There are substantial loan resources available for the self-employed and employers with fewer than 50 employees.
The U.S. Small Business Administration (SBA) opened up their Payroll Protection Program (PPP) today. We found that the SBA website, The U.S. Chamber Small Business Guide and Checklist, and the U.S. Treasury PPP Information Sheet for Borrowers offer substantial loan resources for you. The following updated commentary from Larry Brown, CPA is also helpful.
If you need assistance, we recommend to be in contact with your local SBA authorized bank. Please contact your advisor if you have any additional questions.
Additional Information Regarding the Payroll Protection Program (PPP)
By Larry Brown, CPA
I’d like to share some information we learned over the last couple of days from a variety of clients and directly from bankers and senior bankers. I know that the process has seemed very disorganized, but the SBA has undertaken a herculean task in a very short time. The bankers are doing the best they can, but there is a lot of information to process and get organized to offer these loans in a very tight timeline. There is and will continue to be confusion, but they are working very hard to get these programs available for you. You may likely find that staff isn’t adequately trained. Please recognize that the people at the banks are doing the best they can under very stressful circumstances. They are still getting details on how to administer the plan less than 24 hours before they are scheduled to start offering these loans to the public.
Unfortunately, 
the news is reporting there will be significantly more demand for these loans than funds allocated. Based on discussions with clients, we believe this is true. According to the senior bankers, the SBA believes they will be undersubscribed. We ultimately do not know which will be true but believe the prudent course is to submit the applications as soon as possible to give yourselves the greatest likelihood of success in securing the funds.
Based on information released this morning, it will be left to the banks to define eligible payroll costs. We have heard from some banks that they will be looking solely at payroll reports, but the definition in the law is more broad. We are also finding that some banks are assuming that the $100,000 cap per employee is based on all eligible expenses for that employee, but again, we read the law as the compensation is limited to $100,000 and the eligible benefits can be added. You can also read the law as the amount for eligible payroll expenses includes payments to independent contractors. As a result, we are recommending clients assemble the information in a manner that will allow them to quickly calculate the payroll figure based on their specific banks instructions. We want you to proactively be ready to submit your application when the floodgates open. Our hope is that between now and when your bank starts accepting applications, they will have provided you with clarity on how they will be calculating payroll.
Some additional information:
- Submit one application for each separate EIN and get one loan for each of your entities that qualify. The bankers believe this is correct, and believe that your separate applications will be aggregated only to make sure the total loaned to the group does not exceed $10 million.
- You get to count up to $100,000 per employee. You do not get zero because an employee made more than that. Note the clerks are likely to get confused by benefits especially where the employee and employer share the medical insurance cost, and where there is a 401(k) with employee and employer portions.
- We are still not clear as to what 12 month period to measure. We believe you should use calendar year 2019 because those numbers will be easily be supported by W-2s, W-3’s and calendar payroll reports. If your payroll is much larger by including a month or two or the first quarter of 2020 compared to 2019, you might get a bigger loan, but might have a harder time with if the clerk does not understand your numbers.
- Small businesses and sole proprietors can apply today - Friday, April 3rd. Independent contractors (who are sole proprietors) and the self-employed (generally sole proprietors, working partners or LLC members and farmers) are supposed to wait until April 10. This guidance is contradictory on its face. We believe the government is prioritizing S and C corporations who generally employ more people and where “payroll is easier” to prove and understand. A partnership with big payroll can apply April 3rd without counting its partner self-employment income and leave money on the table, with partner self-employment income and risk getting put on the bottom of the pile, or wait until April 10 and risk being too late.
- Steve Mnuchin indicated that if the funds run out, he will go back to congress to request more funds where this program has broad based bipartisan support.
- Employers may not claim both the Employee Retention Credit and receive a Payroll Protection Loan.
- Your best bet for obtaining this loan is through your existing bank. Many bankers are taking the stance right now that they are only offering these loans to.
If you have any questions, please reach out to me at 805-708-3812. I will do my best to help, but any guidance issued by your bank is what should be relied upon in the event it contradicts information I have provided.
Larry Brown, CPA
Nasif, Hicks, Harris & Co, LLP
104 West Anapamu Street Suite B
Santa Barbara, CA 93101
Office: (805) 966-1521 ext.123
Direct: (805) 963-5105
Fax: (805) 963-1780
E-mail: lbrown@nullnhhco.com
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