlined in the calculator. When you click the link, please look for an Excel file calculator to download rather than opening in a new window.

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We're going to move our first pay period in June up 4 days to the 11th so we can fit a 5th payroll into the 56 days.  100% forgiven.

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I'm trying to figure out what to do with the half month. My payroll is monthly and I got the PPP loan deposited into a new account. So that account is going to have half of one payroll cycle's worth of funds in it for June. Thinking I should just fund the other half from my primary business account, point payroll back to the old account for July, and close the PPP account with zero balance. Anyone in the know see any reason to not do that?

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28 minutes ago, BradInATX said:

I'm trying to figure out what to do with the half month. My payroll is monthly and I got the PPP loan deposited into a new account. So that account is going to have half of one payroll cycle's worth of funds in it for June. Thinking I should just fund the other half from my primary business account, point payroll back to the old account for July, and close the PPP account with zero balance. Anyone in the know see any reason to not do that?

That's basically what we're doing.  I don't see why the pay periods have to line up with the expenditure of the funds.  In the end, I think all you have to do is say "I spent $x on payroll, and here's when."

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You really don’t want to mix your PPP money with your operating account. My lawyer (troph) advised me to take all of the money out of all my accounts in cash, and then also cash out my PPP money. I keep the money organized in piles on the floor of my office with a sticky note indicating what account the money goes in. One time I knocked over a pile into another pile and had to burn both, lest they become intermingled. It’s a pain, but doing things the right way is worth it. 

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14 hours ago, VABuckeye said:

We're going to move our first pay period in June up 4 days to the 11th so we can fit a 5th payroll into the 56 days.  100% forgiven.

But only 8 weeks, right? That's the max amount you can use if I'm reading correctly.

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Basically yes.  We pay bi-monthly.  It's my understanding that we can use the overlap for payrolls.  I'm delving more into the language this afternoon.

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1 hour ago, VABuckeye said:

Basically yes.  We pay bi-monthly.  It's my understanding that we can use the overlap for payrolls.  I'm delving more into the language this afternoon.

The language seems pretty clear that you can use the "alternate" payroll period to cover 8 weeks regardless of how you pay

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18 hours ago, shakahorn said:

That's basically what we're doing.  I don't see why the pay periods have to line up with the expenditure of the funds.  In the end, I think all you have to do is say "I spent $x on payroll, and here's when."

Spent = incurred.   Doesn't matter when you cut the check.    Else I'm paying all my rent for the remainder of the year tomorrow. 

 

 

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I would not advise screwing with payroll periods. 8 weeks is 8 weeks.

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38 minutes ago, Brew said:

I would not advise screwing with payroll periods. 8 weeks is 8 weeks.

All of this.   Our payroll covers April - June for the forgiveness period.  100% of May goes into forgiveness and pro-rata pieces of April and June based upon our funding date and the end of the runout period.  

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On 5/14/2020 at 2:49 PM, shakahorn said:

Got the EIDL email earlier today, seemed too easy and too good to be true.  Slider maxed at $150k, answered a couple questions and done.  Has anyone been denied after reaching this point?

Just to close this out, asked for the full $150k on 5/14.  Got email on 5/17 late at night saying it had been approved.  Docusigned the app on 5/18 first thing in the am.  Got $149,900 in the bank account today 5/19.  Don't recall seeing anything about a $100 fee and really not going to try too hard to figure that out.

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For anyone that's looked at the Loan Forgiveness Application....where is the excess of $100K/employee carved out of the amount available for forgiveness?   I skimmed through the thing pretty quickly but didn't see (mechanically) where the excess was deducted out.  Probably right under my nose. 

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14 hours ago, Wally Pryor said:

For anyone that's looked at the Loan Forgiveness Application....where is the excess of $100K/employee carved out of the amount available for forgiveness?   I skimmed through the thing pretty quickly but didn't see (mechanically) where the excess was deducted out.  Probably right under my nose. 

It's in the "Summary of Costs Eligible for Forgiveness" under "Eligible payroll costs". Essentially, when you fill out Line 1 on the Calculation Form, you'll use a max of $15,385 as the "total amount of cash compensation eligible for forgiveness" 

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1 minute ago, Wally Pryor said:

Thanks.   What's the purpose of Tables 1 and 2 on page 9? 

