Industry sign banking north carolina letter of intent simple
has in some former fashion been adversely impacted by the coronavirus and so because of that almost every single business is going to apply for a two-year 50 basis point interest loan and as they should that's the entire point of the program so be aware that a lot of your bankers are going to be overwhelmed with the massive amount of applications and so if we're putting our client hat on today and we're talking about the best way to achieve receiving funding as quickly as possible you want to make sure that you reach out to a couple different institutions and once Peter and I are able to really hone in on what the SBA is going to require from banks specifically with respect to collection of documentation keep an eye out for that NCBA approved lender list because you're definitely going to want to contact them as quickly as possible so we kind of just talked about it with respective of what is what is what type of business is eligible and frankly I think everybody on this call with 500 employees or less is eligible in some form or fashion for the payroll protection loan the second question is what is it so for those of you that are kind of just jumping on to what this triple p loan may be for your for your institution and how much you might be able to borrow it's actually fairly simple the general gross loan amount that has been approved that banks will be able to lend to you is two and a half times your average payroll now because SBA hasn't released specific guidance on that calculation we aren't exactly sure how average pay will payroll will be calculated however most of my clients have simply said hey go back and calculate your average 12-month payroll and then multiply that by two and a half that more than likely is going to be your gross loan amount that will then be placed dispersed to disperse to you as a borrower it will be deferred and then it will be placed on a two-year term at 50 basis points and the purpose of this loan as it's you know mentioned in the name is to protect payroll so it's either to keep your employees hired and continuing to be paid or it's to rehire employees that you had to either furlough and/or fire in order for them to get unemployment while your business was shut down so if you've been negatively impacted or simply think you may be negatively impacted you're going to apply for two and a half times your payroll and then you're here to make sure that the majority of those proceeds are used to keep employees employed or hire back your old employees now another important part of this loan is some something called forgiveness so so forgiveness is essentially the ability for you as a borrower to go to a bank receive a loan for two and a half times payroll and then go back to that bank at a future period in time to which the SBA has not said what that deadline will be yet and say hey we're back up and running we're super successful I really appreciate you bank injecting this capital into my business in a time of need I've used it for the right reasons and you're gonna have to prove those reasons and we'll talk about that in a second so I would like to be forgiving at that time the bank is going to receive some documentation from you they're gonna aggregate it they're gonna compare it to the documentation that you submitted and if you did indeed use those loan proceeds for an eligible use which is either keeping people employed or using it for mortgage interest rent or utilities the bank will then submit an application to the SBA and you will be forgiven for what we believe will be roughly 80 to 90 percent of the overall loan amount that remaining 10% will then continue to be amortized over that 2-year term from the start date of the loan at 50 basis points so some of you are probably asking you know this is great but this hurry-up-and-wait strategy is is causing anxiety I've called a couple banks nobody knows exactly what's necessary to collect yet but how can I be prepared and I think at this point what we're doing guidance on with with our institutions and our clients and what we're suggesting most of our banks communicate to to their borrowers currently is you definitely want to collect if you have you know 12 months of payroll tax reports you're going to have to sign off per the SBA application on the fact that you indeed were negatively impacted by Co vid and that you're using the loan for the proper purposes which is protecting payroll mortgage interest rent and utilities and that you have not applied and/or received a government loan for the exact same purpose through another vendor and then lastly you have not defaulted or not an active default or delinquency of a government backed loan so that means student debt that means a prior SBA 7a loan or a private I'm sorry or a a public government-backed mortgage loan that if that makes sense so what we've been saying is grab your payroll tax reports you want to get a list of any owner of the business with greater than 20% ownership stake you will not have to personally guarantee but anyone that owns 20% are more is going to have to sign an affidavit from the SBA that says hey government we're using this for the right reasons and we're applying because we've been negatively impacted you're gonna want to provide your organization Doc's clearly you're gonna need to be able to prove that the business is a functional active business and operating and then should you plan on using that two and a half times payroll cash for either rent and mortgage and/or utilities make sure you're providing that utility documentation and that rent or mortgage documentation up front you may talk to some banks that that don't need that but