SBA PPP and EIDL Small Business Loans (some money is forgivable)

[cgr]

Haven't been following PPP updates, but is it correct that if you take a 24 week period, owner compensation is capped at $20,833 and employee compensation is capped at $46,154?

Correct.

Can you take out a bigger loan or that's still capped at 2.5x salary (capped at 100K)?

Still capped at 2.5X

Any other major updates?

You can apply for forgiveness before your covered period is over, but if you had any wage reductions, they'll prorate it over the entire covered period and deduct it from your forgiveness.

[AsherO]

Haven't been following PPP updates, but is it correct that if you take a 24 week period, owner compensation is capped at $20,833 and employee compensation is capped at $46,154?
Can you take out a bigger loan or that's still capped at 2.5x salary (capped at 100K)?
Any other major updates?

@Dan

The loan amount and forgiveness amount are calculated differently. For PPP, loan amount is 2.5/12 of 2019 payroll (revenue for IC/SE/1099) (besides for a few exceptions like corporations that started operating in early 2020, seasonal businssses etc).

Forgiveness is calculated based on 8 or 24 week period, depending on when you got your loan would determine when these periods start. You have to expend at least 60% of loan amount on payroll, and the rest on qualifying expenses for full forgiveness.

With PPP, you cannot get a higher loan amount than the amounts you cited per employee. With EIDL you can borrow up to $150k if you have $300k+ in 2019 revenue.

[SwellCindy]

Am I the only one finding this clause murky?

"7. Paying down (including regular installment payments) or paying off loans provided, or owned by another Federal agency (including SBA) or a Small Business Investment Company licensed under the Small Business Investment Act. Federal Deposit Insurance Corporation (FDIC) is not considered a Federal agency for this purpose; "

If, for ex, I have a business LOC from say Citibank, and was unable to make the monthly installment payments during Apr - June, can I use the funds from an EIDL loan to bring my payments up-to-date? Is it considered FDIC or not? What about business CC payments?

[cgr]

Am I the only one finding this clause murky?

"7. Paying down (including regular installment payments) or paying off loans provided, or owned by another Federal agency (including SBA) or a Small Business Investment Company licensed under the Small Business Investment Act. Federal Deposit Insurance Corporation (FDIC) is not considered a Federal agency for this purpose; "

If, for ex, I have a business LOC from say Citibank, and was unable to make the monthly installment payments during Apr - June, can I use the funds from an EIDL loan to bring my payments up-to-date? Is it considered FDIC or not? What about business CC payments?

Here's something that I saw floating around- I didn't put it together but it gives you some perspective (it's in reference to the term long term debt the SBA uses as a proceed use restriction):

1. You CAN make regular mortgage/CC payments.
2. You CAN catch up on missed payments since 1/31.
3. You CAN pay off debt which was charged to your CC since 1/31.
4. You CANNOT pay down/pay off an old mortgage.  You CAN pay a balloon payment which became due now.
5. I’ve seen  several experts state that CC debt is, by definition, “short term” debt even if you’ve had the debt for year. That would make it kosher.  But other experts  (I think most), say the opposite.   


Obviously the term you here is in reference to the entity receiving the loan.

[Avs175]

I am a self employed new business and I got a ppp loan based on "jan & feb 2020" income. Will this loan be forgiven? I'm reading online that forgiveness goes by 2019, so how does it work for new businesses?

[cgr]

I am a self employed new business and I got a ppp loan based on "jan & feb 2020" income. Will this loan be forgiven? I'm reading online that forgiveness goes by 2019, so how does it work for new businesses?

I've emailed the SBA countless times about this because they said they'll publish guidance on how forgiveness will work "soon"- no response yet and when I call the reps tell me email is the only way...

[Avs175]

I've emailed the SBA countless times about this because they said they'll publish guidance on how forgiveness will work "soon"- no response yet and when I call the reps tell me email is the only way...

Thank You

[Avs175]

So frustrating!

