Podcast

Episode: 251 |
Dave Haase:
Paycheck Protection Program:
Episode
251

HOW TO THRIVE AS AN
INDEPENDENT PROFESSIONAL

Dave Haase

Paycheck Protection Program

Show Notes

Note: This episode recorded April 1, 2020. The guidelines on the Paycheck Protection Program are evolving daily.

For the latest news, visit:

https://umbrex.com/resource/paycheck-protection-program-and-sba-eidl-loans/

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Dave Haase runs Peninsula Accounting, which offers bookkeeping, tax preparation, and payroll services to small businesses.

Dave’s firm is working with ~100 of their clients this week to prepare applications for the Paycheck Protection Program, and in this episode we discuss that program as well as the SBA EIDL loan.

Regarding the PPP we cover:

The latest guidelines from the U.S. Treasury

The draft application form

The information you need to pull together to apply

How much will your business qualify for?

How does the loan forgiveness work?

Can you apply for the loan through more than one bank?

Regarding the SBA EIDL we cover

Documents you’ll need to apply

How to apply

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The U.S. Treasury application form for the PPP is here:

https://home.treasury.gov/system/files/136/Paycheck-Protection-Program-Application-3-30-2020-v3.pdf

Contact Dave at:

dave@peninsulaaccounting.com

https://www.peninsulaaccounting.com/services-overview

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

Will Bachman 00:02
Hello, and 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. And I’m your host Will Bachman. I’m so happy to be here today with Dave Hayes, who runs an accounting and bookkeeping firm out on the west coast. He has is working with 50 to 100 clients just this week, helping them with applications for the paycheck Protection Program, part of the cares Act passed by Congress just last week, and today, Dave is going to walk us through the whole process guidelines are still coming out. He’s going to tell us the latest. Dave, welcome to the show. Thanks. Great to be here. So Dave, first, just give us the kind of the overall big picture view of what is the paycheck Protection Act? What kind of businesses are eligible? And what are this, you know, it’s a loan that converts to a grant, give us give us the basics?

01:03
Yeah, it’s great. So there’s been a lot of changes in the last few weeks. And even in the last couple of weeks, on a huge number of different tax issues. And the most relevant probably right now for small business owners and self employed individuals is the payroll Protection Program, which is was was approved on Friday by the Congress. And basically, it’s part of a larger package to continue to incentivize businesses to pay payroll. And so the gist of the program is a forgivable loan. So it’s a loan upfront that has subsidized interest rates half a percent to 4%. And can be forgiven if you maintain the level of payroll that you had before the disaster. So there’s no hardship that needs to be proven to apply for the loan. What they’re looking at is really just how much payroll you had last year, and they’re comparing it to, you know, a period during this year. And if you were, you know, maintained your payroll and didn’t lay anybody off or reduce it by up to 25%, then you get that full loan forgiven and it’s not income. So that is the very short kind of cliffnotes version of payroll Protection Program.

Will Bachman 02:28
Okay, fantastic. So understanding that it sounds like guidelines still have not been the final guidelines still have not been issued, walk us through the process of what materials we need to gather. And what’s the process to apply for one of these loans to people? Do you do it with the SBA? Do you do it with a bank? How do you go about applying for one of these loans?