here's my suggestion as to why you do once you get up and running you're gonna want this forgiveness process to probably go as quick as possible when you're ready and if you're going to use some of those use of proceeds for rent mortgage or utilities getting the documentation in evidence of that to the banker ahead of time is going to dramatically speed up their ability to go to the government and get the government to approve your forgiveness ahead of time we're not sure how quickly the the you the us small business community is a can ask for forgiveness when they're actually gonna ask for forgiveness and the SBA hasn't released exact guidance on what exactly is gonna need to become collected by banks and then aggregated and submitted but we do know it is going to be an electronic based process and it's going to involve some human capital and so anytime you have to call someone provide statements prove that you use funding correctly and then have that packaged up and sent to the government for approval it could take some time and so why not use this time right now when you can't actually apply and receive funds to prepare for the future for when you're gonna want that forgiveness now post receipt of the loan I would expect that most banks will reach out to you to learn more about how the bank is doing most banks will reach out for evidence of continued interest and or utility statements if you plan on asking for that forgiveness and probably have one check-in call I know Windsor advantage is going to do that for most of our clients so I would definitely expect that and then once you're able to apply for forgiveness it's off to the races and it's pretty pretty simple there's gonna be some work on the back end from the bank side but not much from your end as long as the proceeds are used for those eligible areas which again hiring or keeping employees mortgage and or interest utilities with that said that is the most simplistic way I think I can present the current product and to how how you should apply I guess what I would I'd like to bring one more aspect up is there are a couple different options and how different banks will receive applications okay and so there will be banks out there that have spun up online sites that you will go in and have a digital calculator and then be able to drag and drop your documentation in and most of that is going to be a people less or a people light process there are going to be other banks out there that are going to use the PDF application if you guys and girls want some fun reading material ahead of time go ahead and google SB a PPP application I wouldn't fill it out with paper and pen cuz I don't think most banks are actually gonna accept it right now but there is a digital PDF form on the SBA's website that shows every field that's going to have to be filled out so making sure you can answer all of those questions ahead of time is going to help you get into the front of the line and thank you Mike and Gary I believe that application PDF was provided as part of the notice for this webinar is that correct yes Peter it was and the link was provided to the application and the information for borrower's link was provided also great excellent excellent I'm seeing questions here in the chat room Mike do you mind if I post some questions to you no please one is one question is well folks have a have to sign a no overdue taxes document to apply to show that their current on their taxes they will not okay okay now let me let me caveat before we before we all go into this as of right now the sample draft application that was provided is what you will have to attest to and that that is not that is not on the application now things can change as of as a 48 hours ago we we were under the impression again that this was a 10-year note with 4% interest rate with a lot of other requirements and it shifted and that's okay it's actually better for everyone on this call so I I'm not trying to sound like I'm caveat e but please be aware that you I highly suggest that you double check for the newest application and use an online application and/or call your banker if it's not online for when you do apply for the loan in case things change good point Mike and and I just want to emphasize what Mike just said about how quickly things are changing a minute ago I turned my camera off because I received a call from one of our congressmen it was telling me he's just learned we're going to get guidance tonight and in terms of managing your expectations banks will not have final guidance on the program until tonight and so that just it's going to take some work to to change processes and get things ready for this program and it more than like it more than likely will take we'll take a lot of banks the majority of banks in this country a day or two to get set up on the compliance check so so don't get frustrated support your bank that you're currently with support your local NCBA banks and give them give them a day or two if you obviously if you can if you can wait that long because they most most will be using it to protect to protect small businesses but but they've got to make sure that they adhere to all the standards that the SBA is requiring correct there's a question about going back over how to determine salaries and there is I've also seen questions related to that what if you have an employee whose income is over 100,000 great call yeah great great question so there's there's some great resources out there that the NCBA can send out as well I know there's another really simplistic walk through from the US Chamber of Commerce that's been published as well but essentially the best way to calculate payroll costs is it's it's going to be to