[@mike]

I own a single family rental property and manage it on my own. My accountant says I'm not eligable for PPP. Needless to say, it wasn't the answer I was looking for.

Anyone here know otherwise?

[cgr]

I own a single family rental property and manage it on my own. My accountant says I'm not eligable for PPP. Needless to say, it wasn't the answer I was looking for.

Anyone here know otherwise?

He's right. Passive income entities are on the ineligible SBA list for PPP. You can get EIDL though.

[Hjay]

Before I ask anything I just want to say a huge THANK YOU for all the clear concise info @cgr has been posting here & responding to everyone’s questions, it’s really a model of the way we should all be helping each other on this forum. Truthfully it’s above & beyond. Really appreciated.

Wondering if anybody can help me construct this. I’ve been following this thread since the beginning & at the same time been somewhat following the updates about unemployment. Here’s the scenario - husband & wife both work for the same employer. Employer just pays the wife both of their pay on a 1099. Covid hits, wife applies for PPP & gets a loan based off her 1099 of 2019. Due to all the ambiguity in the beginning employer says I’ll just pay the husband the next check or two in case you need to prove financial uncertainty (yes work did go drastically down for those 2-3 months but there was still a little work & husband was continuing to work as well). PPP gets approved & funded may 6-8. If they use as payroll over a 24 week period they’ll be able to get full forgiveness be’h.

Can the wife claim unemployment? & for what dates?
Can the husband claim unemployment (he got 2 checks in the past 2 months)? & for what dates?
Is this too sketchy?
Is it easy to apply for unemployment retroactively?

Really appreciate any insight or help with this

[TBD]

The chart give you the basics- Microloans generally have the shortest term but also has the smallest maximum loan...

You'd also want something with no prepayment penalty if you just want the loan for the 6 months of free money and then pay it all off once you need to start footing the bill...

Question- if I get a 50k microloan with a 6 month term, does that mean the SBA just gave me 50k straight up?

I GUESS 7 MONTHS LOANS ARE ELIGIBLE.....
https://www.sba.gov/sites/default/files/2020-06/5000-20030.pdf


Intermediaries are prohibited from considering the availability of Section 1112 payments in establishing the repayment schedule or the loan term of any microloan. The repayment schedule and the loan term must be established as if no section 1112 payments would be made.  Intermediaries may not intentionally shortenloan termsso that Section 1112 payments pay all or a substantial portion of the loan principal.SBA expects Intermediaries to establish the loan maturity for each microloan consistent with the Intermediary’s microloans approved prior to the COVID-19 emergency.


In addition, Intermediariesare prohibited from underwriting any new microloanthrough September 27, 2020 with a maturity of six months or less.  SBA will be making the section 1112 payments on new loans for six months and, if the new loan has a maturity of six months or less, SBA would not be providing just short-term debt relief to the borrower, but would effectively be providing a grant to the borrower, which is not the purpose of section 1112.

[Baglach]

Any bank that i dont have to verify that im a resident in the US

[cgr]

Before I ask anything I just want to say a huge THANK YOU for all the clear concise info @cgr has been posting here & responding to everyone’s questions, it’s really a model of the way we should all be helping each other on this forum. Truthfully it’s above & beyond. Really appreciated.

Wondering if anybody can help me construct this. I’ve been following this thread since the beginning & at the same time been somewhat following the updates about unemployment. Here’s the scenario - husband & wife both work for the same employer. Employer just pays the wife both of their pay on a 1099. Covid hits, wife applies for PPP & gets a loan based off her 1099 of 2019. Due to all the ambiguity in the beginning employer says I’ll just pay the husband the next check or two in case you need to prove financial uncertainty (yes work did go drastically down for those 2-3 months but there was still a little work & husband was continuing to work as well). PPP gets approved & funded may 6-8. If they use as payroll over a 24 week period they’ll be able to get full forgiveness be’h.