02:57
Yeah, so. So this is actually going to be processed through private lenders, the SBA right now is really overwhelmed with disaster loan applications. And so they have, there’s been a million changes since since Friday. And as you can imagine, with, you know, your, like the entire IRS, and probably most of the Treasury Department working from home, and most of the banks, it has been difficult to get really good information. So it’s still coming out right now. And, but I can give you basically the, you know, what we’re thinking at this point, although this literally may change tomorrow. And I will say that’s one very important recommendation for folks, if you’re looking for information, make sure you’re sorting based on the last day, essentially, is what I’ve been doing for the last week or so because I had things that came out this weekend, I sent a big, you know, note to my clients. And it was all out of date by like Monday morning, which was frustrating. But but but basically what we know as of yesterday afternoon is we got an initial draft application form for the payroll protection loans. And basically this was issued by the Treasury Department, it’s given to banks, because again, like your private lenders are the ones who are going to be processing those loans. And what that means is that Wells Fargo Chase, you know, whoever you might use for your business banking is probably where I would begin. I know that Wells Fargo and chase both have programs in place and they both Wells Fargo gave the draft application out yesterday. They didn’t have an application form to fill out online. And this was just informational so that people could begin to prepare and chase yesterday kind of gave the process that they’re going to use and the small banks are working on this as well. I just use the big examples because I know you’ve got folks all over the place. But those private lenders will be processing the loans. They don’t have to wait for SBA approval. They’ve really tried to strip out qualifications for the loans to make it Fast, they want to get money into the economy as quickly as possible. And so, you know, you may be surprised who qualifies for these loans, like I run an accounting business. And I expect to see a revenue slowdown we haven’t yet versus last year, and yet we qualify for this. And so, you know, I’m telling our business owners to be as conservative as possible, knowing that we don’t know how long this disruption will last and to go get, you know, capital for the worst case scenarios. And I think this is going to be a no brainer for folks. So you’re going to apply for your private bank, there is a draft application out that we can I’m sure, we’ll find some way to share that with folks. There’s one on the Treasury website. Yeah. And essentially,

Will Bachman 05:45
we will include a link in the show notes. So listeners, you can check the show notes to get that draft application.

05:52
Perfect. And so the formulas pretty easy. So basically, and this is the important part where the nuances are, it’s only a multi page form. And it asks for your average payroll, and there’s a few different things that you can, that you should know are included there. So I’ll start, there’s a few different scenarios. Unfortunately, tax law is just, you know, really, really complex. So I’ll try not to go too far down the rabbit hole in terms of the exceptions, but I’ll give you the general gist of it. So payroll as they define it includes benefits, which can be retirement benefits, as well as healthcare benefits. And so that’s something to be aware of make sure you’re including those things that can it can bump the numbers significantly. And essentially, they just asked you for a payroll amount. And then on average, across 2019, is the default formula that they want you to use. And then you’re going to multiply that by two and a half, and that is the maximum loan amount. And that’s also the maximum forgiveness announce, if you were to keep folks on on payroll, a couple nuances here, you do have to exempt folks that make over $100,000. So I know for some of your consultants that may be particularly impactful. Just Just a question there.

Will Bachman 07:07
I’ve heard different things on that. So my understanding is when you say exempt, folks, my understanding is that the first $100,000 qualifies. So if someone earns $105,000, you could count $100,000, against the amount.

07:22
Yeah, I think that’s correct. I’m not 100% sure, because I haven’t seen that yet, in writing and on the application form that you guys will see it’s not, it’s not called out clearly. So I definitely that is a very important question to ask your bank. And my bias, generally, is to include the amounts. And as opposed to like cutting them out, it would

Will Bachman 07:46
be bank, it’d be very strange if someone earning $99,000 99k would qualify. But then if they earn 100 $101,000, like zero qualifies. I certainly hope that that’s not the case. And that would be kind of bizarre. If they do it the rules,

07:59
we could have a follow up on bizarre tax rules. But yes, this would go on that list. And there’s a long list of bizarre tax rules. But yeah, I mean, I just don’t want to make any assumptions, because we’re still figuring out exactly what the rules are. But so I’ll just call that out is like, I don’t totally know the answer to that yet. But I would include it right now in people’s applications and have the bank strip it out.

Will Bachman 08:19
Yeah. And then we also want to point out here, and just make it clear that independent consultants and gig workers and self employed, a lot of the listeners of this show who run their own practice are included, right. So for us, we don’t issue most of us maybe have an LLC, we don’t have a payroll report, my understanding is that basically the net earnings after expenses. So what if you have an LLC, basically what you paid yourself, that counts as payroll, is that is that correct?

08:54
Yeah, that’s right. And you know, I don’t know if you noticed this on the application form, but it really did not talk at all about self employed individuals, or guaranteed payments, which you know, is part of the structure of an LLC. The one thing I will say is, if people have an S corp, and they pay themselves salary, then that is pretty straightforward. But even if you have an S corp, and you have distributions that are not salary, which would kind of be in that bucket that you’re talking about, if your total take home pay, regardless of whether it’s a distribution or a self employed individual, just literally like, you know, putting money in their bank accounts, or if it’s an LLC, where you have a mix of guaranteed payments and profits, regardless, that is a very important question to ask for folks. And it does. The initial bills said that it would include self employed individuals, and I haven’t seen on the application form any place, you know, the application specifically called out payroll. So I’m expecting to see more information on that. But yes, the bill did seem to read that way. The application itself right now is a little bit inconsistent with But I expect to see some clarification pretty soon on that.

