Podcast

Episode: 255 |
Ryan Vaughan :
PPP Updates:
Episode
255

HOW TO THRIVE AS AN
INDEPENDENT PROFESSIONAL

Ryan Vaughan

PPP Updates

Show Notes

Today’s episode is a recording of a webinar that I facilitated on April 8, 2020, attended by 80 independent management consultants.

Ryan Vaughan is a Tax Director at Mazars, a leading global accounting firm, and he answered our questions about the Paycheck Protection Program.

Ryan first provides a general overview that pertains to all businesses, and then he gets into our detailed questions about how independent consultants can access the Paycheck Protection Program. Some of our key questions included:

  • If we aren’t W2 employees of our own firms, how do we demonstrate “payroll” to ourselves
  • How much of a loan should we be eligible for
  • How does the loan forgiveness work
  • The practical steps of applying for the loan
  • Starting around the 45 minute point, we touch more briefly on the Small Business Administration Economic Injury Disaster Loan.

In the first part of the discussion, Ryan reviews several pages of a slide deck. We’ve posted that document on the Umbrex website, and here is the link.

In this episode, Ryan zips through the highlights of the slide deck in about 10 minutes. He’s also done a full hour webinar on that deck: watch it here.

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. Today’s episode is a recording of a webinar that I facilitated this afternoon, attended by about 80 independent management consultants, and led by Ryan Vaughn, who is a tax director at mazars, a leading global accounting firm, Ryan answered our questions about the paycheck protection program. So Ryan first provides a general overview that pertains to all businesses. And then it gets into answering our detailed questions about how independent consultants can access the paycheck protection program. And some of the topics we cover include. If we aren’t w two employees of our own firms, how do we demonstrate payroll to ourselves? How much of a loan should we be eligible for and how do we calculate that? How does loan forgiveness work, the practical steps of applying for the loan. And then starting around the 45 minute point, we touched briefly on the Small Business Administration economic injury, disaster loan, and if you’re able to apply for both the Ei dl and the PPP. So in the first part of this discussion, when Ryan is reviewing several pages of a slide deck, which obviously you can’t see right now, we have posted that document on the Umbrex website. And there’s a link right here in the show notes where you can download that document and follow along. In this episode, Ryan zips through the highlights of that slide deck we go through in about 10 minutes. But he’s also done a full hour webinar on that document. And if you want to get the details, there is a link in the show notes that you can go and view that webinar on the mazars website. So without further ado, here is Ryan Vaughn.

02:07
So everyone, I just want to start and thank everyone for joining and hope that everyone is well and everyone’s family as well during this crisis, and that will, you know, emerge stronger better than than we were before. So thank you for everyone’s time. And as well mentioned, I’m going to share a slide deck with you right now. And I’ll go through some of the the high points or just the summary of and then we will get into your specific questions as it relates to the PPP program, and then potentially other areas of the cares act as we as we go through the list. So

03:01
this

03:03
this slide deck is well mentioned was used in a an hour long presentation on the PPP program. So I’m not going to get into all of the details. Here, this will be available. But just at the overview, an eligible business as a small business, nonprofit tribal business or veterans organization with 500, less 500 or fewer employees, sole proprietors self employed individuals are eligible, which was an expansion under the cares act. from previous seven, eight loans. The loan amount is essentially calculated using two and a half times your average monthly payroll and that payroll is capped at $100,000 per individual. You can also add into that retirement costs healthcare costs and state and local costs all covered all paid by the employer or the company. The loan forgiveness terms the terms for the loan forgiveness look at the my Sorry to interrupt you, Ryan, but I’m having

04:24
a really hard time hearing because some people are not muted and I can hear everything they’re doing. So if everyone could please check in mute. Thank you. Yeah, it’s Barry. So Barry, if you can hear us would you mute?