Can the wife claim unemployment? & for what dates?
Can the husband claim unemployment (he got 2 checks in the past 2 months)? & for what dates?
Is this too sketchy?
Is it easy to apply for unemployment retroactively?

Really appreciate any insight or help with this

Thanks for the kind words.

-You didn't mention which state you're located in, but wife can claim UI in any week where she earned less than the states partial unemployment allowance. While on PPP it's a bit complicated to say definitively when she earned what, but dividing PPP funds over either 24 weeks (covered period) or 2.5 months (funding amount) could work.
-Same rules apply to husband- remember receiving payment is not the same as earnings- getting a check in May for work done in Jan is not earnings, while not getting a check in May but earning $ to be paid at a later date is earnings.
-If you follow the UI rules in your state there's nothing sketchy about it.
-Depends on the state. NY- very easy, NJ- not so much.

These questions might be better suited to the UI thread.

[cgr]

Any bank that i dont have to verify that im a resident in the US

That's a default clause to get a PPP loan.

[sprint]

Funny situation. 1065 Partnership owned by S-Corp (owned by the only active partner who receives a base salary, and not just a distribution). S-Corp received PPP predicated on the portion of salary paid in 2019 to the S Corp as "payroll". Can the partnership also receive PPP based on the same? Or is that a "double dip"? If yes, are the non active partners (distribution only) eligible to receive funds from the PPP loan if they would start on salary now?

[cgr]

Funny situation. 1065 Partnership owned by S-Corp (owned by the only active partner who receives a base salary, and not just a distribution). S-Corp received PPP predicated on the portion of salary paid in 2019 to the S Corp as "payroll". Can the partnership also receive PPP based on the same? Or is that a "double dip"? If yes, are the non active partners (distribution only) eligible to receive funds from the PPP loan if they would start on salary now?

If they have a K-1 1065 they can receive PPP (although some banks aren't so eager). Both partners must apply together for the partnership as a whole- not based on their individual K-1s.
It's not double dipping as in the first case you're getting against payroll, while in the second against distributions that you pay taxes on (key difference between this and K-1 1120S).

Note that each owner applying for PPP is limited by 12/2.5 compensation with the 100k cap across all entities for a 24 week period (8/52 if going with 8 weeks). You can still take advantage of this by getting multiple loans and only using 60% of funds in each entity for owner comp, and then use the rest on rent/utilities to up your total forgiveness.

They don't need to take a salary- they need to follow the owner compensation limit rules.

[sprint]

If they have a K-1 1065 they can receive PPP (although some banks aren't so eager). Both partners must apply together for the partnership as a whole- not based on their individual K-1s.
It's not double dipping as in the first case you're getting against payroll, while in the second against distributions that you pay taxes on (key difference between this and K-1 1120S).

Note that each owner applying for PPP is limited by 12/2.5 compensation with the 100k cap across all entities for a 24 week period (8/52 if going with 8 weeks). You can still take advantage of this by getting multiple loans and only using 60% of funds in each entity for owner comp, and then use the rest on rent/utilities to up your total forgiveness.

They don't need to take a salary- they need to follow the owner compensation limit rules.

Will Kabbage or any of the other big ones do this?

[cgr]

Will Kabbage or any of the other big ones do this?

I know someone who applied with a K-1 1065 at BlueVine and they didn't want to process his application because they didn't know how to handle a K-1. I find it hard to believe because it's clearly allowed, but that's the answer he got.

At this point just apply everywhere you can and hopefully someone will accept. Not much time left.
Loan will be based on 2.5X of line 14 for individual K-1.

[TBD]

The chart give you the basics- Microloans generally have the shortest term but also has the smallest maximum loan...

You'd also want something with no prepayment penalty if you just want the loan for the 6 months of free money and then pay it all off once you need to start footing the bill...

Question- if I get a 50k microloan with a 6 month term, does that mean the SBA just gave me 50k straight up?

https://www.sba.gov/partners/lenders/microloan-program/list-lenders

It seems that micro loans are not from traditional lenders, only some non-profits