Will Bachman 10:03
Okay. And just as a clarification, you mentioned for LLCs, guaranteed distributions and so forth. That may apply to certain for certain LLCs, maybe with multiple members, but that were for a lot of listeners of this show who have a sole member LLC, you know, we don’t have guaranteed distributions, it’s just, you know, people will often pay themselves, you know, when they feel like it or when they can from to their personal account, but there’s not you don’t know, just because you have an LLC doesn’t mean you guaranteed have to have a guaranteed distribution, right. That’s right. Yeah. single member LLC would not have to have that. Yeah. And also, even multiple member LLC s do not necessarily have to have guaranteed distributions, they may have put it into their owners agreement, but they don’t necessarily have to have them.

10:51
Yes, and no, that would be another podcast, but you’re supposed to have guaranteed payments if you had profit. But if you have profit, but that’s a comp, yeah. It’s a complicated tax topic. But yeah, that’s generally right.

Will Bachman 11:02
All right. Okay, so that’s so you see, there’s a, we’ll take a look at this draft. There’s the draft application form. What have you seen in terms of the Can you list out like the major banks that you’re aware of you mentioned wells, Fargo, and chase. They all are all like basically all the major, the major national banks part, because my understanding is they have to be already approved. SBA seven a lender, would that include like Bank of America, and what other what other big banks?

11:38
Yeah, there’s a list on the on the website, the SBA website of lenders. And it does include all the major banks that people think of it, it probably includes a lot of the regional banks as well. I’ve seen notes from some of those folks, but they do have to be seven, eight lenders. So that will, it will eliminate some regional banks. But I know that the major, you know, Bank of America, Wells Fargo Chase, those guys have seen communications already about this program. So I know that they’re all involved. And I, you know, you may not have to be a customer or client of that bank, in order to participate. But I do know that Chase was giving priority to some of their their folks. So I would start with a bank that you work with and and see if they are a seven a lender, which you know, or ask them if they’re doing these types of loans. And then if you need a larger list, there’s one on the SBA website.

Will Bachman 12:32
That’s good to know. So if so you’re saying that some banks may give priority to their current customers. So it’s what

12:41
chase said they were going to do? Yeah, which makes sense to me, there’s going to be an onslaught, I mean, there’s $300 billion is part of this bill for these loans. And so you can imagine the number of applications that folks are going to get the SBA website yesterday said, like, please try applying during off peak hours. So there’s just going to be, you know, daily use of new applicate applications and applicants here. So I would start with the bank that you work with, if you can,

Will Bachman 13:09
okay. But again, you’re not going to apply for this at the SBA site, you’re going to apply directly to your bank. So you need to find out what your bank’s process is.

13:18
Exactly, yeah, there is no application form on the SBA website, it’s going to be processed through the private lenders. That’s not true for the disaster loans. That’s just for the payroll Protection Program.

Will Bachman 13:27
Alright, maybe good. And, you know, after we talked about the PPP, we could get into the disaster loans, a little bit separate, separate program. So Alright, so people apply for the what documents Do we need to start gathering to support our application? What are we going to need to get together?