My guess is that its a nice way for the banks to review/verify the data you are providing since Payroll is the majority of the $$$.

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12 minutes ago, Wally Pryor said:

Makes sense. 

Appreciate your insights / feedback on all this. 

Yeah, man. We're all trying to figure it out. We are 5 weeks into our 8 so we're running out of time to get clarity

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Sorry, I'm sure this is buried somewhere in the thread.  Helping another business on its forgiveness calc.   

If you get a PPP loan and then the EIDL, is it as simple as the EIDL being deducted from the amount of PPP that can be forgiven?   It can't be that simple. 

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You mean the EIDL grant?  Because for most small businesses the EIDL loans are larger than the PPP loans.

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I posed this to Troph so I’ll pose it here as well.
I’m in M&A and we have sellers that have recd and are using PPP funds. These deals are well past LOI and most DD. 2 are set to close in July. Both past their 8 week timeframe to use the funds.

A CPA I was talking with today mentioned he read/heard that if a business recd PPP funds and is sold in ‘20 it must pay back 100% of the funds.

Has anyone seen verbiage regarding this?
How long after funds are used can a business apply for forgiveness?

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Business for sale with contracted buyer and business takes on loan seems unwise. They gonna have to pay that shit or ride it out and find another buyer later.

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I posed this to Troph so I’ll pose it here as well.
I’m in M&A and we have sellers that have recd and are using PPP funds. These deals are well past LOI and most DD. 2 are set to close in July. Both past their 8 week timeframe to use the funds.

A CPA I was talking with today mentioned he read/heard that if a business recd PPP funds and is sold in ‘20 it must pay back 100% of the funds.

Has anyone seen verbiage regarding this?
How long after funds are used can a business apply for forgiveness?
Why the fuck would they take out a ppp loan if they are under contract to sell?

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Deals fall apart all the time so for most sellers it is business as usual until very near closing time. We had no APA on either and were still negotiating LOI’s when the PPP came down. One buyer is fine with closing after their 8 week window is up and they apply for forgiveness.

The other buyer is a Billion dollar company and is slow as shit so I don’t expect it to impact the closing.

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I’ve got a deal where the buyer and seller took funds and so far we’ve structured to keep both entities alive (instead of a merger). Plenty of reasons to take forgivable loans and still sell, in fact it might make them more sellable.

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Posted (edited)
8 hours ago, T’Boo Ted Marshall said:

I posed this to Troph so I’ll pose it here as well.
I’m in M&A and we have sellers that have recd and are using PPP funds. These deals are well past LOI and most DD. 2 are set to close in July. Both past their 8 week timeframe to use the funds.

A CPA I was talking with today mentioned he read/heard that if a business recd PPP funds and is sold in ‘20 it must pay back 100% of the funds.

Has anyone seen verbiage regarding this?
How long after funds are used can a business apply for forgiveness?

I have not seen anything on it. I had a merger that pushed back 3 months because both entities took PPP money. They both needed it for payroll because they were shut down, so I have a hard time seeing an issue with it.

Edited by Brew

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9 hours ago, troph said:

I’ve got a deal where the buyer and seller took funds and so far we’ve structured to keep both entities alive (instead of a merger). Plenty of reasons to take forgivable loans and still sell, in fact it might make them more sellable.

This is where I am with the HVAC company.  The strategic buyer is valuing lower than I estimated, but my sellers want to get the deal done with them.  The extra cash during their busy season will make the lower value offered more palatable.  They estimate nearly all of their funds to be forgiven so my direction, against my advice, is to get it done as quickly as possible.  

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Just now, T’Boo Ted Marshall said:

They estimate nearly all of their funds to be forgiven so my direction, against my advice, is to get it done as quickly as possible.  

Yeah, very few people are going to get their funds 100% forgiven, and if they do it's because their business has increased over the last 3 months. I'd be concerned about "means-testing"  the loan if that were the case.

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I like the option on the Forgiveness Application, Schedule A, at the bottom where you can simply check the box re: FTE if you're still fully employed from Jan 1 to date.  Saves all the numerator and dominator crap and prior reference periods. 

