It seems like one of the conditions of the new stimulus package is that small business maintain their workforce. Does anyone think that means business who've recently laid off employees will bring some or all of those employees back?

I can't imagine that is an expectation

You're going to borrow 2.5x your average monthly payroll, rent and utilities. Then 8 weeks later you're going to show you used those funds to pay for payroll, rent and utilities during these difficult times. IMO, no you don't have to rehire Sally, Joe and Sue but you do have to have payroll expense and probably activity roughly equivalent to them in order to have the loan forgiven.

What period are they using to calculate a business' payroll costs? Can small businesses hire right now and have those payroll costs compensated?

claym711 said:

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What period are they using to calculate a business' payroll costs? Can small businesses hire right now and have those payroll costs compensated?

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My understanding is 2/15/19 to 2/15/20 so no. I've seen some conflicting information on some details but I doubt you're going to be able to artificially inflate your payroll now just to maximize your loan.

LOYAL AG said:

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You're going to borrow 2.5x your average monthly payroll, rent and utilities. Then 8 weeks later you're going to show you used those funds to pay for payroll, rent and utilities during these difficult times. IMO, no you don't have to rehire Sally, Joe and Sue but you do have to have payroll expense and probably activity roughly equivalent to them in order to have the loan forgiven.

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Maybe I'm reading it incorrectly. I read it that you could borrow for payroll, rent, and utilities, but loan forgiveness was only for the payroll portion of the loan. Anyone see anything different?

And what if you've recently hired an that person wasn't on the payroll until March 2020? Were a small company of 4, so it matters if we can't count them.

AgLA06 said:

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LOYAL AG said:

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You're going to borrow 2.5x your average monthly payroll, rent and utilities. Then 8 weeks later you're going to show you used those funds to pay for payroll, rent and utilities during these difficult times. IMO, no you don't have to rehire Sally, Joe and Sue but you do have to have payroll expense and probably activity roughly equivalent to them in order to have the loan forgiven.

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Maybe I'm reading it incorrectly. I read it that you could borrow for payroll, rent, and utilities, but loan forgiveness was only for the payroll portion of the loan. Anyone see anything different?

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I've read several interpretations today and all are saying the opposite. 2.5x payroll only and you can use it for those things you listed.

It it a bit more nuanced than this, but in general, these amounts for which loan proceeds are used can be forgiven:

• payroll costs

• payments of interest on any liability of the borrower that is a mortgage on real or personal property and that was incurred before February 15, 2020 (covered mortgage obligation)

• payments on any rent obligated under a leasing agreement in force before February 15, 2020 (covered rent obligations)

• payments for a service for the distribution of electricity, gas, water, transportation, telephone or internet access for which service began before February 15, 2020 (covered utility payments)

How do you go about applying for these notes?

The Paycheck Program applies to businesses, not-for-profits and veterans organizations with fewer than 500 employees that were in operation on February 15, 2020.

The maximum loan amount to each business is equal to the lesser of $10 million, or the average monthly payroll costs of the borrower multiplied by 2.5.

Any bank that is a SBA-approved lender is already automatically qualified to lend funds under the program (just do a Google search for your area and I guarantee some banks will pop up - or just ask your usual banking partner and see if it is participating in the program). I suspect these banks will be ramped up for the program within the next week to ten days. Banks that are not SBA-approved lenders can apply to Treasury for approval to make the program loans. I anticipate that many banks will do so.

There's an application process for the borrower that will require a few simple certifications. In addition, the SBA is currently working on new loan diligence forms for both the lender and the borrower. These forms will require less information in order for the loan to be originated and the lender to receive and SBA loan number and get loan proceeds out faster.

The maximum interest rate is 4%, and no personal guarantees will be required.

Aglaw. Do you know for sure about the interest part being forgiven? Everything I read talks about payroll, rent, utilities, etc being forgiven. Then later it talks about interest included in the loan.

That's the one part I'm confused on. I only have two employees, but a lot interest expense.

My other question is one of those employees came on in January so his cost won't be included in my 3 years of financials (I only had one). Anyone know if I can include him?

The loan forgiveness is for a portion of the loan, and is based on certain expenses of the borrower paid during the eight weeks after the loan origination.

The forgiveness is based on the sum of (i) payroll costs, (ii) payment of interest on a mortgage, (iii) payment of rent, and (iv) utility payments. The mortgage must have been in place on February 15, 2020. The available forgiveness is reduced if the number of employees and the amount of employee compensation declines during the course of the loan.

So MORTGAGE interest is included in the forgiveness, but normal loan interest apparently is not.

The maximum loan amount is 2.5x the average total monthly payments by the applicant for "payroll costs" incurred during the one-year period before the date on which the loan is made. So the fact that an employee started in January shouldn't impact ability to get the loan, just the amount of the loan (because your average payroll cost would likely be lower than your current payroll costs given the late addition of the new employee).

That's what I was afraid of thanks

I'm doing my research this morning, but figured I would ask here as well being that TexAgs knows stuff.

