QuickTips: Important Latest Information on COVID-19 Loans for Businesses and Nonprofits
Hello to All,
On behalf of myself – Gregg Bossen – and QuickBooks Made Easy for Nonprofits, we want to extend our warmest wishes that you are staying safe and sane during this trying time. Please know you are in our thoughts. We want to share with you the most current, up-to-date information on COVID-19 loans available to small businesses and nonprofits. Stay safe and wash your hands!
There are currently 3 ways to access funds for your business, most or all of which are completely forgivable. In other words, you don’t have to pay it back.
(1) SBA Economic Injury Disaster Loan Assistance
• This is a loan you apply for at the Small Business Administration (SBA). When you apply, you can check a box saying that you need an emergency advance of $10,000. If you check that box and put in your bank routing and account number when asked, as soon as your application has been assigned to a loan officer with the SBA, the $10,000 will be dropped into your account. Most important of all…
• Once you get the $10,000 and the loan person contacts you, you can simply refuse the loan (I’d go through the application process anyway) at the end saying you don’t like the terms and – YOU KEEP THE $10,000!
• The $10,000 emergency advance would not need to be paid back. Any amount beyond that would need to be repaid.
• I am hoping everyone did this already but if not, DO IT NOW!
• Here is the link: https://covid19relief.sba.gov/#/
• When completing the form:
i. Estimate gross revenues from 1/31/19 to 1/31/2020 (in other words don’t worry about getting an exact number – it doesn’t matter)
ii. Unless you sell inventory – your Cost of Goods Sold is ZERO
iii. NONPROFITS: Make the agent the Board Chair
iv. Print the confirmation page!
• To those who have already completed the form:
i. I completed mine a week ago and haven’t heard anything yet – no one has that I know of so don’t worry. You can always call with the confirmation number to find out the status.
(2) Paycheck Protection Program (PPP)
This MUST be done through a financial institution that gets the money from the SBA.
• This is a forgivable loan (equal to 2.5 times your monthly payroll) through a financial institution funded by the SBA. Forgivable! Which again means you may be able to keep the money.
• Everyone should try for this loan. Every business and nonprofit in the country is in a race for these limited funds. You need to:
i. APPLY AT MULTIPLE BANKS (NO HARM IN THIS FOR NOW). FIND BANKS THAT YOU CAN APPLY TO (ASAP)!!!
1. Start with the bank you have your business checking account with. You may run out of luck here.
a. Is Bank of America your bank? – You are lucky; they were the first one up and running. You have to do it online – sign into your account.
b. If you use a small community bank – you may also be lucky. Call them up.
c. Do you use Wells Fargo? You are not lucky! The Fed is still mad at them for their corrupt practices a few years back and has capped the amount they can lend to their customers at a lower amount than other big banks. They opened a preliminary application inquiry on Saturday, April 4th for their current business customers. Within 24 hours the amounts requested had exceeded the cap so they closed it the next day, Sunday. If you were lucky enough to get that inquiry submitted you MAY be able to get a loan from them. They don’t give confirmation that this preliminary inquiry has been received, so who knows when or if you will hear from them. If you missed the tiny window, you are out of luck with them. For now at least.
2. There are a few institutions that are willing to lend to businesses that are not currently their customers. Click this link for a list of all eligible PPP lenders: https://www.sba.gov/paycheckprotection/find
3. Do this one for sure: One of these is Cross River Bank that is partnering with a company called Divvy. I like this option because even though the application isn’t up yet, you can get on a list and they will e-mail you as soon as the application is up, which is supposed to be today! Divvy may send you marketing stuff and they actually offer a cool credit card management APP that syncs with QuickBooks, but don’t worry about that now. The word is that once the Application is up and you complete it you can be approved in 72 hours! So go here and fill out an inquiry NOW: https://getdivvy.com/covid-19/sba-ppp-loans/demo/
• Who can apply?
i. Small Businesses (under 500 employees)
ii. Nonprofits (under 500 employees)
iii. Independent contractors (under 500 employees). Some will say that you can’t apply unless you have employees. The law says otherwise so – APPLY! Worst thing that happens is you get denied. It doesn’t hurt to try!!!
• How much is the Loan for?
o The loan amount you request is equal to 2.5 times your average monthly P/R cost
o P/R cost means:
Gross Wages Paid (Including tips)
Health Insurance paid by Company
Retirement Contributions paid by Company
Amounts paid to 1099 contractors (Some will say this is wrong but the law says otherwise so – add it in! Worst that happens, the bank takes it out.)
o Average Monthly Payroll means during a 12 month period. Which 12 month period? Who knows? The law says 2/1/2019 to 1/31/20 BUT some banks are saying it’s the year of 2019, some are saying it’s the 12 months ending March 12th, or March 15th, and even the date of the loan. Let the bank tell you. In the initial application just pick something and go with it. This is just an application.
• The loan will be totally forgiven provided workers remain in employment for the 8 weeks after the loan is given (at least 75% of headcount) and may still be partially forgiven as you drop below that amount.
• The portion forgiven is equal to payments made for 8 weeks for
o PAYROLL PAYMENTS
o INTEREST PAYMENTS ON MORTGAGES
o RENT AND UTILITIES
• Notice how the loan amount covers payroll for 2.5 months but should be spent within 2 months. Easy to do. Use it to pay employees for 2 months and take the other ½ month of funds and apply it to rent/utilities etc…
• Also notice that there is no required proof that you actually need the money.
(3) Employee Retention Credit
• This is a refundable credit that you use to lower your payroll tax payments. It is refundable. This means that you use the credit each quarter to lower your payroll tax payments and any excess they mail you a check for. More free money!
• It is available to businesses and nonprofits that either:
o Have been forced to close or scale back by a governmental agency (like a bar or restaurant)
o Have seen a 50% decline in gross receipts for a 2020 quarter as compared to that same quarter in 2019
• The credit is for 50% of wages paid from March 12 through December 31, 2020
• The credit cannot be applied to the amount wages of $10,000 (So the maximum credit is $5,000 per employee)
• The credit can be used to offset payroll taxes with any excess refunded (this gets done on the 941 form your payroll service completes)
• You can get this money in advance of Payroll by completing a FORM 7200: https://www.irs.gov/pub/irs-pdf/f7200.pdf
• IMPORTANT: If you choose to use this credit, then you can’t get the Paycheck Protection Loan above. So you will want to calculate which one is better. For now, it’s best to apply for the PPP above. It’s usually better and you will have time before you get the loan to see if this credit will yield a better result. If it does, just refuse the loan.
That’s it for now! If you do nothing else after reading this, at a minimum:
• Sign up for the SBA $10,000 at https://covid19relief.sba.gov/#/
• Sign up to be notified by Divvy to apply for the PPP loan at Cross River Bank. Go here https://getdivvy.com/covid-19/sba-ppp-loans/demo/
Stay safe and wash your hands!