04:40
The Thanks everyone. So the loan forgiveness period is the eight weeks following the loan date and looking at four buckets of costs, payroll, costs, rent, mortgage interest and utilities and The some of that is your maximum amount of loan forgiveness. There are two loan forgiveness clawbacks may not be applicable in in the independent contractor, sole proprietor realm, but they look at headcount and salary paid during that period, and it can reduce your amount of loan forgiveness. And that’s really looking to keep people employed and keep their wages up is is essentially the the goal behind that. And if we have questions, I can get into that further. But I think for this group, it’s probably not as important headcount in in wages clawback. Another thing to note is non payroll costs can only represent 25% of your loan forgiveness amount. So if you have high rent cost or high utility costs, you may be limited in what you can include in the loan forgiveness calculation. This isn’t a this is a interesting slide that we developed, it really looks at the timeline of on the PPP program. And for this example, we use the loan date of April 30. And that’s relatively arbitrary. But we thought it was helpful to illustrate the periods that that we’re looking at. And the first period really looks back from February of 2019. And the period goes through in this case, April 30 2021, you’re covered period, which is is, is the focus in the current year, February to June of 2020. That’s where we look at some of the clawback cost and likely where the eight week period is going to fall. Your payroll calculation cost to establish the loan amount. We’ve seen most banks looking at your 2019 calendar year payroll cost, it can’t. There’s ambiguity in the act, to where you could potentially look at your trailing 12 months, you probably need to work through your through your bank to come up with that if that’s a better number for you. Again, depending on maybe there were bonuses or something that that were paid out, or you had a spike in revenue in a certain period that you want to include that might benefit you. The forgiveness period, in this case would be the end of April through the almost the end of June for those eight weeks to look at the payroll, rent, utilities mortgage interest, the loan has a deferral period of at least six months and up to 12 months. So that’s, that’s a period there where we get out to April of 2021. And then below, there’s the forgiveness. And these are really looking at the clawbacks. So again, I’m going to skip those for right now. But if you have questions later, we can we can jump into that. But the clawback comparisons look to essentially 19 or early 20 in compared to your cost from February to June 2020. Here’s a few screenshots of the tool that we developed to assist companies and individuals in calculating their their amount. So I’m just gonna skip through these, and just kind of gives you an idea of, you know, what your loan amount is, in this example, it’s 748,000. And this next slide, we calculate your your loan forgiveness, again, in this case is 486. You know, a little more complicated when you’re working with, in this case, 50 employees but still an important planning mechanism to consider when you’re when you’re in that eight week period.

09:08
Definition of wages is wages, tips, Commission’s self employment income, guaranteed payments to partners. Those the wage component is what is applied to the $100,000 limitation on an annual basis. The retirement payments group insurance state and local tax assess that’s additive to the 100,000. So that there is potential depending on your your payment structure and what you did with compensation in 2019, that your loan could be greater than two and a half times 1333 or 20,000 and change There is potential that it would be larger related to insurance payments that you may have paid and retirement payments. Again, just a quick overview, I think the only thing I didn’t mention on this slide, the terms of the loan currently is at 24 months and interest rate of 1% with that six to 12 month deferral. So that’s, you know, if you if if there are going to be cost incurred, or cost remaining in the loan, you know, that’s those are the terms that you’d be looking at. From the bank standpoint, and we have the the published application from the SBA, it’s a very simple document, I think there’s three numbers on there, and that’s your monthly payroll, it’s a function of multiplying that number by two and a half. And then your number of employees. And the rest is really just certifying and making verifications. In our opinion, that’s, I mean, that’s enough to get the loan amount, essentially, but it’s extreme simplification of what goes into and the nuance of calculating and managing what your forgiveness amount is. And really, I think that’s, you know, obviously, the most attractive part of this is that you’re going to have a forgiveness component. And while it’s great to maximize your loan, if you don’t understand what the forgiveness will be on the other side, you can be, you can have a loan amount remaining that you would need to repay, the terms aren’t the worst. But if you don’t know going in you, you can be left at a disadvantage. We had a couple other things in here related to the cares act, I’m not sure the employee retention credit applies to this group. So I’m going to skip that and the deferral of payroll taxes. There are a couple items from a business income tax standpoint, in the cares act that I think are worth mentioning. The first related to net operating losses, the limitation to offset income was removed. You can carry back losses now for five years, to the five years preceding the year of the loss. And these were all previously changed under the tax cuts and JOBS Act. And they were brought back temporarily under the cares act. Additionally, for non corporate taxpayer, so your schedule C or LLC partnership type filers, the $500,000 loss limitation was removed. So you can now offset more of your other income with losses in your in your business. I think that was a an interesting one that was expanded here that that’s likely applicable, or could be applicable for this group. And I know that that was kind of it. Just wanted to share the high level items here. And and kind of talk about what what we’re seeing and that high level aspect. And I’m going to stop sharing. And then I think we can dive into some of the questions here that, you know, will provide me and I’m just going to try to run down the list. And, Brian, Brian, let’s

Will Bachman 13:47
start actually with there’s been several questions in the comments. And I think we can get to the specific bank questions in the process maybe later. But let’s start with this question that a lot of people have around eligibility for us as for fraud. The majority of folks on this call who are running an LLC may have no employees or maybe they have one employee. A big question a lot of people have is how does your own compensation How do you count that if you’re not a W two employee of your own LLC? How do you you know, count that as payroll? Can you talk through that that part?