13:48
Yeah, so I would start going through your payroll records, and I pulled them essentially buy month for 2019. And there’s, there’s a reason for that, which is that there, you can elect to use different timeframes. So for new businesses that didn’t exist in 2019, there’s a different formula where you can use I think it’s January and February wages of 2020. For most people, they want you to use an average of all in 2019. But you’re still going to want essentially payroll you want your your other benefits. So your retirement benefits that were paid in 2019, your medical benefits that were paid in 2019. I have heard it said that some people are opening a checking account so they can have an audit trail when they get this capital to ensure that they’re paying for things that are forgivable, basically, as part of the loan belong kind of has some limitations on how you can use the loan for utilities and rent and payroll and things like that. So I would potentially consider doing that if that’s something that’s that’s important in terms of an audit trail for a client. But right now, it’s really going to be those payroll records. And I would go ahead and pull like your balance sheet and your financial statements. For probably, you know, the last few years. So what will often happen in these scenarios is your private lenders will have their own kind of qualification processes. And they may ask for different documents. But for sure, you’re going to need a lot of information about your payroll. So you’re going to want to see if you’re an independent contractor, for example, like this is a totally different flow, because you may not have payroll that you can pull from gussto, or ADP, whatever it might be. But for everybody else, I would take payroll you want to buy employee because of the exemption over 100,000. And you want to find month, probably, so you can actually do an assessment of, you know, you may have paid like, I pay taxes and bonuses, and it’s during one of the windows, so I’ll elect to use the February to June window, because it’s actually, you know, ended up being like $20,000 different. So you may want to look at it by month to make some assessments of the best possible application process for you. And then just quickly on the self employed individuals, or people that have LLCs, you know, similar process, you’re not going to have payroll reports, it won’t be as clean, there’s probably going to be a little bit more work in substantiating what your distributions were from your business. And my guess is in these scenarios, and it’s really just a guess, right now, because we don’t, we don’t know what the application process looks like, they’re probably going to use your tax returns for that. You know, a lot of these folks are and I, I’m one of them, basically, are like writing yourself a check whenever you have the cash in the bank, or whenever you need money, maybe paying rent or something like that. And so you may have inconsistent distributions. And my guess is they’ll go back to the tax returns to show what your final self employed income was, for example, on your schedule C, or, you know, it can flow up in different ways to your tax return based on your structure, but but for sure, you’re going to want to pull the last couple of years of tax returns, and profit loss statements and your balance sheet if you’ve got those.

Will Bachman 16:58
Right. Now, you mentioned that they want you to pull all of the months in 2019. I sounds like you obviously know this better than I do. I’d heard a couple different things. I thought that I had seen somewhere where it’s going to be not as late 2019, but like trailing 12 months. So if you apply here on, you know, April 1, they would look at April 2019 through March 2020, or something like that. But is maybe I heard wrong before. So you’re saying

17:30
for my saw was an average of 2019? Okay, so you know, it’s possible I there are actually this is one area where there’s a number of different exceptions. And so there’s exceptions on two fronts. One is the number you use for the average payroll. And if you have variances between Yeah, exactly like you were saying, if the 12, trailing 12 is going to be different than the average 12 for 2019. Or if you have seasonality and the February to June window is going to be different than the rest of the year, then I would encourage you to spend a little more time making sure that you’re looking at those options, because there are some exceptional kind of time rules that you can apply. And the other piece is that for folks, if you’re working with small businesses, or even midsize businesses that may have already done some layoffs, there’s also so part of the forgiveness is keeping people on payroll. But there is for restaurants, for example, when you close the loan, you have eight weeks to hire people back there is actually a window there for you to scale back up. So for example, I work with a number of restaurants in San Francisco that are relatively, you know, closed at this point. And they do have eight weeks to hire people back on there’s I haven’t seen like the, you know, exhausting detail of what that means. But basically, it’s eight weeks from the time that you close the loan. So there may be businesses where that eight week period is really important. And one of the things I’m talking about my restaurants is maybe get approved for the loan and sit and wait, basically, so that you know that we’re going to be open again or that you can be open again, because you’ve got to hire people back, do your forgiveness is determined basically eight weeks post closing, closing alone.

Will Bachman 19:16
So a couple questions there. One is Yeah, you know, $349 billion was approved for this. Thank you Congress. Yep. But I’ve seen some, you know, speculation that that’s not nearly enough. So and that might be sort of first come first served. So you said sit on it. But what’s the concern that if you sit on it, that they may just run out of funds and say, Hey, sorry, tough luck, you’re approved, but there’s no longer funds?

