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


VABuckeye

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Yes they can do this. I’ve advised many clients to do so. What we call “epicenter clients” - those in hospitality, events, travel, leisure, retail - they can not afford to spend for forgiveness, they need to save and spend for making it until October. They have to spend it when they spend it on legit items and saving it forever isn’t really an option given an aggressive time frame.


But does the firm get to have the loan forgiven under that scenario? I thought only the amount that goes towards employee compensation during this time period is forgiven.
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But does the firm get to have the loan forgiven under that scenario? I thought only the amount that goes towards employee compensation during this time period is forgiven.

Does not get forgiven but spending to get it forgiven can still be the wrong answer. Even if the proceeds are a 9-12 month lifeline that’s better than no cash infusion at all.
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8 hours ago, VABuckeye said:

I received the EIDL email yesterday.  Sliding scale for loan amount up to $150K.  I believe they have maxxed these loans at $150K as it's the most I've heard offered on any site.  We are not asking for that much but $100K at 3.75% with a 30 year term and payments deferred for 12 months is a tough one to pass on.  It looks like I have a couple of large projects to fund coming up soon (fingers crossed) and this would help fund that additional business nicely.

Yeah, I just accepted a 100k today and signed the documents.  It's hard to pass up 3.75% interest on a 30 year note like you said.  There are no pre-payment penalties.  I have a bunch of equipment I need to buy and I won't get those same terms financing it.  I'm taking a 100k out and will use it to grow my start up and if this virus comes back in the fall, it'll be nice to have as a security blanket.  

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We got the email for our eidl Friday. I filled out the form Sunday, and by Monday night we had our $25k. I think it was 2.5 times what reported our 4-6 week losses to be. It’s way too late, but what was the time horizon for the losses to look at?  I though it was just 4-6 weeks, but I’ve heard some went out 6 months. 

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4 hours ago, UT_OB1 said:

We got the email for our eidl Friday. I filled out the form Sunday, and by Monday night we had our $25k. I think it was 2.5 times what reported our 4-6 week losses to be. It’s way too late, but what was the time horizon for the losses to look at?  I though it was just 4-6 weeks, but I’ve heard some went out 6 months. 

you applied early?  the last iteration of the form even weeks before it closed didn't ask such questions.  gross revenue, COGS, number of employees, and lost rent if applicable.  that was it.

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SBA released a new Q&A answer yesterday that basically clears everyone below $2M from any oversight on the economic uncertainty question and clears those over $2M from any liability if it is shown that you didn’t have economic uncertainty. You just have to pay it back immediately. It looks like after the publicly traded companies were taken care of they are softening the rhetoric substantially.

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Meant to post the details.

How will SBA review borrowers’ required good-faith certification concerning the necessity of their loan request?

When submitting a PPP application, all borrowers must certify in good faith that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” SBA, in consultation with the Department of the Treasury, has determined that the following safe harbor will apply to SBA’s review of PPP loans with respect to this issue: Any borrower that, together with its affiliates,20 received PPP loans with an original principal amount of less than $2 million will be deemed to have made the required certification concerning the necessity of the loan request in good faith.

SBA has determined that this safe harbor is appropriate because borrowers with loans below this threshold are generally less likely to have had access to adequate sources of liquidity in the current economic environment than borrowers that obtained larger loans. This safe harbor will also promote economic certainty as PPP borrowers with more limited resources endeavor to retain and rehire employees. In addition, given the large volume of PPP loans, this approach will enable SBA to conserve its finite audit resources and focus its reviews on larger loans, where the compliance effort may yield higher returns.

Importantly, borrowers with loans greater than $2 million that do not satisfy this safe harbor may still have an adequate basis for making the required good-faith certification, based on their individual circumstances in light of the language of the certification and SBA guidance. SBA has previously stated that all PPP loans in excess of $2 million, and other PPP loans as appropriate, will be subject to review by SBA for compliance with program requirements set forth in the PPP Interim Final Rules and in the Borrower Application Form. If SBA determines in the course of its review that a borrower lacked an adequate basis for the required certification concerning the necessity of the loan request, SBA will seek repayment of the outstanding PPP loan balance and will inform the lender that the borrower is not eligible for loan forgiveness. If the borrower repays the loan after receiving notification from SBA, SBA will not pursue administrative enforcement or referrals to other agencies based on its determination with respect to the certification concerning necessity of the loan request. SBA’s determination concerning the certification regarding the necessity of the loan request will not affect SBA’s loan guarantee.21

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4 minutes ago, Cheeseweasel said:

So we are halfway thru using our PPP loan and project we'll only use about 90% of it (>75% for payroll, only 15% for utilities, etc).