14:28
Sure, sure. So the this is this is one of the areas of the Act that we’re expecting additional guidance on but right now, you know, you would let if your 2019 tax return has been filed. You would look to that as a supporting which I know what the delay to July a lot of that hasn’t happened. The other thing would be providing 1099 as supporting to What your business income was or what your income was during the year? I think it would be beneficial if you have a set of financial statements. I mean, they don’t need to be looked at by anyone. But even if it’s just the QuickBooks report that says, here’s my gross receipts for 2019, here’s the group of 1099 that support that number. And that’s really how you’re going to establish the, the payroll amount for independent contractors, sole proprietors,

Will Bachman 15:36
okay, so, so the payroll amount would be your gross receipts, less any expenses that you deducted from your from your business, and you’d say, okay, that’s my payroll. And however, you know, for folks that are, you know, who paid themselves more than 100,000, in 2019, that anything over 100,000 is excluded. So you’re up to $100,000, which works out to be divided by 12, multiplied by two and a half, you get roughly $20,000 would be, you know, the loan amount you could get.

16:13
That’s right. But you do get to add in the health insurance cost if the if the company paid. And, again, the company, if you can see my air quotes, there is, you know, it becomes skewed a little bit in this scenario, but we do believe you’re going to be able to include your health care costs, as well as contributions to your any retirement fund. So if you made a potentially have the retirement contribution, that could significantly increase your, your loan amount as that is on top of the $100,000. So salary or, or payroll limitation. And does that doesn’t work the same way if you’re not an LLC, or if you’re just a sole proprietor or code independent? Yeah, that’s our expectation. The I mean, I don’t know if you saw on the just to give a little bit of background on the entity side of this the business side, which went live last Friday, Thursday night, at like six o’clock, he SBA released guidance on on some of the applicable things to to the business application. Hopefully, maybe they’ll release guidance today, at some point to give us a little bit of time before the Friday independent contractor opens up. But it’s it’s a very fluid situation and but right now, we believe you it would, it would be very similar for the sole proprietor without an entity that they would, you know, pull their schedule C essentially, or the information that they would have populated on their schedule, see if they had filed in 19. And put that as part of the application, support it with the 1099 or, or other documentation that you have around your income level.

18:14
Ryan, this is Astrid, by the way your webinars last week was super helpful. I just want to thank you and the Mazhar firm, I actually applied Monday for the PPP, but I think I messed up. I am an S corp, and I contribute to a SEP IRA. Should I have included the SEP IRA amount?

18:38
So so so you can include the SEP IRA amount? And that’s going to, you know, potentially really increase your loan, you know, depending on how much you put in there, it could, it could move your loan amount significantly.

18:53
And as well, I didn’t do it. Unfortunately, for those the other ones on the on the web, you know, I’d have a SEP IRA don’t mess up like I did, but in this case, it could have been your annual contribution divided by 12 times two and a half. That’s right. Okay. Thank you.

Will Bachman 19:15
Hey, Ryan. So, guys, I asked everyone to just go ahead and put your questions in the chat. And I’m going to try to facilitate here. So if you have questions, go ahead and put them in the chat. Please stay on mute. I’m going to try to go through the questions in that kind of an organized fashion, which we, which I sent out earlier. Um, so if you don’t mind, so I’m going to go ahead and take Ryan off mute. So if you have additional questions, please put them in sheltering make sure we get through them all in order. So, Ryan, a question. So just want to continue on this eligibility question. Make sure we’ve handled all of the iterations there. So looking to the list that I sent you earlier, I think we’ve covered the question. If you’re If you’re just the independent without an LLC, we had one question of, if you run your business through an LLC and receive a K one, and you perhaps also have one w two employee, when you fill out the application, you should you select the top LLC or eligible self employed individual. Hold on a sec, I gotta unmute, okay.

20:27
Okay, I would select the LLC option. For a flow through LLC partnership, you would include yourself in the wages or, you know, your your self employed income number in that wage amount. But you want to make sure you’re the LLC so you can count your employees as well.

Will Bachman 20:48
Okay, another question that we had Ryan was, you know, sometimes consulting revenue can be a little bit choppy or feast and famine. So when we’re when we’re working on our monthly payroll to ourselves, is the is the answer to this take the full 2019 revenue, less expenses, and then you just divide that by 12. So basically, if you had filed your 2019 tax return, you would take your total net income from that, is that is that correct?

21:18
That’s correct. I think that’s the the most practical and pending any guidance. Again, that’s, that’s gonna be the approach to get get the number for independent contractors.

Will Bachman 21:33
Okay, we had one question of sort along these lines is. So some folks have wondered, well, what if I have a subcontractor that’s not a W two employee, but that is a 1099. So can I count that person’s? What I paid that person as a 1099? Can I count that as payroll of my firm?