19:41
Yeah, so what I mean by sit on it is go ahead and apply. That’s I’m telling all so we’ve got about 300 business clients total. And I’m telling all of them to drop what they’re doing and assess this program immediately. Because it’s, you know, maybe hopefully the only time in our lifetime Where you got something truly exceptional and the government stepping in and basically giving money to get into businesses that are, you know, can be a really significant amount of money, six figures or even, you know, potentially seven for a few of my clients, and completely forgiven and not counted as income. I mean, I don’t know, we never really foresaw this type of scenario. But so what I mean is go ahead and apply, get it approved, right, and then wait, if you needed to, as long as you can, but but we obviously are going to be tracking the news daily, I do think there is some risk that the banks are going to be really overwhelmed with applications for this program. And there’s also a risk that they may run out of funding for this. And I’m not really sure what would happen in that scenario, but, but I would encourage folks to act quickly, because I think even if you look at the SBA, like, this weekend, I applied for some clients. And then by Monday morning, they had a completely new application process. by Tuesday, they were announcing that they were way behind on applications and that their site was crashing, and not to not to worry about it. But you know, to try using it during off peak hours, you know, this, there’s obviously a great deal of demand, and there’s a lot of businesses that you know, are going to be really interested in this. So I definitely would encourage folks to, you know, this may be a weird, I’m telling you, some of my clients, you may have applied multiple banks, to see who can get through the process, the quickest.

Will Bachman 21:24
I was gonna ask you about that, actually. Yeah. So so that’s kosher, you can go ahead and apply to more than one bank? And then it let’s say that you get it, maybe you get approved it to you, then you could you could you can obviously only pick one of them. But it is okay, then like it’s not like they say, Oh, well, you’ve already applied to chase, you can’t apply it here at Bank of America or whatever you can apply. Yeah, my own bank,

21:49
I think you can apply multiple places, you know, think of this, like the mortgage. Right? You’re welcome to shop out different banks. And there’s no harm in doing that, I think, my guess is that it may be hard to get to the finish line with multiple banks. Meaning that like I think it’s going to take, I don’t know how the banks are possibly gonna process it didn’t have departments set up, right? Think about their seven, a loan department is probably even a huge bank, maybe a few 100 people or something, and they might have 100,000 applications this week. So I don’t know how they’re possibly going to process all of these, my recommendation is get in the minute, something opens up, you want to get in. And I’ve got, I’ve told all my clients, like the minute I see any sort of private lender, put an application form up, I’m going to have all my clients apply there. And then when their bank opens, they should apply there as well. Okay.

Will Bachman 22:41
So try to get to be tried to be first in line and get all your ducks in a row and all your materials gathered with this draft application, like immediately, so that as soon as you anybody is accepting it. It’s like buying some concert tickets or something. Totally. And then. So Oh, I’ve heard some confusing stuff around the loan forgiveness. So in you mentioned you alluded to earlier, so it’s if you hire the people back by the eight week point. So let’s say that you’re okay. Let’s say that you’re a restaurant and you, you had to layoff everyone, unfortunately, so you get alone. And let’s say that you’re just keeping the numbers simple. Let’s say that your average monthly payroll was $100, just for round numbers just for a hypothetical, and you laid off everyone. And maybe you had 10 people. And so is it the extreme case that if on the last day of the eighth week, you hired all 10 people back and they were just there for just that one day? Then they’d say, okay, on eight weeks, you have 10 people back, it’s 100% forgiven? Or is it also based? So is it I heard that it was based Pereda, both on headcount, but also on the amount of salary that you paid. And if there was more than a 25% reduction in the salary you paid. There was some reduction in loan forgiveness, as well. So could you talk a little bit more about how you expect that to be calculated?

24:11
Yeah, I mean, I’ve heard all the same things that you just mentioned. Right. And that’s not a formula that I can understand. Meaning that there is going to be an extreme amount of detail coming out about that they really, they they passed the bill, they actually gave themselves 30 days to clarify different points in the bill. So those are some of the things that that are still, it’s unusual to pass a bill and be like, oh, by the way, we’ll give you all the details at some point in the next 30 days, but started sending out money right now. I’ve never really seen that before. But But you know, I’ve heard the same things. I think there was going to be some combination of the number of ft E’s which even that term like full time employees is kind of an interesting one right for restaurants and things like that. And there’s also going to be a factor for the total amount like dollar amounts or payroll. It’s, it’s really not clear and that, you know, same thing is true, I thought the same thing I’d like, hey, maybe you can hire everyone back on the day of the eight weeks, you know, for restaurants that may not be open, I don’t expect San Francisco to have fully functioning restaurants here in eight weeks and a bunch of people, you know, banging on the doors to get into them. But But you know, I think the prudent thing is to take the loan now to wait for the details to come out on that. And to make a plan once we have better details, like we don’t even have the application details at this point, let alone the forgiveness formula. So but I’ve heard all the same things you did, it’s going to be some combination of those those things, the eight week period was in the bill. For me right now, I’m trying to gather capital. And basically, I will evaluate staffing decisions differently in the next eight weeks. And I think every business owner should be doing that one, go get capital, if you can get capital and, and have a need for capital. or, frankly, if it’s a forgivable loan, even if you don’t have a need for capital. I mean, that’s what I would say to my clients is, you know, that, even though I understand the ethical pieces of this whole thing, right, it’s like, Look, if you have some sort of interruption, you should get as much capital as you can as a business owner. And you can make those decisions as you go through it. But for sure, for me for the next eight weeks, I’m going to try to keep everything pretty similar to last year. I mean, we’re in the middle of tax season. So we have a unique situation where we still have revenue coming in, but but I will evaluate those decisions differently because of the limitations on the forgiveness of these an expectation of getting one of these loans.