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24 minutes ago, Wally Pryor said:

I like the option on the Forgiveness Application, Schedule A, at the bottom where you can simply check the box re: FTE if you're still fully employed from Jan 1 to date.  Saves all the numerator and dominator crap and prior reference periods. 

Are you talking about the Schedule A worksheet "Safe harbor"?

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Just wanted to point out that the SBA is quickly working through the EIDL backlog. If you haven't gotten an email from them, expect one soon. This is for the actual EIDL loan, not the advance grant. Please pay careful attention to the terms and conditions. For example, you can't move your business without SBA approval. If the EIDL loan is $25,000 or above, the SBA even takes a security interest in your business property. You can't use the loan to expand or for fixed assets. If PPP wasn't bad enough, this is another situation where you'll almost definitely need to talk to your lawyer and maybe your accountant.

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6 minutes ago, Apep said:

Just wanted to point out that the SBA is quickly working through the EIDL backlog. If you haven't gotten an email from them, expect one soon. This is for the actual EIDL loan, not the advance grant. Please pay careful attention to the terms and conditions. For example, you can't move your business without SBA approval. If the EIDL loan is $25,000 or above, the SBA even takes a security interest in your business property. You can't use the loan to expand or for fixed assets. If PPP wasn't bad enough, this is another situation where you'll almost definitely need to talk to your lawyer and maybe your accountant.

Any idea if it can be used for repairs?

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On 5/25/2020 at 7:02 PM, Apep said:

Just wanted to point out that the SBA is quickly working through the EIDL backlog. If you haven't gotten an email from them, expect one soon. This is for the actual EIDL loan, not the advance grant. Please pay careful attention to the terms and conditions. For example, you can't move your business without SBA approval. If the EIDL loan is $25,000 or above, the SBA even takes a security interest in your business property. You can't use the loan to expand or for fixed assets. If PPP wasn't bad enough, this is another situation where you'll almost definitely need to talk to your lawyer and maybe your accountant.

I got an email this morning I had been approved, and on the SBA website it says for up to 150K. 

I'm leaning towards declining this, unless there's something I'm missing - why would I want to repay $263K over the next 30 years to get $150K now. Although last year when I was in the process of buying a building I might have done that - would have been useful then. 

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One of the big things for which the EIDL can be used is to refinance IRS debt at a lower interest rate than the IRS charges. Because there are no prepayment penalties, the EIDL can also be good for cash flow right now.

This post is a decent start on the EIDL.

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On 5/25/2020 at 7:11 PM, Bevo said:

Any idea if it can be used for repairs?

Doesn't appear so. See the link in my previous post.

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1 hour ago, hornian said:

I got an email this morning I had been approved, and on the SBA website it says for up to 150K. 

I'm leaning towards declining this, unless there's something I'm missing - why would I want to repay $263K over the next 30 years to get $150K now. Although last year when I was in the process of buying a building I might have done that - would have been useful then. 

I suppose if you're debt free and have credit facilities that allow you to tap a $150k or greater line, at less than 3.75%, it could be unattractive.

I believe the language excludes the use of the funds to buy a building.

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From the ABJ....

Legislation to overhaul the Small Business Administration’s Paycheck Protection Program — and make its numerous provisions friendlier to restaurants and retail shops in particular — may come before the House of Representatives as soon as Wednesday afternoon.

The Paycheck Protection Flexibility Act would:

  • Extend the “covered period” under which small businesses can spend the loan proceeds from eight weeks to 24 weeks or until Dec. 31, 2020.
  • Remove the limits on loan forgiveness for small businesses that were unable to rehire employees, hire new employees or return to the same level of business activity as before the virus.
  • Strike the 25% cap to use PPP funds on nonpayroll expenses, such as rent, mortgage interest and utilities. Currently, small businesses must use at least 75% of the loan for payroll expenses to get maximum forgiveness.
  • Allow small businesses to take a PPP loan and also qualify for a separate, recently enacted tax credit to defer payroll taxes, currently prohibited to prevent “double dipping.”
  • Extend the loan terms for any unforgiven portions that need to be repaid from two years to five years, at 1% interest.
  • Give small businesses more time to rehire employees — until the end of enhanced unemployment benefits that were originally passed in the CARES Act on March 27.

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