21:59
So unfortunately, not the the SBA issued guidance. That was this was either I think this was in the one last Thursday that excluded 1099 due to the fact that they themselves would be able to then apply. And essentially, there would potentially be double counting if an entity or employer included the 1099 and then the 1099 filed on behalf of themselves.

Will Bachman 22:29
Okay. Next question is around. Like I’m, my understanding is that for the paycheck protection program, you do not need to show that your business has suffered from the Coronavirus, you do not need to show that your revenues down or down to zero or anything like that. But could you just compete or confirm that? Uh, correct me. So so one person asked a question about, they think that, you know, their understanding is that your business has to be suffering based on that. Could you could you speak to that a little bit? Who if you’re out if that affects your eligibility?

23:07
So so the eligibility, and it’s it’s one of the questions on the SBA application, you have to make a good faith certification that due to the economic uncertainty related to the covid 19 pandemic, you are requesting the funds to maintain payroll, rent, utilities, or and continue the operation of your business. It’s a it’s a very broad statement. And I think it’s, it’s open to interpretation, you do not need to show a drastic reduction of income, you don’t need to show that, you know, you lost the job or your hours are reduced, but just make the statement that due to the uncertainty you think you need this to continue to operate. So it’s, it’s it’s a broad statement, but you know, I think given the current situation, it’s it may be widely applicable.

Will Bachman 24:16
Okay. We another question, which is, if you’re self employed, but you’re missing some of the 1099 for 2019. So you haven’t yet received all those 1099 are those actually required? So if you know how much you got paid, then also if you just if you bank statements, you know, how much money you received? Are those 1099 required or are those really just like if you prepared your tax returns or if you have a sort of a accounting statement for the year is that sufficient what what what sort of requirements are you seeing?

24:51
So the requirements have varied by the banks? Really, the the SBA has pushed that down to the bank Do the initial due diligence. And as such, there’s, you know, 100 banks and 100 different answers. So, if you don’t have all the 1099, I would suggest bringing your your financial statement or what you have prepared to show your income 1099 is that you have. And then if you have the bank statements or snapshots of deposits, that you’re you’re tying out, I think that’s, that’s going to be your best your best support in the event, the 1099 is haven’t been received. Also, at that point, you probably want to contact the bank and make sure you’re on the same page because they’re ultimately the gatekeeper of moving you into the SBA approval.

Will Bachman 25:54
Okay, great. So first, if you have additional questions about just the eligibility, go ahead and put them in the comments. And I’ll make sure you know, I review all those and hit any more on eligibility. Let’s turn now Ryan to loan forgiveness. So walk us through, particularly as it pertains to independent consultants. My understanding is you get a certain amount of money as a loan. And then from eight weeks following that, they look at how much you paid out in terms of payroll plus, other eligible amounts that include health insurance that may include rent may include mortgage, but particularly for those of us who are running our own LLC. explain the details of how that loan forgiveness portion works.

26:48
Sure, so you’re right, the the loan forgiveness portion is calculated in the the expenditures in the eight week following the loan for payroll, rent, utilities and mortgage interest. And, unfortunately, there’s not much guidance for the independent contractors beyond that, based on the way the act is written, it does, it appears that you would be able to potentially pay yourself the lost income with the loan proceeds and have it qualify for forgiveness. But it is it is surely something that we expect the SBA to, to provide guidance on in hopefully the next day or so before the application period opens. But, but certainly, in the near future. It’s just not clear in the in the language that they that you can actually just pay yourself. If no, no income was earned, it appears to be the intent. But it’s it’s not specifically stated. But we believe that if you’re self employed, if you’re self employed income is included on the payroll costs on the front side, the long calculation, the definition doesn’t change under the forgiveness portion of the act for payroll costs, so we believe that you should be able to count it on both sides. But we it, it’s not clearly stated as such. Okay.

Will Bachman 28:43
Now, in addition to paying yourself. We’ve had several people ask about the other expenses. So if you’re operating out of a home office, and you normally let’s say, deduct a portion of your mortgage as a business expense, can that mortgage interest portion be counted as part of the loan forgiveness?

29:14
Excuse me, we believe so. And we think that what your what the best way to support that is if you have historically been claiming that on tax documents, and have that allocation, that’s going to be your your, your best supporting information. So even if it’s 2018, and you said, you know, 10% of my mortgage is for my art, my home office, you know, showing that you had historically done that I think is going to go a long way in helping them helping the banks, get on board and receive that forgiveness. If all of a sudden now I mean, maybe if your business started in 18 or in 19 you might not have the historical record. But if you had been operating for several years never claim the deduction for home office, and now you want to claim it, you may have a little bit more of a hurdle to go through to do that. So if you’ve been claiming it, I think applying that same ratio is, is what you’re going to want to do. Until we know more from the SBA.

