A STEP-BY-STEP GUIDE ON THE PPP Co-hosted by The Asian Bar Association of Washington http://abaw.org Jeff Liang http://ling-liang.com April 23, 2020 April 25, 2020 April 26, 2020
ABAW is Washington State's largest voluntary bar association of Asian attorneys. Formed in 1987 by a small group of Seattle area attorneys, ABAW now counts hundreds of member attorneys, judges, professors, and law students in a wide range of practice areas and locations in the state of Washington and throughout the country. As the voice for the Asian Pacific American legal https://www.abaw.org/ profession in the State of Washington, ABAW promotes justice, equity and opportunity for Asian Pacific Americans. We serve as a resource for our members and foster professional development, legal scholarship, advocacy and community involvement.
NOTICE: All materials in this presentation and provided to you are informational. Any answers to questions will not be considered legal or tax advice. Also, you should be aware that the rules and laws created to respond to COVID-19 are changing quickly, and information in this presentation may become out of date.
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Effective March 27, 2020 Created Paycheck Protection Program ( PPP ) Initial $349 billion (all gone) Proposed $310 billion (Pending) Expansion of Economic Injury Disaster Loan ( EIDL ) Other loans for investment capital, non-disaster loan (not covered here) CARES ACT
EIDL PPP The Small Business Administration EIDL VS. PPP – WHO IS THE LENDER?
EIDL PPP The Small Business Administration • Bank • Business account • Personal account • Ask if need a bus. Acct. • Non-Banks • PayPal • Intuit • Square EIDL VS. PPP – WHO IS THE LENDER?
EIDL PPP Any business that has 500 or • less Sole proprietors or • independent contractors Non-profits • EIDL VS. PPP – WHO CAN APPLY?
EIDL PPP Any business that has 500 or • Businesses that were open on • less or before 2/15/2020 and have 500 or less employees Sole proprietors or • independent contractors • Sole proprietors or independent contractors that were in Non-profits operation as of 2/15/2020 • • Non-profits in existence on or before 2/15/2020 and have 500 or less employees EIDL VS. PPP – WHO CAN APPLY?
EIDL PPP YES, SBA may initiate a hard • inquiry on your credit report This will reduce your credit • score. Likely not worth it. More on • this later. EIDL VS. PPP – IS THERE AN IMPACT ON MY CREDIT REPORT?
EIDL PPP YES, SBA may initiate a hard • NO, banks will not check your • inquiry on your credit report credit This will reduce your credit • NO impact on your credit • score. report (unless you default on the terms of the PPP) Likely not worth it. More on • this later. EIDL VS. PPP – IS THERE AN IMPACT ON MY CREDIT REPORT?
EIDL PPP Financial obligations and • operating expenses If getting PPP, can’t use for • what’s covered under PPP (payroll costs, rent, utilities, etc.) BUT can do so after PPP loan is • forgiven or paid off EIDL VS. PPP – WHAT IS THE LOAN FOR?
EIDL PPP Financial obligations and • Permitted costs which are: • operating expenses • Salaries, wages, etc. • Health insurance premiums If getting PPP, can’t use for • Payments of interest on any • what’s covered under PPP mortgage obligation but (payroll costs, rent, utilities, excluding any prepayments etc.) or payments of principal • Rent BUT can do so after PPP loan is • Utilities • forgiven or paid off EIDL VS. PPP – WHAT IS THE LOAN FOR?
EIDL PPP No • EIDL VS. PPP – IS THE LOAN FORGIVABLE?
EIDL PPP No • Yes. SBA will issue guidance. • • 100% forgiven if: • 75% used on Payroll Costs • Maintain employee headcount for 8 weeks when compared to (2/15/19 through 6/30/19 or 1/1/20 through 2/29/20) • Don’t reduce compensation of any EE making $100K or less by more than 25% EIDL VS. PPP – IS THE LOAN FORGIVABLE?
EIDL PPP $2 million max • Up to $200K without personal • guarantee (but will need to provide collateral in business assets) Can not use to pay same • expenses as covered under PPP EIDL VS. PPP – HOW MUCH CAN YOU GET?
EIDL PPP $2 million max • 2.5x your “payroll costs” (max • of $2 million) Up to $200K without personal • guarantee (but will need • Time period provide collateral in business • 2019; OR assets) • 12 months prior to application Can not use to pay same • expenses as covered under • If not in business between PPP 2/15/2019 to 6/30/2019, then 1/1/20 to 2/29/20 EIDL VS. PPP – HOW MUCH CAN YOU GET?
