This is a very important message, and I'd like you to read it carefully.
Here at Team Business Advisors Inc, we have been walking closely with our Minnesota business owner clients (and many, many new business owners who have been reaching out) to cut through the noise and online misinformation about these loans.
Some of this misinformation is innocent, simply because the IRS has been rolling out new and various forms of guidance, and the SBA as well — almost daily.
Some of this misinformation is not quite as innocent. Not only are the scammers showing out in force (already — be careful where you put your company's info!), but there are also overly-aggressive tax and accounting professionals out there who are charging small businesses $2K+ to fill out these Payroll Protection Program (PPP) and EIDL applications.
Not only are these applications relatively simple (though doing the calculation isn't always … and we CAN help with that), but it might also be against the law.
Directly from the CARES Act: ''(ii) FEE LIMITS. — An agent that assists an eligible recipient to prepare an application for a covered loan may not collect a fee in excess of the limits established by the Administrator."
And then on Tuesday, March 31, 2020, the Department of Treasury released Lender Guidance further clarifying:
"Agent fees will be paid out of lender fees. The lender will pay the agent. Agents may not collect any fees from the applicant." (my emphasis)
And yesterday, the AICPA (American Institute of CPAs) went a step further and said:
"It is our understanding that the limitation on fees relates to fees for assistance in the preparation of a loan application for a loan available under the Payroll Protection Program."
The reason they had to be so forceful was because there are many firms who have pounced onto scared business owners and charged predatory, excess fees for this service. We are not one of those firms. The work we do for you in these situations falls under existing agreements … and we will absolutely take into account your business' situation as we do.
Please feel free to share this article with any of your business owner friends who may have been victimized.
We are in your corner:
How To Get A PPP (Forgivable) Loan:
This program allows a lender (such as a bank or credit union) to provide small business owners with a loan that then is "forgiven" when you show that you spent the money on "qualified expenses."
- Loans can be for up to two months of your average monthly payroll costs from the last year plus an additional 25% of that amount. The loan amount is capped at $10 million. AS OF YESTERDAY: The payroll calculation no longer includes 1099 contractors in the formula
- Loans will be forgiven up to the loan amount for a borrower's payroll, rent, mortgage, and utility costs incurred and paid during an eight-week period after a loan is originated.
- Loan forgiveness will be reduced to the extent of a) any reduction in employee headcount during this period (as compared to the prior year), and b) any reduction in pay of an employee by more than 25% (as compared to their prior year compensation). Borrowers that rehire workers will not be penalized for paying them less when they are rehired.
"Qualified expenses" include:
- Payroll expenses (including for your own salary, for example, if S corporation shareholder / employee, or your net business income if you're a sole proprietor)
- Rent for business office (IRS has not clarified yet if home office expenses could qualify)
- Utilities for business office (IRS has not clarified if home office utilities could qualify)
To simplify the concept, this program could give you money to cover those expenses named above, through a loan, and then as long as you can prove you spent the money on those expenses named above, the loan gets forgiven (meaning, the loan doesn't need to be paid back).
Banks opened up their applications for this program YESTERDAY (Friday, April 3, 2020).
IF you want to get this forgivable loan, we are strongly advising our clients to "get in line" ASAP, because the volume of applications for these loans is going to be huge and funds may run out soon.
Now what does "get in line" mean?
It means preparing to submit an application when the lenders start posting those applications online (which, again, is supposed to be today).
If you have an existing relationship with a bank, we would advise you to start an application with that bank because it should be easier for them to process your paperwork since they already have a lot of the records that will be needed.
You can also find lenders by using this SBA "Lender Match" tool.
If you have an existing business banking relationship, consider starting the process by speaking to your existing banking contact. Since that bank will already have your business records, it likely will be easier and faster for them to process and approve this type of loan, if you need one.
Get familiar with the requirements for the loan, as follows:
- Click here to see the "Borrower Information Sheet." This describes the rules for getting the loan.
- And then click here to see a "Sample PPP Loan Application." This is not a real application with a real bank, but you could fill this out ahead of time and possibly contact a bank and get the process started.
Banks are accepting applications from companies (with an Employer ID Number as your Tax ID Number).
Then on Friday, April 10th, the banks will start accepting applications from self-employed people (working under your own Social as your Tax ID Number).
REMINDER: MAKE SURE YOU UNDERSTAND THE TERMS OF ANY LOAN THAT YOU TAKE. THE FACT THAT WE ARE KEEPING YOU UPDATED ON THIS DOES NOT MEAN THAT WE RECOMMEND ANY PARTICULAR LOAN FOR ANY PARTICULAR PERSON OR BUSINESS.
WE ARE OFFERING THIS AS AN INFORMATIONAL SERVICE AND YOU SHOULD ALWAYS PERFORM YOUR OWN DUE DILIGENCE AND CONSULT WITH TRUSTWORTHY ADVISORS DIRECTLY WHEN NEEDED (such as your Business Advisors Inc Team!) BEFORE ENTERING INTO ANY FINANCIAL TRANSACTION.
Let Us Help You Navigate These Waters.
We're hearing from businesses all over Minnesota — and that is fine with me. The more the merrier. Good information is good information, and we're all in this together.
If you want help from experts who get it, and who have YOUR best interests in mind…
… you know where to find us.
The Business Advisors
Business Advisors Inc
A quick note our staff hear at Business Advisors Inc. We have four employees sick at home. The illnesses are mild in couple of cases, more severe in the other two. It could just be the flu or cold. Some of them are working from home when they feel up to it. There are only two of us working full time right now and we are working from home. If you have any questions please call the office or e-mail us. We are checking voicemail hourly. We are working on tax returns and helping people with the payments from the IRS and federal loan programs. Thank you for your patience as we work through these difficult times together.
And again, to reiterate my "Crisis Action Plan" for my clients:
1) Don't marinate in other people's panic. Be mindful of your social media consumption.
2) Get financially and logistically prepared for the worst.
3) Make sure you have some ready, liquid assets, if you are able. (I.e., cash in the bank, and in hand.)
4) Set aside plans for any big spending until the dust settles — but don't let up on your communication and your marketing (especially digital).
Much more to come in the days ahead.
We will get through this. Together.
I'm grateful for our chance to serve you and your business — and we are dedicated to its success, in every season.
Feel free to forward this article to a business associate or client you know who could benefit from our assistance. While these particular articles usually relate to business strategy, as you know, we specialize in tax preparation and planning for families and business owners.