Anyone else in this boat? Are you planning on giving out bonuses? Giving it back?

Bonuses.  Why not? Employees like them and will count against your operating expenses.

Am I wrong?

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6 minutes ago, Brew said:

Meant to post the details.

How will SBA review borrowers’ required good-faith certification concerning the necessity of their loan request?

When submitting a PPP application, all borrowers must certify in good faith that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” SBA, in consultation with the Department of the Treasury, has determined that the following safe harbor will apply to SBA’s review of PPP loans with respect to this issue: Any borrower that, together with its affiliates,20 received PPP loans with an original principal amount of less than $2 million will be deemed to have made the required certification concerning the necessity of the loan request in good faith.

SBA has determined that this safe harbor is appropriate because borrowers with loans below this threshold are generally less likely to have had access to adequate sources of liquidity in the current economic environment than borrowers that obtained larger loans. This safe harbor will also promote economic certainty as PPP borrowers with more limited resources endeavor to retain and rehire employees. In addition, given the large volume of PPP loans, this approach will enable SBA to conserve its finite audit resources and focus its reviews on larger loans, where the compliance effort may yield higher returns.

Importantly, borrowers with loans greater than $2 million that do not satisfy this safe harbor may still have an adequate basis for making the required good-faith certification, based on their individual circumstances in light of the language of the certification and SBA guidance. SBA has previously stated that all PPP loans in excess of $2 million, and other PPP loans as appropriate, will be subject to review by SBA for compliance with program requirements set forth in the PPP Interim Final Rules and in the Borrower Application Form. If SBA determines in the course of its review that a borrower lacked an adequate basis for the required certification concerning the necessity of the loan request, SBA will seek repayment of the outstanding PPP loan balance and will inform the lender that the borrower is not eligible for loan forgiveness. If the borrower repays the loan after receiving notification from SBA, SBA will not pursue administrative enforcement or referrals to other agencies based on its determination with respect to the certification concerning necessity of the loan request. SBA’s determination concerning the certification regarding the necessity of the loan request will not affect SBA’s loan guarantee.21

That will be very interesting to watch unfold.   

Any chatter on what metrics they will use to measure "need" or will it be completely subjective?  

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Just now, Cheeseweasel said:

That's what I'm trying to find out. Zero guidance from the SBA.

I think that is a pretty simple and acceptable use of PPP funds.  Assuming you kept your headcount right and the funds were used per the instructions on the label you should pass any smell test the SBA comes up with should you be audited.

I've already discussed this "what if" with my CPA and she has no problem with it.  

But we are dealing with government bureaucrats and a now politicized program that is the definition of "ready? shoot! uh, AIM!"

....so watch your cornhole.

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32 minutes ago, Cheeseweasel said:

So we are halfway thru using our PPP loan and project we'll only use about 90% of it (>75% for payroll, only 15% for utilities, etc).

Anyone else in this boat? Are you planning on giving out bonuses? Giving it back?

Bonuses here.

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43 minutes ago, Incredulity said:

That will be very interesting to watch unfold.   

Any chatter on what metrics they will use to measure "need" or will it be completely subjective?  

Zero guidance at this point, we’re working with clients on documenting their expectations when they signed as well as evaluations of current circumstances. The view in the industry is that if you overload them with information supporting your stance that it will get through the system.

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10 minutes ago, Bozo_Casanova said:

Analysts have gone crazy. I've got the same question from like 5 different shops about how Covid is affecting the demand signal in our industry and the economy as a whole.  Literally, that's the whole question. 

Analysts are bored at home and can't reach out to their normal sources. Poor bastards. 

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9 minutes ago, G650 said:

Gotta take care of my peeps the best I can. Don't know what the future holds.

Bonuses are still an unknown at this point. I would say document your reasoning they were needed/deserved and you’re good if you’re under $2M. I would also not try to get to 100% forgiveness by doing things outside normal operations. They made loans based on 11 weeks of payroll and forgiveness is based on 8 weeks payroll, so most everyone should have some measure of payback. I operate and advise under the pigs get fat, hogs get slaughtered method of thinking so I would not go overboard with this. We’re expecting to pay back about 25% because of the timing of the measurement and part time people and I’m good with that.