variable algebra so it's some of you're included payroll costs net your excluded payroll costs equals your technical payroll cost and then multiply that by two and a half times Peter brought up a great point we are capped at at one hundred thousand dollars per employee if you make more than that so if for some reason you have two employees right that are each earning one hundred and fifty thousand dollars of salary they do not count into your payroll as three hundred thousand rather they would count as two hundred thousand so you you have to net out any amount over one hundred in most calculators that I'm seeing currently published as well as most bankers are producing tools to be able to do this for you but it but but it is a good back of the napkin calculation to make sure that you have netted out any excess above a 100 thousand dollar employee and that evidence will need to be provided to get your loan very good thank you Mike that's the clearest answer I've heard you to that question so far and it's being asked quite a bit so what about a company or a business owner that owns more than one company can they apply for more than one line yeah each each company has to apply individually so so you're you're gonna have to apply for each individual tax ID yes based on the tax ID number correct let's say another another questioner asked about what is included in the loan is insurance cost of insurance covered in the in determining the amount of the lawn insurance premiums are included yes so that's an eligible use of them that's an eligible use of payroll and rolled up into your overall payroll costs okay from our understanding this far very good as well as I guess to spin on that so we can just like I mean same with things like you know payment of agreed-upon retirement benefits payment of things like you know tax state state and local taxes s assessments for compensation of employees take your gross payroll that you normally always would that's all included excellent excellent thank you what about contract employees company the question it sounds like the company has a number of contract employees we so I I hate telling you TBD on this but this is one of the big conflicting items that we have not received staunch guidance from the SBA on at the beginning we were told take a trucking company for example that the overall entity that employs tendon in sorry 1099 contractors on a continuous basis would be able to use that we are now being told that each independent contractor is probably going to have to file on their own so we're unfortunately not able to give you a hard answer yet I would I would keep a keep a close eye and if you've got the time which I'm sure you don't start prepping for both okay none of the question are our owner employees who take a biweekly salary draw eligible for wage restoration under the program yes okay another important question you've mentioned a number of times about getting in line and the question is about will the money run out and I know the answer to that one and we are fully expecting the money to run out yeah I've spoken with congressional leadership and people that we work with have talked to congressional leadership and they are ready to go for a phase four measure to provide more funding for this program is that consistent with what you're hearing Mike that is consistent with what we're hearing unfortunately I it was gonna run out or fortunately depending on how you look at it I represent banks and it was it was gonna run out quicker on the previous structure however we do definitely think it will run out I would not wait until June 29th June 30th is your final date and your deadline to be able to apply I would get your application in in the month of early April if you can okay very good I guess okay caveat sorry Peter with one thing though thinking about the thing about the banks but also try to empathize with the borrowers as well realize that if you're you know a night owl and at 12:01 tonight if one of your banks has the systems come up and you hit apply there probably will be an initial backlog for fun disbursement so so you might not hear from a banker for a day or two but but I and I obviously can't can't speak for every financial institution but but they're working hard to process it so just be patient it's gonna be a tidal wave and then kind of kind of flow out yes and I'll just I'll add to that I just this is a hard time to be patient because there's such an urgent need but the banks will not get the final guidance until late tonight and and and then once they're processing loans it will take some time to get them processed and then to disburse finds it is a tidal wave and so you just beg your patience on that let's see other I'm looking for other questions that we have not covered so Peter would you like me to start going through questions or do you want to sor
through the questions that well thank you to Lisa if you see any questions they are any of questions I I just saw one that that pop that popped up it looks like it's it's gone from a couple it's popped up from a couple different different people there's two there's two programs out there there's the PPP program and there's there's an eID ell program and and the questions are can you apply for both the answer is yes you can apply for both but you can't accept both and yet you can pay off a I deal with PPP so my suggestion is if you're really hustling for first in line apply for both but if you then get through the queue quicker with PPP make sure you cancel your Eid L because you have certified that you have not received not applied that certification is received funding for a similar purpose so as long as you have not received direct government funds and