Author Topic: SBA PPP and EIDL Small Business Loans (some money is forgivable)  (Read 536106 times)

Offline dovy2

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Re: SBA PPP and EIDL Small Business Loans (some money is forgivable)
« Reply #980 on: May 10, 2020, 12:14:56 AM »
random question. was approved for 60k loan at 2.5 for 30yrs, differed first 12 months.
don't really have any specific need for it right now... an idea popped up in my head, and want to hear others' thoughts.
what do you think about using the money to buy a minivan (until now we've been leasing).. would that be allowed according to the rules?
we've been having a hard time getting approved (most banks dont like biz lease applications)

Offline AsherO

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Re: SBA PPP and EIDL Small Business Loans (some money is forgivable)
« Reply #981 on: May 10, 2020, 12:38:44 AM »
random question. was approved for 60k loan at 2.5 for 30yrs, differed first 12 months.
don't really have any specific need for it right now... an idea popped up in my head, and want to hear others' thoughts.
what do you think about using the money to buy a minivan (until now we've been leasing).. would that be allowed according to the rules?
we've been having a hard time getting approved (most banks dont like biz lease applications)

Sounds like EIDL loan, well done.

Keep in mind if you get a PPP the EIDL gets rolled into that and you have to repay it within 2 years.
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Offline TBD

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Re: SBA PPP and EIDL Small Business Loans (some money is forgivable)
« Reply #982 on: May 10, 2020, 01:12:31 AM »
random question. was approved for 60k loan at 2.5 for 30yrs, differed first 12 months.
don't really have any specific need for it right now... an idea popped up in my head, and want to hear others' thoughts.
what do you think about using the money to buy a minivan (until now we've been leasing).. would that be allowed according to the rules?
we've been having a hard time getting approved (most banks dont like biz lease applications)
On What was based the amount of the loan? When did you apply? When did you get approved? Which docs did they require? Thanks

Offline TBD

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Re: SBA PPP and EIDL Small Business Loans (some money is forgivable)
« Reply #983 on: May 10, 2020, 01:14:21 AM »
I think it's still up in the air. Did the SBA release their IFR on forgiveness? If it hasn't come out yet, things might still change.

My guess is, just like approval for the loan, that it will vary by lender. Bluevine is making me hopeful I can get 100% forgiveness if 25% is for qualifying expenses (rent/utilities etc)

https://bluevine.zendesk.com/hc/en-us/articles/360042679731-Loan-Forgiveness-Sole-Proprietors
I didn't see anywhere that Schedule C won't be able to use the 25% for other expenses, they only limited the payroll amount to 8/52 but other expenses if you have than it is forgivable.

Offline cgr

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Re: SBA PPP and EIDL Small Business Loans (some money is forgivable)
« Reply #984 on: May 10, 2020, 01:18:30 AM »
I didn't see anywhere that Schedule C won't be able to use the 25% for other expenses, they only limited the payroll amount to 8/52 but other expenses if you have than it is forgivable.
The issue is that 8/52 is only 74%. That leaves you with 1% to 26% unforgivable.

Offline TBD

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Re: SBA PPP and EIDL Small Business Loans (some money is forgivable)
« Reply #985 on: May 10, 2020, 01:23:54 AM »
The issue is that 8/52 is only 74%. That leaves you with 1% to 26% unforgivable.
In the link from Bluevine ther is no mention about the 1%. It says 8 weeks of payroll (which is 73.85%) +25% for other expenses

Offline beeweegee

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Re: SBA PPP and EIDL Small Business Loans (some money is forgivable)
« Reply #986 on: May 10, 2020, 01:28:07 AM »
In the link from Bluevine ther is no mention about the 1%. It says 8 weeks of payroll (which is 73.85%) +25% for other expenses
The issue is that those who don't have any other expenses only reach 73.85%, below the 75% threshold...

Offline AsherO

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Re: SBA PPP and EIDL Small Business Loans (some money is forgivable)
« Reply #987 on: May 10, 2020, 06:34:26 AM »
I didn't see anywhere that Schedule C won't be able to use the 25% for other expenses, they only limited the payroll amount to 8/52 but other expenses if you have than it is forgivable.

I’m confused by this because for other (more typical?) PPP scenarios, e.g. S-corp or LLC with W2 employees, they have to spend at least 75% of the loan amount on payroll, why is this different for sole proprietors?