Will Bachman 30:27
Okay, so and that’s, we would also then apply, Brian to you tell the ladies that people may be paying and have deducted in the past? And is a business expense a portion of their utilities or telecom? That’s right, right. Now, you mentioned retirement benefit, what if you, for example, have a SEP IRA, the contributions that you typically make two that Is that considered payroll expense.

30:59
So the the language in the act, and it has not been clarified under the additional guidance as any retirement benefit paid, is included in the payroll costs, so paid by the company? So right now, yes, we believe that your your Sep IRAs, your solo 401k, or single 401 K’s contributions to that should qualify, and they should qualify on both sides of the loan calculation. And the debt forgiveness. There’s, there’s obviously, a significant planning opportunity, if you receive the old, let’s say, the $20,000 loan, and you can pay yourself 15,000 and change for eight weeks prorated $100,000. So you still have a few 1000, your let’s call it $5,000 left of the loan, there may be a conscious planning opportunity to make that as a contribution to your retirement plan. And potentially, if you don’t have the the other costs, potentially offset most, if not all alone. We don’t know if that was the intent in the act. It appears to be open to that. But there could be there could be clarification from the SBA saying, you know, maybe an owner can’t do that. But it would it would be okay for you to make a contribution on behalf of your employees. We don’t know that’s just speculative, as you know, it could be not well received if you’re if you’re taking a loan and benefiting solely benefiting your retirement funds. So there could be clarification from the SBA on that.

Will Bachman 32:58
Okay. Let’s see. So good. Someone had a question on a question or and that asked the question. Is the April 10, date the loan application for self employed independent contractors? Only? I’m sorry, could you just clarify Ryan? What is this April 10 date that’s coming up.

33:25
So the SBA broke the funds out into an April 3 date for essentially entities with employees. And then there is the April 10 date, which opens up to independent contractors and sole proprietors. I think it was a little bit of a way to give the banks a break of everyone rushing in last Friday, even though they still struggled with with setting it up. And I don’t totally flop fault, excuse me fault them because, as I mentioned, the right guidance was issued at six o’clock the night before. So you know, there were a lot of moving parts. But I think that was the the intent was to, to split up the rush into the banks by a week and give the bank some time to digest and start processing. Okay.

Will Bachman 34:23
There’s been a couple questions about if you don’t get the full amount of the loan forgiven, then what does it convert into? And a couple people asked questions that seem to make it think that they believe that was going to be a two year loan, what I thought I had read was that it converts into a 10 year loan. But what happens for the portion of the loan that is not forgiven?

34:48
So the the language in the act itself, says the loan can be no more than 10 years amortization, no more than 4% interest The SBA came out and said that for this program, they are going to target a 24 month amortization 1% interest. So that most likely will be all the terms unless the individual bank opps for a different term, but we think that’s going to be pretty standard of 24 months and 1% interest. Okay.

Will Bachman 35:28
So, oh, and then there was just one more question about loan forgiveness, which was if you’ve prepaid some expenses, like if you prepaid rent for, let’s say, April and May and June, can you now count those as part of the loan forgiveness or is it actually has to be cash out the door in the eight weeks following the time you get the loan,

35:49
so the the rent utilities interest has to be paid and incurred during the eight week period. So you wouldn’t be able to pre pay rent or prepare utilities as you haven’t incurred them yet. One thing that we’ve we’ve talked about is if you are talking about or negotiating with any landlords, the deferral of rent, you may want to plan that outside of the eight week period. In the event that you can you want to maximize your loan forgiveness. So again, just some some thought going in on that side of making sure you’re hitting the take you taking advantage of and achieving the maximum loan loan forgiveness.

Will Bachman 36:39
Okay, and then how when do we actually apply for the loan forgiveness? Ryan? That’s question from Astrid his visits are happening automatically or at the eight week point, do we have to then go File some paperwork? What do you expect to happen there?

36:54
Sure. So so this is this could be a point of differentiation between the independent contractor, sole proprietor and then companies with employees. So I’ll get companies with employees because there’s a clawback period that looks through June 30. Most of them are going to have those conversations about loan forgiveness sometime in July, we anticipate because you have to maintain or restore your headcount and salaries by June 30, to maximize your loan forgiveness amount. For independent contractors, sole proprietors, since their headcount isn’t going to change, it’s likely going to be one in one at the beginning and ending of this, there potentially could be appear an opportunity to settle the loan forgiveness prior to June 30. But that would have to probably be at the bank’s discretion. So the bank is each individual bank has been authorized by the SBA to gather documentation, certify the loan forgiveness amount, and then communicate that back to the SBA. So that will be the process, when the banks determine when that period is is you’d go to the bank, show your payroll cost or your payments to potentially yourself retirement contributions, rent utilities during that eight week period. And then the bank will sign off on on the loan forgiveness amount. Okay, great.