I know this isn't an eID l call but-but-but the Eid L program is a direct government funding program you can fight it on the Internet it's through the disaster recovery program there's a three-step process and you can you can apply online it is it is not related to to banks or private lending institutions and it it it's a great program if you can get it I believe that PPP will go quicker once it gets started so I highly encourage you to be able to apply for both but then I also reiterate make sure you cancel the IDL if you get PPP first which I think's gonna happen a lot well and for Mike I think it's it's good to talk about the Eid L is the emergency income disaster loan the it's an SBA direct loan you go to SBA website and you apply for it directly through them what is the processing time for that got it that's still TBD I talked to a banker who helped great client of ours down in Florida that helped take walk through the process two nights ago and it took eight hours online to get everything plug it in and submit so it's gonna take you in that that's I don't know if that's the average and so so I'm not quoting that that's the average but I know it took one individual along with their banker up to eight hours to get done and then I have heard that he IDL funds have started being dispersed by the government and being received I do not know the lead time as it is now by any means we've mostly been focused on on PPP sure PPP will be quicker because you can prepare ahead of time go to an online app typically or go right go a mail your banker if you've got a great relationship with them and they're accepting you know the hard information and go in exchange and and I think a lot of banks will be able to disperse PPP funds within you know a matter of a week depending on the massive influx of applications so definitely go for both okay very good Felisa okay assist Rennell there are a little bit questions that's quite all right in the question and answer section one question I see our expense reimbursements and/or bonuses included in payroll cost that has not been completely outlined yet so we do not know we we will know we will know tonight okay what if I do not have enough work for employees do I continue to pay them if they are at home yes that'd the purpose the purpose of the proceeds are to keep your employees to keep your employees and to keep them paid a is one and then there's the forgiveness calculation is actually based on you know the average number of full-time equivalents that you have each month for essentially eight weeks beginning on when you receive your funds so if you plan on getting forgiven for for every employee or the full use of the payroll funding that you used right we did our calculation we multiplied it by two half if you want to be forgiven for all of that you you have to have those employees employed right so if you got 25 when you got it it's got to be 25 at the end and that's what you're gonna have to prove for your forgiveness you can reduce employees for the sustainability of your company no this is not a you know a pressure situation but if you do reduce those employees to keep the sustainable activity of the company your forgiveness might be dropped as well so then you're gonna have to pay that that remaining balance off at a very reasonable rate right now fifty 50 basis points over the remaining time or roughly two years okay how exactly do you determine your number of employees for purposes of the 500 employees limit so it's it's an average TBD on the final on the final calculation of average employees but we have been told that it's it's your average FTEs calculated we most likely think it's gonna be through the year of 2019 and/or as of February you know 28 or March first so so it's it's it's a TBD on the number of employees there there are some exceptions for over 500 restaurants are a big one and they're one of them so if you if you have a large amount of employees in the restaurant industry you are allowed and you are eligible to accommodate more than the 500 employee because they are looking at 500 per physical location if that makes sense can and companies apply with more than one bank I know you mentioned that earlier yes they can but make sure make sure that you your your your your watching those funds accordingly in the minute you get improved you have to go cancel the rest or else or else the second loan more than likely will break the certification that you signed and you obviously wouldn't want to do that and then if if that comes up more than likely you will not be forgiven for that loan okay what if you rehire employees can you pay them for prior periods a time when they were off of payroll the purpose of the payroll is to be calculated as of March 1st so if you laid them off you know March 15th etc you can you can rehire into into that level you'll be you'll be granted the average payroll up to when all those employees were hired so it's your use of funds for that to keep them employed different things have also been said I've also said will forgive retirement benefits does this include our safe harbor 3% for 401k and 401k fees we pay on behalf of our employees as of as of right now payment of any other retirement benefit should be included in the overall total payroll cost that's as much detail as they've given us at the current moment so we don't know from the forgiveness period whether or not they would strip that out however every single calculation we have seen has not said to strip that out which would mean that the eight weeks of full FTEs and the cost of that if it's included of the safe harbor or included of the 3% should be forgiven as of now getting into kind of the sub levels of these equations are