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Stimulus Information for Business

  • Paycheck protection program – SBA backed loan with payment forgiveness (Loan with 8 weeks cash-flow assistance and forgiveness)

    • In my opinion, by far the best option for small businesses

    • No cost to apply

    • How do you apply – loans will be handled by local banks and bankers approved by SBA

    • Max interest – 4%; max term is 10 years; 6-12 payment deferment; no prepayment penalty

    • How much can you borrow? – Take business payroll for a 12-month period, divide by 12, times by 2.5 = amount you can apply for. For example: Your 2019 payroll = $150,000; $150k/12 = 12,500; 12,500 x 2.5 = $31,250 loan amount

      • If you are a seasonal business, the SBA will use a 12-week period beginning 2/15/19 or 3/1/19 and ending 6/30/2019

      • If you are a new business and didn’t exist before 6/30/19; the SBA will look at your cost in January and February 2020

    • You can get payment forgiveness on this loan. The payment forgiveness is based on the following expenses for 8 weeks following your loan signing date:

      • Payroll – salary, wage, vacation, health benefits

      • Mortgage interest – if signed before 2/15/20

      • Rent – must have lease agreement in effect pre 2/15/20

      • Utilities – must have service pre 2/15/2020

      • So in the above example if you borrowed $31,250 on May 1, 2020 – If payroll from May 1, 2020 to June 30, 2020 is $22,000; health insurance for employees during that period is $1,900; rent for 8 weeks is $4,500, and utilities are $625, then you would have a payment forgiveness of $29,025 and only owe back $2,225 on the loan. You can spread this out via payments or payoff with no prepayment penalty

      • To get forgiveness you must meet the following conditions:

        • Maintain the same average number of full-time equivalent employees equal to or above the average during the previous 1-year period

        • Make sure total wages are not reduced by more than 25% or the forgiveness gets reduced

      • If you laid-off employees, reduced wages, or temp cut hours, you will not be penalized for having a reduction if you rehire them by June 30, 2020 or when the loan is approved.  So, your employees can take advantage of the unemployment until the loan is approved then you can cover then again under your payroll with the forgiveness program

    • Documents needed for loan forgiveness

      • Payroll – payroll tax filing reports

      • Mortgage/lease – canceled checks/receipts

      • Any other documentation admin determines necessary

    • Has the option to cover expenses dating Feb 15 – June 30, 2020

    • Who all can qualify? – 

      • small business – need to submit tax returns and financials

      • sole proprietorships – need to submit schedule C from tax return

      • independent contractors – need to submit form 1099-Misc

      • self-employed – need to submit payroll tax filings

    • No collateral required

    • Must demonstrate or sign that your business was economically affected by COVID-19

    • Forgiveness can be obtained by using funds for payroll, commissions, health care benefits, mortgage, rent, lease payments, utilities, interest on other debt pre-covered period

    • We understand processing is going to be very fast, but lenders do have up to 60 days

    • If you received this loan, you are not eligible for an EIDL SBA loan

    • Covers the following – business less than 500 employees, nonprofits, etc

    • Forgiveness portion will not be taxable income to the business

  • SBA bridge loan

    • If you currently have an SBA loan, you can borrow up to $25k with less paperwork and a fast turnaround. You can do this and still apply for “SBA economic injury disaster loan”

    • Will be prepaid in full by proceeds from EIDL loan if you get it

    • This is for business with urgent needs for cash

    • Go to SBA website for more info

  • SBA disaster relief loan

    • Low-interest loan to businesses with easier access and paperwork for businesses struggling and need economic support

    • I don’t think you can do the “Paycheck protection loan program (forgiveness)” if you do this loan

    • Working capital up to $2 million – requires normal forms and approval

    • Possibly eligible to get delayed payments

    • Go to SBA website for more info

  • Payroll tax credits as part of stimulus bill

    • This is not as beneficial as it sounds. Only an employer portion of SSI and Medicare – 7.65% and capped at $10k in wages per employee. For example – You have 3 employees that make $40k each. You can get a payroll tax credit for wages up to $30k (3 employees with $10k cap) – 7.65% of $30k is $2,295 in total benefit. – Paycheck Protection loan is way more beneficial

    • Business cannot use this option along with Paycheck Protection loan

  • State unemployment benefits for employees

    • The Department of Labor website offers online instructions, details, and applications for businesses currently laying off workers, providing fewer hours, or closing during this time. 

    • The federal government is also kicking in additional funds per employee.

If you have any questions or concerns about the stimulus information, please give us a call at The Tax Shelter.  Our experts are ready to help you. (706) 353-1711 www.thetaxshelter.com/

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