Payroll costs INCLUDE: Compensation (salary, wage, self-employ. income, etc.) Payment for vacation, parental, family, medical, or sick leave (except for provided under FFCRA) Allowance for dismissal or separation Group health care insurance premiums Retirement benefits State or local tax (L&I, ESD) Employee’s share of federal employment tax WHAT ARE PAYROLL COSTS?
Payroll costs EXCLUDE: Monetary compensation exceeding $100,000 Employer’s share of federal employment taxes Compensation of employees who live outside of U.S. Sick and Family leave paid under Families First Coronavirus Response Act WHAT ARE PAYROLL COSTS?
EIDL PPP Advance = $1,000 per • employee/owner up to $10,000 max Not obligated to repay • Advance even if you don’t qualify for EIDL EIDL VS. PPP – HOW MUCH CAN YOU GET?
EIDL PPP Advance = $1,000 per EIDL Advance reduces PPP • • employee/owner up to loan forgiveness: $10,000 max $30,000 PPP Loan Not obligated to repay -$10,000 EIDL Advance • Advance even if you don’t = $20,000 max PPP loan qualify for EIDL forgiveness EIDL not worth it unless you • need a loan for capital expense EIDL VS. PPP – HOW MUCH CAN YOU GET?
EIDL PPP Term: 30 years • Interest • For-profit: 3.75% annual • interest Non-Profit: 2.75% annual • interest First payment due 12 months • after loan date EIDL VS. PPP – WHAT’S THE TERM AND INT. RATE?
EIDL PPP Term: 30 years • Term: 2 years for unforgiven • portion of PPP loan Interest • For-profit: 3.75% annual • 1% annual interest • interest Non-Profit: 2.75% annual • First payment due within 6 • interest months from loan date First payment due 12 months • after loan date EIDL VS. PPP – WHAT’S THE TERM AND INT. RATE?
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STEP 1 : Find a PPP lender Check with your bank where you have a business account If no business account, then go to bank where you have personal account and ask if you are required to have a business account to apply Non-Banks PayPal Intuit Square TIPS FOR PPP
STEP 2 : Complete these forms (click on the links) PPP Application form (as of 4/20/20) Payroll Cost Calculator (talk to CPA) or use one of these spreadsheets: Self-employed All others (in business 2/15/19 to 6/30/19) I will do a few samples at the end before Qs TIPS FOR PPP
STEP 3 : Gather the following corporate documents (PDFs): Corporation and Non-Profit Corporation: ❑ Articles of Incorporation ❑ Initial Annual Report ❑ Bylaws ❑ Business Licenses ❑ EIN letter from IRS ❑ (Non-profits) Get a Board Consent to authorize borrowing ❑ Bank might require additional documentation TIPS FOR PPP
STEP 3 : Gather the following corporate documents (PDFs): LLC: ❑ Certificate of Formation (might be called Articles of Organization outside of WA state) ❑ Annual Report ❑ Operating Agreement (aka LLC Agreement) ❑ Business Licenses ❑ EIN letter from IRS ❑ Bank might require additional documentation TIPS FOR PPP
STEP 3 : Gather the following corporate documents (PDFs): Sole proprietor – no entity (but you should have one for personal liability protection): ❑ Business Licenses ❑ EIN letter from IRS (if you got one, otherwise you will use your SSN) ❑ Bank might require additional documentation TIPS FOR PPP
STEP 4 : Gather these financial documents (Corp., NPF, LLC) 1. 2019 IRS Forms 941 and 4. Retirement plan annual Forms W-3 or 944 documentation showing the sum of all retirement 2. Payroll reports for plan funding costs paid calendar year 2019 or the by the organization. previous 12 months 5. Get from payroll service 3. Healthcare costs — all (Gusto or ADP) health insurance premiums paid under a 6. Leases, mortgages group health plan statements, etc. TIPS FOR PPP
STEP 4 : Gather these financial documents (self-employed) 1. 2019 IRS Form 1040 4. 2019 Bank Statements Schedule C (even if you 5. 2020 Bank Statements haven’t filed, you will 6. If you have employees, need to complete provide payroll Schedule for 2019 documentation stated in 2. 2019 Profit and Loss previous slide 3. 2019 IRS Form 1099-MISC TIPS FOR PPP
STEP 5 : Hurry Up and Wait Apply with your PPP lender Upload your documents Wait…wait…wait. Some lenders give status updates Bank will approve SBA will approve You sign loan docs (likely E-sign) Get your PPP funds within 10 days Be Patient but Persistent TIPS FOR PPP
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