what we're all in the industry really looking for to make sure that that we we approve the the proper loan amounts for our for our lenders and we should hear more tonight I hate not giving you the full stanch answer there but that that's a sub level question that we expect to hear tonight thank you there are a few questions asking did you say that the maximum forgiveness is 90% I did not I said we believe the average forgiveness would be around 80 80 to 90 percent based on on certain uses of proceeds because because remember you're borrowing you're borrowing two and a half times your payroll and that that's your calculation but then you're using you're using that two and a half times payroll funds not only to either rehire or keep your average full-time employees but also for utilities rent and and mortgage interests and they're only for giving eight weeks but you borrowed two you borrowed two and a half months right so because you borrowed you borrowed ten weeks and you're your typical we believe your typical cost with utilities mortgage interest in rent you know are going to be less than probably that that other two weeks of full-time payroll there's gonna be a little leftover if that makes sense so so we feel that on average based on what we're kind of seeing you're gonna be looking at anywhere between 80 to 90 percent forgiven and then paying off the remaining 10 ish percent over that that two-year period you also I assume as long as your bank allows it and it you wanted to could borrow less right you could borrow you could borrow a little bit less if you wanted to and then provided the evidence and have it fully forgiven and then nothing left over if you want to remain debt-free after that as well I'm not sure every bank will be able to accommodate that because a lot of this is going to be a programmatic approach just given the mass influx of applications but that could be an option okay what about a 100 percent foreign owned company with non-resident with a non-resident alien owner would they be eligible it's a great question I'd like to follow back up with this with this thread on that it's my understanding that you would not be eligible but I will go back and check because I don't want to I don't want to overstep my bounds there okay our owners included in the loan owner owners that receive payroll yes so if you're evidenced on that summary of of your payroll yes if you're if you're a hundred percent distributions I don't believe so can all healthcare premiums be paid excuse me can all healthcare premiums paid be included in the payroll calculation if the health care premiums were all those premiums paid over the last twelve months into the summary of the the some of those those that 12-month average then yes you have to prove that what you did before in the previous twelve months is utilized for the same thing to keep those employees engaged and operating okay again so we believe we hope to get a lot more guidance on what flows into payroll and how to calculate that it sounds like tonight okay our company has applied for golden leaf if we get this can we still participate in the payroll protection program I will have to get back to you on that I I'll have to look into golden leaf the US Chamber of Commerce information states that payroll taxes are excluded payroll cost is this referring to federal and state withholding yes I believe that's the current interpretation penalty's that we may be exposed to good question depends on if you continue to keep your loan current so if you decided to take the money and use it for an ineligible use of proceeds you've certified to the US government under federal law that you were you were telling the truth and you were using the eligible proceeds the right way I wouldn't want to get on their bad side so so I would stay away from from not using the proceeds the right way you are not technically personally guaranteeing but you are certifying and borrowing government funds that you're using them for the proper purposes and based on what I've seen in typical SBA little liquidations they don't take kindly to improper use of proceeds so that's that's a scary one if you for some reason have a event and you continue to keep your loan current I can't speak to how your individual financial institution will will monitor your loan but but I would think that if you were trying to do the right thing you applied for forgiveness and your bank determined that you didn't use it the right way but you were not acting a bad faith and the SBA wouldn't give you that forgiveness through the bank then you'll simply have to pay the loan off over its over its two-year time for another one I have a new business a barbecue restaurant their business started in May of 2019 I then purchased the business in January of 2020 my question is pertaining to the fact that I don't have tax returns as of yet can i still be approved for this loan if i have all payroll records and sales numbers that is going to be a lender specific question you're gonna you're gonna have to go to your lender outline it take your previous if you have the 2019 tax returns show them the payroll I assume you you may have a pay some sort of some sort of federal documentation of January and February or and and I would use that and that will probably be a lender decision unfortunately we you know writing writing guidelines for a brand new financial product backed by the government in five days doesn't think of every every single situation so we'll have to wait and see I could see a lot of lenders saying let's let's get this done it's in the right the right fate but I can't I can't commit to that okay another question what if your rent and utilities end up being a higher percentage