Will Bachman 26:38
Yeah. And since the rules aren’t out, you may not be able to answer this one. But I’ve heard some people ask me, hey, in terms of the number of employees, what if I hired different employees? So if it’s not the same names? Does it still count? So if a small business, yeah, 10 employees, they had to lay them all off? They go back and hire 10 different names at the same salary, then would that still count for the loan forgiveness?

27:04
It should? Yeah, I haven’t seen that is a limitation on anything. So it, you know, it’s possible that that does sneak its way in there at the end, but I haven’t heard of that on anything that I’ve seen as a limitation.

Will Bachman 27:17
Alright. So it’s not a name base to just a number based and salary base yet. Okay. Let’s talk a little bit about the Small Business Administration, economic injury, disaster loan, or SBA, ei DL. That’s a different program. Tell me what that’s all about. I don’t really understand how that works. Walk me through that one.

27:39
Yeah, I didn’t either until about a week ago. But so that is a loan program that has been in existence for some period of time, that basically the SBA helps out by funding small businesses in times of, you know, disruption. And it’s a loan program that you apply for through the SBA. So there was a great form that they uploaded Monday morning, and then change Tuesday morning, that is really streamlined in terms of application, it takes like 15 minutes. And essentially those loans are for businesses that have been closed because of because of Coronavirus for the most part, or shelter in place. And businesses that have seen a revenue decline. And so they can be for up to I believe 2 million is the limit on those loans. And they have subsidized interest rates. I think 4% is the top interest rates. And they can be long term loans. I think 30 years is the longest loan period that you can have under that program. And so what’s interesting to me is I don’t see a really clear formula for how they’re going to calculate the amount of money that they give to those individual businesses. But, but I’m going through it with a lot of clients right now, we’ve put in a lot of those applications this week. And we should know more shortly. But one thing that they did change last week is they gave a $10,000 advance on those loans that they said would be processed within three days, although I haven’t seen it yet. And we started applying on Saturday, maybe three business days but but basically you can check a box there that says yes, I want a $10,000 advance on this loan and if you don’t get approved for a loan that $10,000 is essentially becomes a grant. So so that’s good to know about I have told a number of folks to go ahead and apply there and and check the box for the $10,000 that’s supposed to be processed within three days and and then we’ll know more about the process there as we go along. But I will say for the initial form. People really if you You just need to know your like social media. curity the date you started your business, what type of business you are in your Ei n if you’re a multi member LLC, or an S corp, and your total revenue for the like rolling 12 months through February 1 and your total cost of goods sold. So that there are they’re going to use those to kind of calculate the loan. And initially, what they’ll probably ask for as a follow up, because this is their Sunday, and then it disappeared on Monday is a personal financial statements, that takes a little bit of time to fill out, if you have any sort of investment accounts, you have to pull like all the details on those accounts, and authorization to go look at your tax file. So there’s a few different forms that you’re probably going to have to fill out during that process. But the initial application process is very quick. And you go ahead and you load in like your bank information so they can transfer the $10,000. And I expect to see those start to come through in the next few days. Which should be some really much needed capital for some of these small businesses.

Will Bachman 31:04
Okay, so and Zoo when you when you apply for one of these? Do you request a specific amount of money or you just apply? And then they’ll decide how much they want to loan you?

