Podcast

Episode: 244 |
Will Bachman:
Paycheck Protection Program:
Episode
244

HOW TO THRIVE AS AN
INDEPENDENT PROFESSIONAL

Will Bachman

Paycheck Protection Program

Show Notes

This episode is U.S. specific, as I discuss the Paycheck Protection Program, which is an element in the CARES Act passed by Congress yesterday.

Topics covered:

  • Who is eligible for the loan
  • The maximum amount you can borrow
  • How you can get the loan forgiven. Yes, I said forgiven.
  • The interest rate for any portion of the loan not forgiven
  • The application deadline
  • And whether you can double dip if you already got a Small Business Administration Economic Injurty Disaster Loan (EIDL) related to COVID-19

Useful links:

The full text of the CARES Act

https://www.govinfo.gov/content/pkg/BILLS-116hr6379ih/html/BILLS-116hr6379ih.htm

Articles from bench.co that do a great job of summaring the Paycheck Protection Program as well as the full CARES Act

https://bench.co/blog/tax-tips/coronavirus-relief-bill/

https://bench.co/blog/operations/paycheck-protection-program/

A press release on the PPP from the US Senate Committee on Small Business and Entrepreneurship

https://www.rubio.senate.gov/public/_cache/files/ac3081f6-14ae-4e6f-9197-172ede28badd/71AB6CB05A08E369E0D488A80B3874A5.faqs—paycheck-protection-program-faqs-for-small-businesses.pdf

A blog post from the Economic Innovation Group that has a nice table summarizing the key features of the Paycheck Protection Program

https://eig.org/news/understanding-the-paycheck-protection-program

A link to CareerOneStop.org, which has links to the Unemployment program website for every state

https://www.careeronestop.org/LocalHelp/UnemploymentBenefits/find-unemployment-benefits.aspx

A summary from Golenbock Eiseman law firm

https://www.golenbock.com/wp-content/uploads/2020/03/GEABP-Alert-Federal-Assistance-For-Small-Business-Under-the-Cares-Act-March-27.pdf

Forbes article

https://www.forbes.com/sites/peterjreilly/2020/03/27/paycheck-protection-program-looks-like-a-very-sweet-deal/#29fe80b51c60

One weekly email with bonus materials and summaries of each new episode:

Will Bachman 00:01
Welcome to Unleashed the show that explores how to thrive as an independent professional. Unleashed is produced by Umbrex, which connects you with the world’s top independent management consultants. I’m your host Will Bachman. This episode is us specific as I’m going to discuss the paycheck Protection Program, which is an element in the cares Act passed by Congress yesterday. cares stands for Corona Coronavirus, aid relief and economic security. I always wonder if they have someone in Congress whose job it is to come up with these catchy acronyms. The paycheck Protection Program is a pretty amazing deal. And incredibly enough independent professionals the self employed and gig workers are eligible. Today I’ve read the actual text of the bill, at least the relevant part, which is section 1900 to paycheck Protection Program. I’ve also read multiple articles on the paycheck protection program. And they all pretty much say the same thing as what you’ll find in the bill just in a bit plainer English. Understanding this program is important to all of us running small businesses so we can apply for these loans expeditiously. As I mentioned in Episode 234, Umbrex has put together a task force of consultants who have volunteered to advise businesses on a pro bono basis. helping small business navigate this program is one of the areas we expect to see a lot of demand. If you own a small business and you’re looking for support, you can sign up to request help@umbrex.com. Just click on the pandemic playbook link in the menu bar. And if you are a consultant interested in volunteering to advise businesses pro bono on that same page, there’s a separate link for you to sign up to volunteer. Okay, so regarding the paycheck Protection Program, you’ll want to move quickly on applying to this program. My intuition is that the allocated funds will not be sufficient to meet the total demand, and you don’t want to be late to this party. The program has 349 billion allocated to it. That sounds like a big number, but I’ve seen estimates that the total demand for the program could be much, much higher. In this episode, I’m going to discuss who is eligible for the loan, the maximum amount you can borrow, how you can get the loan forgiven and yes, I said forgiven the interest rate for any portion of the loan not forgiven the application deadline and whether you can double dip if you already got a small business administration economic injury disaster loan, otherwise known as AI dl related to COVID-19. Okay, who is eligible, businesses with fewer than 500 employees are eligible. Also, restaurants and hotel companies that have fewer than 500 employees per location are eligible. Also tribal businesses 501 c 19 veteran organizations 501 c three nonprofits, including religious organizations, and sole proprietors, independent contractors, gig economy workers, and the self employed are all eligible as well, which is pretty awesome. You do not need to show that you’ve lost business due to the Coronavirus or that you’ve gotten sick from it. Or they’ve had your door shut by down a lock by shot by a lockdown order. They made this thing with very few strings attached. And they just seems like Congress wants to shovel money into the economy as quickly as possible and make it easy for people to apply. Okay, how much can you borrow, you can borrow up to 250% of your average monthly payroll expenses, or basically 10 weeks of payroll. Now, they exclude from that number, the payroll for anyone earning more than $100,000 a year. So if you earn more than $100,000 a year, you’re payroll unfortunately would not be eligible. But if you have one or two employees, then any payroll that you paid to them would be eligible. What do you need to do such that a loan will be forgiven? Okay, now this statement is I’m quoting right from the US Senate Committee on small business and entrepreneurship. The amount of principal of the loan that may be forgiven is equal to the sum of expenses for payroll and existing interest payments on business mortgages, rent payments by the business, not for the owners house for business leases and for utility service agreements. payroll costs include employee salaries up to an annual rate of pay of 100,000 hourly wages and cash tips, paid sick or medical leave and group health insurance premiums. So if if you paid yourself more than 100,000 in the preceding 12 months, like I mentioned, it seems that the loan won’t be forgiven and your payroll doesn’t count against the amount you can borrow. Okay? Now you can use the funds for other purposes, but then you can’t get the loan forgiven. The loan gets forgiven at the end of the eight week period after you take out the loan. So basically, this becomes a pure government grant. If you keep all of your employees, the loan will be forgiven in its entirety. If you lay off some of your employees, then their forgiveness is reduced by the percentage of workers you lay off. So if you lay off 25% of your workers and keep 75%, then 25% of the loan, you’ll still have to pay at 75% would be forgiven. If you have already laid off employees, you can rehire them and you’ll still be able to get the loan forgiveness. And for any portion of the loan not forgiven, the loan will be a 10 year long 10 year term loan with the interest capped at 4%. There’s no fees on the loan. There’s no collateral requirements, and the personal guarantees are waived. Can you double dip and get a paycheck Protection Program loan as well as a small business administration economic injury disaster loan, or Ei l related to COVID-19 answer to that is you cannot take out a paycheck protection loan and an Ei dl for the same purpose. However, if you’ve already taken out an Ei DL, which does not have a loan forgiveness, I believe, you can convert that into a paycheck protection loan, which does have the loan forgiveness, so you can convert it over how to apply. So you can apply for this. You don’t apply directly to the Small Business Administration. You apply it any lending institution that is approved to participate in the existing Small Business Administration, SBA seven a lending program. Now there are a few other benefits in the cares act beyond the paycheck Protection Program, there are some other elements that you might want to pay attention to. I’m not going to go into detail in this episode. But once look out for our the unemployment benefit for independent contractors and self employed people who don’t typically qualify for traditional unemployment benefits. So check out your local state’s Department of Labor, as the rules vary by state. And number two relaxed net net operating loss rules. So normally, you can only carry backwards and net operating loss two years in this case, they’ve relaxed requirement, there’s a greater number of years, not going to get into details on that here. In the full in the show notes. I’m gonna including links a bunch of links, so got a link to the full text of the cares act, got articles from bench.co. And that is a really nice job of summarizing the paycheck Protection Program. As a separate article on the full cares act. There’s a press release on the paycheck protection program from the US Senate Committee on small business and entrepreneurship that nicely summarizes the key parts of it. I have a link to a blog post from the Economic Innovation group that has a really nice table summarizing the key features of the paycheck Protection Program. A link to career onestop.org which has links to the unemployment Program website for every state, and a summary from going back Iseman law firm and as well as a Forbes article, so a bunch of links so you can do some additional reading on this program. If you have questions. You’re welcome to email me at unleashed@umbrex.com. And again, if you want to volunteer, we’d love to get your help advising small businesses sign up, go to umbrex.com click on the pandemic playbook link on the right top right. And there’s a link to volunteer thanks for listening

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