of the loan amount then payroll if your rent and utilities are a higher percentage than pig-nosed the two at the two months of payroll you would be given you would you should be forgiven for those two months and then up to I believe a percentage basis up up to I believe it's a good question I'm trying to do it in my head I believe you would only be forgiven obviously up to what the full amount was that would have to be documented at a time it's a great question we need to look into that okay there is a PPP that states the recipient will remain neutral in any union organizing effort for the term of the loan does this apply to everyone who receives one of these loans can you repeat that question there is a section in the PPP that states the recipient will remain neutral in any union organizing effort for the term of the loan and the question says does this apply to everyone who receives one of these loans yes I would assume so if it's in the statute and the statute is per the product anyone that receives a PPP loan needs to remain neutral if that is what the statute is quoted no nobody is is given an exception to that statute the statute is what is written in law okay how do you figure waiter and waitresses tips great question it is included and it is allowed in payroll I would suggest hopefully you document the tips and you prove through documentation the average tips earned over that 12-month period okay there are all types of questions here could you review disqualifying factors again which things that could eliminate an application from consideration sure my blanket statement would say I am currently under the impression that almost everything as a private business is eligible including both for-profit and nonprofit if you are in active bankruptcy and/or have previously defaulted on a government guaranteed loan and not made it whole you will be disqualified if you're currently delinquent and/or in default of an SBA 7a 504 or another type of government guaranteed product you will be disqualified anything else should be eligible are there any provisions for nonprofits not to my knowledge right now it's a unified product nonprofits and for-profits are both eligible the same way will owner distributions be included as salary I'll need to check the statute it's my understanding right now that the just to kind of reiterate that because I know a lot of you are probably owner ops right now that it is documented per your overall w-2 summary and we're 1099 summary okay if the loan forgiving is it then taxable income good question I don't believe so because it's a federal loan but I would definitely check with your CPA can a small of one apply yes our banks required to take applications from non clients no no bank is required to use this program so Bank has the active right do not take any applications if they feel that they would not like to participate in the program and many banks I will say are taking non clients while others I don't believe you know I can't tell you whether it's a minority or a majority number at this point but most numbers I do know most of my members at least are currently focusing on their current portfolios to ensure that current clients receive funds though most are open to businesses in their local area as well but if you have a current bank I would go to your current bank first and if they say we're not doing it most banks have created a distribution network and a participation network so your next question definitely should be so who do I go to next and they should be able to refer you to a couple different lenders thank you we are closing in on the end of the hour so we will take a list of the questions from the question in that answer box and we will follow up with the speakers and get answers back to everyone Carrie did you have anything you'd like to say before I close out the coal your muted muted muted Garrett good a lot of people like to do that to me so if the hair
hank you for letting me know well first of all thank you Peter and Mike incredible source of information for folks to begin the process of providing some answers and some certainty folks that employed people of all sizes so Peter thanks for arranging this today and for what you're doing every day you and your members to try and sort this out to help folks and Mike same to you I know you have a lot going on with a lot of clients and the value today and the information has been a place that you can't get a lot of that good straight candor and it's much appreciated as people begin to plan for their businesses but equally if not more importantly their employees futures so we are very grateful to both of you for your time Peter to your partnership and Mike enjoyed meeting you and thank you for you doing every day to help businesses thank you all and they thank you for hanging in there so we appreciate it and we're all going to get through this together absolutely and Gary to your members I'll just commit that we're expecting more information tonight from the Treasury as we know information as we receive it I'll be sharing it with Gary and just count on the chamber for the latest information straight information just be careful what you hear on TV and what you read from others who might have an interest in trying to help you get one of these loans thank you Peter much appreciated thank you all for attending today's call on the Paycheck protection program we hope you found today's content valuable you will receive a brief survey of the webinar via email we would appreciate any feedback you can provide to allow us to improve these sessions thank you stay safe and healthy during this time as a reminder the presentation is being recorded and will be available to all via email