In calculating the payroll costs, should we include all benefits, sales commissions, and 1099 contractors?

My CEO and I are currently debating if it's better to apply for the stimulus immediately or let a few people go first and hire back if needed.

For purposes of the covered loans, "payroll costs" means the sum of payments of any compensation with respect to employees that is a:

• salary, wage, commission or similar compensation;

• payment of cash tips or equivalent;

• payment for vacation, parental, family, medical or sick leave;

• allowance for dismissal or separation;

• payment required for the provision of group health care benefits, including insurance premiums;

• payment of any retirement benefit; or

• payment of state or local tax assessed on the compensation of employees.

For self-employed persons and individuals that have organized as a sole proprietor, "payroll costs" means the sum of payments of any compensation to or income of a sole proprietor or independent contractor that is a wage, commission, income, net earnings from self-employment or similar compensation and that is in an amount not more than $100,000 in one year, as prorated for the covered period.

My reading, therefore, is that you don't include the independent contractor in YOUR payroll costs, as the independent contractor would likely be picked up elsewhere (likely as the self-employed or sole proprietor described above).

I would likely apply for the loan and get the proceeds. The forgiveness applies to various costs for the 8 weeks after the loan proceeds are received.

Thank you for the quick reply, very much appreciated

Here is my scenario. I have an S Corp and pay myself a salary above $100k. As of now, my monthly revenue is the same, but it is subject to go down. Additionally, revenue for next year will be impacted in terms of bonus based on metrics from this year with the company I do business with.

Does it make any sense to get this? I'm not needing the money, but I'm also not going to turn down free money I'm eligible for (forgiveness). My family isn't receiving any stimulus money outside of potentially this.

Who do I even talk to on this? Accountant?

Talk to your accountant and ask him to break down your specific situation. It doesn't sound like you qualify for any of the loan forgiveness as you make over $100k. However, this might be a good opportunity to take a loan at a low interest rate just in case. You could always pay it back if not needed, but the liquidity and cashflow it might provide could be worth a couple of interest percentages for peace of mind.

The way I was interpreting it (good chance wrong) was the loan could be made up to the first $100k in salary, not over.

Since my accountant likely has some time on his hands I'll email him as well.

And thank you to everyone who helped explain this to us small businesses owners. I have 2 very small companies (10 people total) and to say we have been stressed would be an understatement. One entity was down approximately 58% in sales this month, the other essentially stopped last week as our customers had essentially shut down until they could figure things out.

My political views are typically against using tax money and extending national debt, but this may have saved one of our companies.

I hope that is the case for you.

The way I read the bill is that you cant borrow for rent. Only payroll cost can be used to determine the basis for the borrowing. However, if you spend the money you receive on rent that it will be forgiven.

Is my interpretation wrong? I hope so. Would be very helpful if I could borrow rent cost too.

Thanks!

Ryan

The amount you can borrow is based upon payroll, but the borrowed amount can be forgiven based upon payments for, among other things, rent.

Mark Cuban posted this in twitter and I think it's the best summary so far: https://www.uschamber.com/sites/default/files/023595_comm_corona_virus_smallbiz_loan_final_revised.pdf

Is the 2.5X desigination designed to mean this should be 2.5 months of hardship?

I'm not the best at understanding intricacies like this and will definitely talk to my CPA. In the meantime I have a small business where I pay myself $70,000 a year and pay my wife $20,000. I have a couple of other employees that total to about $90,000. So I could borrow the monthly paycheck amounts for these 4 employees up to 2.5Xs? Then that borrowed amount might be eligible for a forgiveness as well?

Also, not quite understanding the mortgage part of this. I have a couple of different commercial mortgages. I can borrow the interest portion of my mortgage payment from this program for a limited time and not pay it back?

In your situation it looks like you could borrow up to $450K (2.5x the annual salary of covered employees). However, only about $27.5K of that would be forgiven (8 weeks of salary). The remaining portion could be in a loan for up to 10 years at a maximum interest rate of 4.0% interest.

Others here probably are more knowledgeable than me but that is my current understanding. I think the $27.5 that is forgiven can be used to pay payroll, mortgages, etc. but it doesn't increase the amount you can borrow or increase the amount that is forgiven.

Quote:

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annual salary of covered employees

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I think it is only average monthly.

Yes, I didn't read that right. You are right.

Pretty sure that any amounts paid as (a) payroll, (b) mortgage interest (on the business property, not any property), (c) rents (same), and (d) utilities, can be forgiven. So more than just the salaries. But you also have to actually pay those amounts.

Yes, that is my reading as well.

aglaw01 said:

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Pretty sure that any amounts paid as (a) payroll, (b) mortgage interest (on the business property, not any property), (c) rents (same), and (d) utilities, can be forgiven. So more than just the salaries. But you also have to actually pay those amounts.

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Do you have to have losses to have them forgiven?

No - you just have to actually pay them.