At some point I was under the impression that if a business spent the “at least75%” on payroll, the entire loan would be forgiven, was I mistaken?
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Online yitz1000

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Re: SBA PPP and EIDL Small Business Loans (some money is forgivable)
« Reply #988 on: May 10, 2020, 09:03:33 AM »
Some are saying that as part of the sole prop Schedule C owner compensation replacement rule, you are allowed to reach 100k before having to worry about other expenses. So if your schedule C is less than 100k you can give yourself a "raise" in the 8 week period to allow for forgiveness on the entire loan amount regardless of what it's spent on.

Offline TBD

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Re: SBA PPP and EIDL Small Business Loans (some money is forgivable)
« Reply #989 on: May 10, 2020, 09:13:04 AM »
The Administrator, in consultation with the Secretary, has determined that it is appropriate to limit the forgiveness of owner compensation replacement for individuals with self-employment income who file a Schedule C to eight weeks’ worth (8/52) of 2019 net profit. This is most consistent with the structure of the Act and its overarching focus on keeping workers paid, and will prevent windfalls that Congress did not intend. Congress determined that the maximum loan amount is based on 2.5 months of the borrower’s payroll during the one-year period preceding the loan. Congress also determined that the maximum amount of loan forgiveness is based on the borrower’s eligible payments—i.e., the sum of payroll costs and certain overhead expenses—over the eight-week period following the date of loan disbursement. For individuals with self-employment income who file a Schedule C, the Administrator, in consultation with the Secretary, has determined that it is appropriate to limit loan forgiveness to a proportionate eight-week share of 2019 net profit, as reflected in the individual’s 2019 Form 1040 Schedule C. This is because many self-employed individuals have few of the overhead expenses that qualify for forgiveness under the Act. For example, many such individuals operate out of either their homes, vehicles, or sheds and thus do not incur qualifying mortgage interest, rent, or utility payments. As a result, most of their receipts will constitute net income. Allowing such a self-employed individual to treat the full amount of a PPP loan as net income would result in a windfall. The entire amount of the PPP loan (a maximum of 2.5 times monthly payroll costs) would be forgiven even though Congress designed this program to limit forgiveness to certain eligible expenses incurred in an eight-week covered period. Limiting forgiveness to eight weeks of net profit from the owner’s 2019 Form 1040 Schedule C is consistent with the structure of the Act, which provides for loan forgiveness based on eight weeks of expenditures. This limitation will also help to ensure that the finite appropriations are directed toward payroll protection, consistent with the Act’s central objective. Finally, 75 percent of the amount forgiven must be attributable to payroll costs for the reasons specified in the First PPP Interim Final Rule.



Offline AsherO

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Re: SBA PPP and EIDL Small Business Loans (some money is forgivable)
« Reply #990 on: May 10, 2020, 09:15:41 AM »
The Administrator, in consultation with the Secretary, has determined that it is appropriate to limit the forgiveness of owner compensation replacement for individuals with self-employment income who file a Schedule C to eight weeks’ worth (8/52) of 2019 net profit. This is most consistent with the structure of the Act and its overarching focus on keeping workers paid, and will prevent windfalls that Congress did not intend. Congress determined that the maximum loan amount is based on 2.5 months of the borrower’s payroll during the one-year period preceding the loan. Congress also determined that the maximum amount of loan forgiveness is based on the borrower’s eligible payments—i.e., the sum of payroll costs and certain overhead expenses—over the eight-week period following the date of loan disbursement. For individuals with self-employment income who file a Schedule C, the Administrator, in consultation with the Secretary, has determined that it is appropriate to limit loan forgiveness to a proportionate eight-week share of 2019 net profit, as reflected in the individual’s 2019 Form 1040 Schedule C. This is because many self-employed individuals have few of the overhead expenses that qualify for forgiveness under the Act. For example, many such individuals operate out of either their homes, vehicles, or sheds and thus do not incur qualifying mortgage interest, rent, or utility payments. As a result, most of their receipts will constitute net income. Allowing such a self-employed individual to treat the full amount of a PPP loan as net income would result in a windfall. The entire amount of the PPP loan (a maximum of 2.5 times monthly payroll costs) would be forgiven even though Congress designed this program to limit forgiveness to certain eligible expenses incurred in an eight-week covered period. Limiting forgiveness to eight weeks of net profit from the owner’s 2019 Form 1040 Schedule C is consistent with the structure of the Act, which provides for loan forgiveness based on eight weeks of expenditures. This limitation will also help to ensure that the finite appropriations are directed toward payroll protection, consistent with the Act’s central objective. Finally, 75 percent of the amount forgiven must be attributable to payroll costs for the reasons specified in the First PPP Interim Final Rule.