Will Bachman 38:31
So Ryan, I think for the most part, we’ve covered most of the broader questions around eligibility and forgiveness. Could you talk about just based on the conversations you’re having with all your clients, talk about the process of applying for this loan with the banks? Maybe any variation? You’ve seen? Your I’ve heard that, you know, some banks require you to have a checking account and alone already, some maybe just a checking account, some banks might be willing to take on new customers? What does the process look like? And also, have you seen any loans already been approved and dispersed? What should we expect if we’re starting this process of applying for the

39:19
program? Sure. So it is varying by bank to bank. And I think I think most are, most traditional banks are preferring that you have some existing relationship with that bank. Now that varies from a credit standpoint, or, you know, a checking account or business account, but most I think are targeting their existing clients first before opening up. And that’s on the traditional bank. We have seen some, I guess, on traditional banks that have been open to new clients. And and those are I’ve heard some good stories and successes in getting the application. And with those the the application process. It varies from bank to bank. But I think from a standard standpoint, the SBA application is generally been requested. that’s available on sba.gov. It’s it’s a pretty straightforward name, business entity. You know what I bet? If I pull it up here, I can share it. If Willie, do you think that makes sense, I can share it really quick. Sure. See, so this is the application. And it sounds like some people based on their questions may have seen this already. But this is the most recent one. So it is pretty straightforward sole proprietor LLC, independent contractor self employed up here, you’re entity name or potentially your name, ei n or social security number contact information, your monthly payroll times two and a half percent plus an Ei dl amount. And we can talk about that in a minute. So I thought I saw a question on that in the in the list there. This is your loan amount your number of employees, you know, you’re looking to pay off payroll lease utilities, you have to show your ownership. A few few questions that you ever been disbarred or have a felony or indicating your total individuals owning more than 20%. You’re located in the US. If you’re a franchise. Here’s the the statement are just a few authorization statements. The good faith statement that I mentioned earlier. That you’re the current economic uncertainty makes this request necessary. And then you sign at the bottom and there are some instructions and disclosures disclosures at the back. So this generally has been requested and asked for by by the banks, in addition, your payroll documentation. So in this instance, your 1099 or bank statements showing the payments received, along with a ledger or your financial statements showing your gross receipts. Some banks have started to ask for, I would say historical information around the forgiveness cost. So they may ask, I had a smaller bank, they asked for lease agreements, they asked for what was your average utility cost? During 2019? I think those were the two big ones that I saw or lease or interest payments during 2019. You know, looking to have an understanding of what the forgiveness amount could be for that loan. We’ve also seen certifications around health care, retirement payments and state and local tax paid by the employer. So so anything that would support that, as well. And that could be if you had any withholdings on your 1099 historical or estimated payments made in 2019 for state and local taxes, something along those lines would be I think what they’re looking for there from an independent contractor standpoint.

Will Bachman 44:14
Okay, Ryan, another question is sort of a two part question is, in terms of applying for these loans, there was one question about is it going to affect your personal credit? And number two, do you recommend applying to multiple banks? So you can’t get the loan from multiple banks? But should we try to apply to multiple banks if maybe if we have a checking account already with a couple banks or apply to one bank or we have a checking account and one of these newfangled banks that’s taking new customers? What’s your point of view?

44:47
So it’s a it’s a good question on a personal credit, I don’t know if I have the answer, but I do know the SBA or the cares act waive the personal guarantee requirement. As part of the SBA seven law, so you do not need to make a personal guarantee for this loan amount. So maybe it would not impact personal credit, but I don’t I don’t know the answer to that for certain. Okay. As far as applying to multiple banks, I believe there is a question in the form that says you are not you have not applied for this with another lender. So you would not want to apply to multiple banks for this, you would just want to use either your existing bank or some of the other banks that may be opening opening to new new clients, but you would not want to apply to multiple banks.

Will Bachman 45:47
Okay. Let’s, let’s turn now, we have about 14 minutes left and want to make sure we cover a couple other topics. If you have additional questions on the paycheck Protection Program, go ahead and keep putting them in the comments on the Could you talk a little bit about this other program, the Small Business Administration, economic injury, disaster loan or Ei dl? How, what’s the difference between that and the PPP? Can we apply for both? I’ve heard of that. If you apply for the Ei, do you get this $10,000 advance? How does that work? Just talk us through the Ei dl and how is that different?