31:15
Yeah, it’s the ladder. So you it’s based on it based on needs that you can qualify. So I haven’t gone, you know, end to end on one of these yet. But basically, the initial application doesn’t ask you about, you know, decline or revenue or any of those things that just ask you for revenue and colleagues. And then it asks you what type of business you are. And it makes sure that you’re not a number of different businesses that are exempted. And then I would expect as a follow up, they’re going to ask for, you know, did you have a decline in revenue? How long is that going to last? And they’ll they’ll qualify it based on those factors. Okay.

Will Bachman 31:51
You go the whole list, but like, what are some examples of exempted businesses that cannot apply?

31:57
Yeah, so there, let me think about this. Okay. So there were some exemptions for like churches and political organizations, the typical things that you see that are exempted from nonprofits that are sometimes exempted from nonprofits, there were exemptions for Let me think about this businesses that had like foreign owners. Any anyone with like a felony or criminal charge of any sort, there was an exemption for porn businesses like online porn, which I was laughing, I was like, if I had more time this week, I would love to understand this, this this limitation. But I did not unfortunately, but it didn’t make the last. businesses like that. So the things you would expect, but any sort of like professional service business, yeah, those things would qualify.

Will Bachman 32:45
Okay. So applying for these loans. So at some point for to call, and then my understanding is you cannot get an economic injury, disaster loan and the paycheck protection program for the same thing, but that you can apply for both as long as you’re using them for like, separate purposes.

33:11
Yeah, that’s right. So there’s, you can apply for both, and they both have requirements on what you can use the loan for. And so that’s you will have to have discrete expenses for the two different, you know, the two different kind of cash infusions that you may receive as part of those loans. So, so yeah, that’s something to keep in mind. I do think, yeah, but because of the limitations on kind of the payroll Protection Program, if you were to keep your payroll in place, my guess is just with the inclusion of like rent and utilities and some of those other things that you may use more capital. I don’t think spending capital is going to be the problem in this case, but for most of my clients anyway, because if you include some of these other expenses that are, that could be included in either kind of cash infusion, as a as a, you know, permissible expense, and you keep your payroll for the most part whole. I don’t think it’s going to be hard to spend the money on things that are qualified. Okay.

Will Bachman 34:14
All right. So, let’s see. And so with these, you apply directly to this small business Business Administration, not through your bank, you give them your bank details, so they would deposit the money in your bank. And this one, again, is a loan. This is not one of these nice forgivable things. So you would actually pay this back.

34:35
Exactly. That’s right. It’s not forgivable. The $10,000 is forgivable if you don’t get approved for a loan. But it is not forgivable. And so it’s a truly you know, I get decision with all the things that come along with that. And I do think that’s something to consider in all of this is even with the forgiveness program for the payroll protection loans. You know, there is there is some risk and kind of how they define this In terms of forgiveness, that there’s a limitation that we did not receive. And so I am telling people to have a bit of caution when they do this. But at the very least, it’s a really, really low interest rate loan. And I do think if you go through the qualifications that we know about, there’s a very good chance that a lot of it, all of it will be forgiven for the payroll Protection Program. But for the disaster loans, it is truly just a loan, that it has a subsidized interest rate. So I think 2.7 to four is what they quoted on that, which is a pretty good use of capital. So for example, for my business, I’ll probably take that and pay off some of my line of credit. So if I needed to pull the money back out, I could very quickly and shift money to kind of a lower interest rates, you know, lever, if you will, for my business. So I would keep some of that, you know, as liquid as you can, knowing you are going to have to pay it back at some point.

Will Bachman 35:55
All right. Could you tell us about any other? These are federal programs, any other city or state run programs that you I think you’re out in San Francisco, so that people should be also be thinking about in New York City, I know that the Department of Small Business Services has some product, but what other products should people be looking at for city state or maybe even private grants and so forth that are available?