Thanks for the quote and the highlights, source for context?
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Offline AsherO

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Re: SBA PPP and EIDL Small Business Loans (some money is forgivable)
« Reply #991 on: May 10, 2020, 09:16:20 AM »
Some are saying that as part of the sole prop Schedule C owner compensation replacement rule, you are allowed to reach 100k before having to worry about other expenses. So if your schedule C is less than 100k you can give yourself a "raise" in the 8 week period to allow for forgiveness on the entire loan amount regardless of what it's spent on.

That would be nice. My guess is some lenders might let this fly (maybe due to their ignorance).
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Offline TBD

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Offline Hjay

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Re: SBA PPP and EIDL Small Business Loans (some money is forgivable)
« Reply #993 on: May 10, 2020, 10:04:23 AM »
Was there a way to get the loan for lower than what you’re eligible for? Meaning if as a sole prop I can only get 75% of the total (8/52) forgiven for payroll (owner comp replacement) then the remaining 25% I’d rather not get at all, because I’m not sure I’ll have documented expenses that they will be looking for.

Offline AsherO

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Re: SBA PPP and EIDL Small Business Loans (some money is forgivable)
« Reply #994 on: May 10, 2020, 10:55:12 AM »
Was there a way to get the loan for lower than what you’re eligible for? Meaning if as a sole prop I can only get 75% of the total (8/52) forgiven for payroll (owner comp replacement) then the remaining 25% I’d rather not get at all, because I’m not sure I’ll have documented expenses that they will be looking for.

Take 100% and repay 25% ASAP? Or put it in a high-yield savings account and make a bit?
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Offline Hjay

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Re: SBA PPP and EIDL Small Business Loans (some money is forgivable)
« Reply #995 on: May 10, 2020, 09:53:31 PM »
Take 100% and repay 25% ASAP? Or put it in a high-yield savings account and make a bit?

True. But with all this confusion about only being able to use 75% for payroll & 8/52 not actually being 75% it would be a lot easier to just get a loan for 8/52 

Offline TBD

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Re: SBA PPP and EIDL Small Business Loans (some money is forgivable)
« Reply #996 on: May 11, 2020, 12:07:10 AM »
True. But with all this confusion about only being able to use 75% for payroll & 8/52 not actually being 75% it would be a lot easier to just get a loan for 8/52
Its a little confusing.. The max a self employed can receive from PPP is $20K. 25% of it is $5K. 1% Interest A YEAR on $5k is $50. So what exactly is your concern? That you will have to pay $11.32 interest??????

Offline beeweegee

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Re: SBA PPP and EIDL Small Business Loans (some money is forgivable)
« Reply #997 on: May 11, 2020, 01:38:27 AM »
I think one of the concerns is not hitting the 75% (only getting to 74%) if you don't have other expenses. Meaning why take a larger loan you don't need and won't get forgiven if it will cause you problems with 8/52?

Offline AsherO

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Re: SBA PPP and EIDL Small Business Loans (some money is forgivable)
« Reply #998 on: May 11, 2020, 06:47:44 AM »
I think one of the concerns is not hitting the 75% (only getting to 74%) if you don't have other expenses. Meaning why take a larger loan you don't need and won't get forgiven if it will cause you problems with 8/52?

The 8/52 rule contradicts the “you have to spend 75% on payroll for forgiveness” law (I’m sure  it’s written differently in legalese but you know what I mean). It’s bad enough they’re only forgiving 73-74% for independent contractors, but they can’t make a rule like that and then deny forgiveness, it will piss too many people off and is defies the whole spirit of the law (as well as it’s letter as indicated above).
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Offline beeweegee

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Re: SBA PPP and EIDL Small Business Loans (some money is forgivable)
« Reply #999 on: May 11, 2020, 09:23:16 AM »
The 8/52 rule contradicts the “you have to spend 75% on payroll for forgiveness” law (I’m sure  it’s written differently in legalese but you know what I mean). It’s bad enough they’re only forgiving 73-74% for independent contractors, but they can’t make a rule like that and then deny forgiveness, it will piss too many people off and is defies the whole spirit of the law (as well as it’s letter as indicated above).
Agreed. So you think that there will end up being forgiveness even if it's 73-74%? Or do you think they won't be strict on 8/52? My accountant thinks the latter, even though they are writing the opposite. Who knows...