46:29
Sure. So the idea is, is more a traditional loan. Through the SBA, you can receive funds up to $2 million. It does require a personal guarantee for loans exceeding $200,000. And the the interest rate is a bout 3.75% are generally in that area. It’s administered through the SBA, where the PPP is being administered through the banks, the the excuse me, ei dl is still administered through the SBA. And there is the 25, or excuse me, the $10,000 grant function. So if you apply through the ideal, you may be eligible for a $10,000 grant, which is accelerated money is distributed before the the remaining amount of the loan would be sent. Based on your application, the SBA determines the loan amount and approves you for such amount. You don’t have to take it. But you are, you are offered the amount you don’t calculate it on your own and like the PPP. As the ideal interacts with the PPP, if you’ve previously applied, if you applied for the ideal after January 30, that amount can be rolled into the PPP about so if you have a Ei DL, and you roll it into the PPP program, it would increase your PvP loan amount. On the loan forgiveness side, if you have the if you receive the $10,000 grant from the AI Do you have to reduce your loan forgiveness amount by that $10,000. So you only get $10,000. Free once.

Will Bachman 48:42
So you can’t double dip on that loan forgiveness part. So is it still possible to get a paycheck protection program? loan and an economic injury disaster loan? You can you can up get both.

49:00
You can get both. And I think I heard someone mentioned you cannot apply the cost to the same things essentially. So you can get an Ei dl and a PPP and use it for the same cost. There’s someone’s unclear in unclear uncertainty around this specific area. For example, an individual who may be making more than $100,000 the PPP caps them at 8333 a month. Could you use the Ei dl over to compensate them for that amount over? Maybe it’s not excluded. You could maybe take that position, but it it could be an aggressive position and there could be Future guidance against that.

Will Bachman 50:03
Okay. Maybe I’m a little confused. I thought the ideal loan. I mean, there’s no forgiveness on that loan. Right. So, on the ideal loan, you could presumably use that money to pay yourself after the eight weeks.

50:20
Right. Right. That could be, that could be an option there.

Will Bachman 50:25
Yeah. Okay, so me. Let’s see. Monique asked, she says I applied for the ideal loan last Wednesday. I have not heard anything back. Even about the 10k. Grant. Do you know if there’s a way to check the status Ryan of the ideal?

50:45
I think you just have to wait to hear from the SBA. They’re under extreme processing pressure at the moment. So I know, everything’s been delayed a little bit. But I don’t think there’s a mechanism to follow up other than maybe wait on hold for a few hours. Until someone answers.

Will Bachman 51:07
Okay. Unfortunately, I had a question earlier about in terms of when you should think about applying Ryan? Is is your advice to just apply as soon as possible as soon as your bank opens the application for these things? Or would you recommend people wait for a couple weeks to sort of see how the guidelines start settling out?

51:28
So so there was a number released, I think, yesterday that about 70 billion of the 340 billion had been approved by the SBA. So roughly, what’s that about a fifth of the, the amount, and that’s been approved? I’m not aware of any funds being distributed yet. At least not on any that I’ve touched. And that was as a, you know, let’s say this morning. So the and, and there’s certainly a backlog in the SBA processing those. So I would, I guess it’s, it’s gonna really be a personal and almost a business decision, right. If If you apply, and something comes out later, that changes the cost that you applied with? Are you comfortable that you may have a loan for 24 months at 1%? incurring those costs? I mean, that’s kind of how, with the lack of guidance, that’s kind of what we’ve we’ve been communicating is that, you know, it can become a business decision that, you know, if Monday, if you apply today and Monday, the SBA says, independent contractors can count their retirement costs. You included that you may have a loan in Are you okay with that? Or would you rather have more clarity and wait, you know, for the middle of the month, knowing that there’s a lot of velocity and, you know, the funds are going, although the President and Secretary minuchin I think just said, there may be 250 billion more dollars going into the program? So that’s speculative, but I think it was someone mentioned that yesterday.

Will Bachman 53:22
All right. So these might take a while to get into good. So one, Karen asked a question that might be applicable to a lot of us and I may have answered it earlier, but just want to make sure we all get it is that for folks that were the Revit were their net earnings are over 100,000 a year, the loan amount would be not just 20% of that, but it sounds like the loan amount would be up to 100,000 for payroll, and then you could add on your health insurance expenses and other other sorts of, you know, potentially retirement on top of that 100,000. And then you take 20% of that number. Is that correct? So your loan amount could be something over 20,000?

