Fourteen timely CARES Act considerations for small business owners.
As previously said here, the second time has been indeed a charm as many more businesses have seen their PPP applications get approved this week and others have finally seen the EIDL (Emergency Injury Disaster Loan) Grant Advance has been deposited to their accounts. This certainly brings hope to many, but at the same time it has brought surprise and confusion to the business owners alike. How the SBA has allowed the PPP funds to be used is still a confusion and why the $10K grant was not received and instead they received maybe $1K or $4K.
Some considerations for small business owners:
1. The change in funding for the EIDL Grant Advance is due to changes the SBA did on this, if your business applied at the beginning of the CARES Act, this is when the SBA was awarding ALL businesses a $10K grant. Later in the program the wording on the eligibility for the “Up to” $10K was changed to instead reflect a $1K grant per each employee. So unless you paid close attention to the fine print, most likely you applied when the changes happened.
2. Will this be all for EIDL? Many are asking themselves. The answer is no, the grant advance is an advance and your loan has yet to come. The good news is; you are closer to receiving the loan if you have already received the grant.
3. How much will my EIDL be? There is still no official word on how the SBA is doing this calculation, therefore we have yet to figure this out.
4. For PPP communication with your banker is still key. Follow up with the bank to check where your application is at, and to learn where you stand. How far advanced you are in line to receive your funding.
5. You can always apply elsewhere is also still valid. Now that many are receiving information and or funding for their PPP applications, some have received denials as well. The good news is that you can always seek another bank to re-apply and in some cases your bank will allow for you to re-apply with them.
6. Now that you have your PPP funding, it is important to keep in mind the eight-week period you are given in order to apply for loan forgiveness for your PPP.
7. The first thing is to mark your calendar for that eight-week period, starting from your loan origination date. At the eighth week you must approach your bank with your documentation and apply for loan forgiveness, as the bank will most likely not remind you and you could lose eligibility.
8. When should employees be brought back? According to PPP guidance, employees must be re-hired immediately. It is important to send out a written notice of re-hiring to those on unemployment.
9. Some employees may believe that unemployment is a better situation for them now. You as the business owner must take back the head count you did to calculate your PPP. If the application was for 3 employees, 3 employees must be hired. Head count is important.
10. There should be no changes with salaries.
11. What is not forgiven on PPP loans will be turned into a 2 year loan at a 1% interest rate.
12. Keep in mind that the loan, although later forgiven will start to accrue interests from day one. The good news is that the interest rate on the forgiven loan will also be forgiven.
13. Always remember to keep your expenses well documented for when the time comes you are able to support the loan forgiveness application.
14. What has not changed are the eligible expenses and how the PPP funds are spent. The 75/25 percent ratio still applies for salaries and other eligible expenses. Make sure this is properly tracked.
Another big change this week is the country’s agribusinesses are now eligible for EIDL, which before they were not allowed to apply. The second round of funding has helped changed this for the agro-economy and for this the EIDL which had recently closed is now open for this category only. Although some had initially applied on the 1.0 application, they were quickly turned away, therefore this notice must come as a sign of relief for many.
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