36:22
Yeah. So looking more broadly, there are a lot of other things going on. I you know, it’s funny. Last year, we had the tax cuts and JOBS Act, and I swore that, you know, this was like the time in our career as tax professionals where we would see more change, there’ll be two ever seen in 50 years of tax code. And this year has been actually you know, about the same which is, which is remarkable. There are so many things available. So California, San Francisco, New York, there are a bunch of states now, and even cities that are providing loans for the most part, low interest rate loans for small businesses that operates in their city or state. In addition, there’s been a lot of federal tax law changes. So for a few that all kind of quickly highlight I mean, the tax filing deadlines push back to July 15. That includes any payments that are due with your tax returns. It also includes any payments, any estimated payments that you would might be making during that time. Most of the states, like nearly all the states have matched that, that timeline for July 15, and a waiver on interest in penalties for payments that are due as well as estimates. So one of the things I’ve told a number of consulting clients is you know, hold your estimated payments for now just keep them handy if you want to have more capital on hand in case you see like a consulting contract come to an early end. So that’s a piece of advice we’ve given folks. There are other you know, mostly loan options at the at the local level, at least I speak mostly from, you know, California experience. Most of those are not forgivable. A number of these cities and states are losing a lot of tax revenue right now. But the name of the game is to really keep the capital in your business. And for that reason, I think delaying some of those tax payments, you may still finish your tax return and understand what you owe, I always think it’s better to have that information early on, rather than later. There’s also the you know, there’s like a tax credit that they’re going to be issuing advanced checks against. That’s a strange structure. But that’s what the 12 $100 checks are that you’ve heard about. Those are for folks that are under 75,000 of AGI and adjusted gross income, if they’re single and 150. If they’re married, you may have some folks in that camp, and there’s also $500 per child. There’s a phase out for those we’re having to work through. We don’t have that many clients that are in that income range. But we’re working through with some of those folks like whether or not they file their 2019 tax returns, because some of them may have a different income number on 18 versus 19. So there’s a lot of other issues going on right now. There are some local counties that are delaying property tax payments, which I think are due April 10, at least in California. I know they’re they’re all due April 10. And they’re starting to talk about pushing those back. So there’s a lot going on. And I think the one thing I’d recommend for folks is if you’re looking for more information about that, just make sure you’re looking at, you know, very recent information, because it’s all changing by the day, basically at this point.

Will Bachman 39:35
All right. All right, Dave, look, this has been incredibly helpful and good, bringing us up to speed. How if what folks wanted to reach out to you follow up I imagine that you’re you’re pretty busy serving your existing client base, but if folks wanted to reach out to you, when you feel free to give a website or email or or whatever contact info.

39:58
Yeah, my email is David peninsula. accounting.com and that’s our website as well, peninsula accounting comm we work with folks all over the US, mostly in California in the Bay Area. But we’re happy to help. I mean, we’re, I’m spending most of my week, unfortunately, it is still tax season kind of. But I’m really spending most of my week with businesses that need capital. And so, so I do have some availability, we’ve kind of prioritized folks that are getting refunds, and folks that are dealing with layoffs or need capital infusions as quickly as possible. And so, so we’re making time for that, I think actually, a lot of my staff will probably pull off tax returns this week. If it’s something that you need, you’ve got to press forward as fast as you can. But realize that basically, every one of my businesses, you know, for the most part will want to at least assess whether or not they qualify for these loans. And so it’s certainly a time where, you know, we’re dedicating all of our resources we can towards this, and I assume most accounting professionals will. But if that’s a hold up for you, then you know, find a way to get it done anyways. All

Will Bachman 41:07
right, great. This was incredibly helpful day. Thanks for giving us the latest on this. And again, it’s evolving rapidly. So as the name suggests, only look at sort of the most recent day of news on this. One, it also mentioned if you’re a small business Umbrex has a program where we’re offering pro bono support to small businesses. So Umbrex consultants, we have over 100 volunteers who have agreed to advise small businesses, help them understand these proxies give give some advice, we have a one page checklist to help you as a small business, come up with a plan to you know how you want to react to the pandemic, to find all that to either request support. If you’re a consultant and want to volunteer to volunteer, or to get all in info, visit umbrex.com that’s umbx.com and click on the pandemic playbook link on the top right there to get to to our kind of mini site where we have all the latest and greatest including upcoming current Coronavirus, related events and seminars. We have a page for that. So if you’re looking for help go that’s a place to sign up. Dave, thank you so much for joining us was incredibly helpful. Yeah, thank you. Appreciate it. If there’s any other follow ups, just let me know. All right, great. Okay.

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