54:09
Yes, it could be over 20,000, you would take your your so let you the math would be if you have $100,000. payroll, let’s say you have $10,000 in health care $10,000. in retirement, you’d have 120,000 in the bucket divided by 12. You’d have $10,000 of your average monthly times two and a half, you get a $25,000 loan.

Will Bachman 54:37
Okay. Let’s see. And then. And, okay. A question about can you pay off the principal early, so if you do get the loan, and let’s say you decide, hey, I really don’t need this money, can you just go ahead and pay it off in August? There is no prepayment penalty. Okay, so it sounds like it’s pretty, pretty cheap insurance if you don’t know exactly how your business is going to go. Advise maybe to go out and get the loan apply as soon as possible. Take as much as you can. And if it turns out you don’t need it in July, August, September, just paid back and it cost you 1% for three months. Okay, let’s see any, if there’s any questions that haven’t been answered, we’ve gone through most of them here on the sheet that I sent out earlier on the compiled list. Maybe just one question, well, if anybody has a chance and wants to add a question, and I’ve tried to capture most of them about unemployment insurance, so apparently, now as independent contractor or running around independent self employed, you’re eligible for unemployment? If you get the PPP, does that make you ineligible for unemployment insurance? Or is that a state by state thing? What What can you tell us about the unemployment insurance aspect, right?

56:03
Sure. So you’re right, the uninsurance was expanded into self employed individuals and independent contractors provide provided they can provide us that they can certify their inability to work due to a number of factors related to COVID-19. So that so you, you have to make you can’t have others, circumstances potentially affecting you you want you have to certify that it’s due to COVID-19. It does not appear in the in the act, that you cannot receive the PPP and uninsurance unemployment, although we don’t, and we anticipate that to be clarified that you would not be able to receive both it. You know, there there was a rush to get the you know, this was written very, very quickly. And, you know, we think there will be clarification that you cannot receive unemployment if you receive the PPP.

Will Bachman 57:11
Okay. And then I think the final question we have time for Ryan is some, Margaret asks, if you’ve heard of any non traditional banks, that you might suggest that we explore that are offering loans to people that are not current customers. So if you’re, if your current bank is being a little slow, or, you know, even that don’t meet the requirements, are there any non traditional banks that you suggest we check out?

57:41
So So we’ve had clients go to a couple banks? I personally haven’t haven’t had any clients go to these but the lendio.com get devi.com. Cabbage with a k.com. And funding circle.com appear to be open for non current clients in that non traditional bank Avenue. But I haven’t personally gone through the process with any of them. But But anecdotally, I know that they’re open to non non current clients.

Will Bachman 58:26
All right, fantastic. Well, Ryan, I see we’re at the top of the hour we there may be may have been some questions here that we didn’t get to. And I apologize for that. I’m gonna look through all the questions from the chat. And I’ll send any that seems like we didn’t to Ryan. And then Ryan, I don’t know if you have time sometime today. But we’ll you know, we’ll see if we get any, you know, any of those. I’ll pass those to you. If you have a chance to look at them. This This video will put up as soon as I can download the recording. I’ll post it, make it available on the website and send it to everyone here. And also Ryan had a link to his presentation. We’ll send out that presentation as well. So, Ryan, I’m really appreciate you taking time out of your busy day. I know you’re talking to clients all day long. So thank you so much for taking an hour out to speak with us.

59:21
Thank you. Well appreciate the opportunity and thanks everyone who joined. Hopefully, everyone stays healthy and we’ll come on to this soon.

Will Bachman 59:32
Really appreciate it. We have a whole bunch of thank yous here in the chats like dozens of Thank you George and Ilana and Alina mahana David and Kendra Jonathan Beebe and Solomon Pamela. So get a ton will include your some is ours copying info accounting firm and you’re doing great work really appreciate you taking time out for us. So I think we can pause the recording here. Ryan, you can hop off I’m Just gonna make sure I copy the whole chat into word before we before I close the call. And I will get back to everyone who was on and registered today with with this recording as soon as I can get it uploaded as well as Ryan’s presentations. So Oh, go ahead mark, you

1:00:20
folks that got the zoom link that weren’t registered. So just if you know that you just make sure to send out a note so we can include you in that email.

Will Bachman 1:00:29
Yeah, thanks. Thank you Margarita for that. Okay, well, thank you, everyone. I’m going to pause recording here. Thank you, and really appreciate Ryan. Thanks. Well, take care. Bye

Related Episodes

jay-altizer-bain-alum-dallas-tx

Episode
440

Food Industry 101

Jay Altizer

Episode
439

Craig Beal on the Travel Business

Craig Beal

Episode
438

Rob Ristagno on Customer Segmentation

Rob Ristagno

Episode
437

Equity Research

Neeraj Monga