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38 minutes ago, Cheeseweasel said:

What about the "timing of the measurement" are you concerned about?

It’s specific to us, we have a higher headcount in the first quarter than we do second quarter each year.

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Also got the eidl email and logged in. Went up to 150k. So very tempting. I have savings and can weather the storm, I think. But terms are so good. Read somewhere that above 25k they are requesting collateral. Is that true? With that usually comes insurance requirements I’m not okay with, so thinking I might just do 25k.

 

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1 hour ago, VABuckeye said:

Our EIDL loan was just approved.  We did not apply for the full $150K and instead chose to apply for $100K.  I just signed the closing documents and now we wait for funds to hit the account which from what I've read will be quickly.

Do you have a link? We got the grant but did not apply/know anything about the loan. The terms are better than equipment loans so I could pay those off with the EIDL.

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39 minutes ago, Texaus said:

Also got the eidl email and logged in. Went up to 150k. So very tempting. I have savings and can weather the storm, I think. But terms are so good. Read somewhere that above 25k they are requesting collateral. Is that true? With that usually comes insurance requirements I’m not okay with, so thinking I might just do 25k.

 

There’s collateral language but like all things SBA it doesn’t get into specifics of what collateral we’re pledging.  Basically company assets. 
 

re 30 years terms.  No prepayment penalties.   Very small minimum payments due and it won’t be hard to pay chunks on $100k and pay it off in a year or two.  We’ll also have a relationship established with the SBA in case we have future needs for working capital. 

Edited by VABuckeye
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13 minutes ago, T’Boo Ted Marshall said:

I never got the grant email or funds.

Did you fill out the application for the grant?   I did on the first day it hit and received the email this week.  They have a huge number of apps to get through. 
 

I never got the grant either.  My dumbass entered my bank account info incorrectly.  I was able to correct that information on Monday when I received the email asking me to create and account.  

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Gents, question about Payroll taxes. It is generally known that payroll taxes for 2020 can be deferred with 50% being paid 12/31/20 and 50% being paid no later than 12/31/21.

What about past due payroll taxes for 2019?

Any instruction whether those too can be deferred?

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Gents, question about Payroll taxes. It is generally known that payroll taxes for 2020 can be deferred with 50% being paid 12/31/20 and 50% being paid no later than 12/31/21.
What about past due payroll taxes for 2019?
Any instruction whether those too can be deferred?
I wouldn't fuck with payroll taxes. They will come after you personally if you don't pay them. I know deferment is allowed, but that's one I'm not touching.
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12 minutes ago, Chewbacca said:
1 hour ago, Lidig8r said:
Gents, question about Payroll taxes. It is generally known that payroll taxes for 2020 can be deferred with 50% being paid 12/31/20 and 50% being paid no later than 12/31/21.
What about past due payroll taxes for 2019?
Any instruction whether those too can be deferred?

I wouldn't fuck with payroll taxes. They will come after you personally if you don't pay them. I know deferment is allowed, but that's one I'm not touching.

This.

x 1000 

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10 hours ago, Lidig8r said:

Gents, question about Payroll taxes. It is generally known that payroll taxes for 2020 can be deferred with 50% being paid 12/31/20 and 50% being paid no later than 12/31/21.

What about past due payroll taxes for 2019?

Any instruction whether those too can be deferred?

It is specific to payroll taxes for current payroll periods. You can skip making the payroll tax deposits on your payroll runs and the assumption is the 941 for this quarter will have a place for the deferment to be noted. As mentioned above, this is a horrible idea and the last place to look for help. Payroll tax liabilities typically follow the responsible party if the something happens to the business.

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Late, on my phone, old lady glasses not working because of tired eyes, so the phone is an inch from my eyes but it looks like you get 56 days of payroll even if the last payroll is paid after the 56th day but it includes days in the 8 week period - an accrual accounting of sorts. This is good. Also the 75% reads like it’s all or nothing but the app let’s you leave out amounts of rent etc that you don’t want included even if you paid it so you can toggle to the 75/25. I’ll look at the interplay of the FTE or salary reduction piece tomorrow but it looks like it’s the lower of but only one of the two even though the statute seems to suggest both, I think this is the right outcome. I agree, first glance it looks like no surprises. Brew or others correct me if I’m wrong.

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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.

Edited by Brew
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