Signature Service Forbearance Agreement Template Made Easy

Signature service forbearance agreement template

hey oh [Music] hi everyone and welcome to the small business update i'm jeanette mulvey the content director of co from the u.s chamber of commerce thank you so much for being here today today we are talking about the 900 billion dollar relief package passed by congress this week and what it means for small businesses this latest stimulus package includes several changes to the paycheck protection program and allows for a second draw for small businesses that have exhausted their initial ppp loan other updates we'll discuss today include changes in allowable expenses covered by initial ppp loans the loan forgiveness process and the tax treatment of those loans a quick note that we will be taking your questions later in the session so you can type them into the right hand side of your screen and if you see a question you like please click the thumbs up button to move it higher on the list so we can ask the most popular questions first all right i'd like to introduce our guest neil bradley executive vice president and chief policy officer here at the u.s chamber of commerce hi neil hi jeanette good to see you again you too all right let's just get right to it because i know people have tons of questions so first of all we we've heard the law has been passed by congress but this what does that actually mean what happens next so uh late yesterday uh the house passed it a little bit before midnight the u.s senate concurred in that it's on its way to president trump's desk as soon as he signs it it'll become the law of the land so we expect that literally within within hours that the president will sign it and all the provisions will become law great okay so let's talk about what this means to small businesses there's a lot of changes in this law so let's just could you give me like the highlights and then we'll walk through each one and and you can give me the details what are the key changes sure well let's start with the paycheck protection program this was one of the the marquee things from the cares act this past spring we spent a lot of time helping small businesses navigate it over the course of the spring and summer and this bill reopens that paycheck protection program it makes a number of changes to the allowable expenses to the tax treatment of ppp loans to the loan forgiveness process to how the ppp interacts with other government programs and importantly it creates what's called a second draw paycheck protection program for some small businesses who have exhausted their current funding it also makes changes to the economic injury disaster a loan program to traditional sba loan programs and also the employee retention tax credit just to a name a few of the provisions okay so we'll go through each one of those things so no one should panic because radial is going to give us all the details so let's just start at the top meal um eligible expenses um under the initial ppp loan how has that changed initially it was for certain utilities and for payroll what's different yeah so the the eligible expenses that you could use uh previously payroll costs mortgage interest rent utilities those remain the same congress has added four more categories of eligible expenses they include some of your business operation expenses around for example cloud computing or sales monitoring the back-end accounting mechanisms that a lot of small businesses have relied on to comply with a lot of these new government programs it also extends to so-called supplier goods so a lot of small businesses spend a lot of money with suppliers providing the goods that they need to operate their business going forward you'll be able to count as eligible expenses what you pay to a supplier for goods that are essential for your business there's an important caveat the the contract or purchase order has to be in effect prior to receiving the loan for the expenses to count unless you're talking about a perishable good so for a lot of restaurants for example you could be able to continue to buy produce and be able to count those expenses we also know that lots of small businesses have spent a lot of money retrofitting their operations because of the pandemic implementing sneeze guards creating outdoor spaces for customers drive-through windows buying personal protective equipment for example now those expenses will also be allowable uses of ppp proceeds and count towards loan forgiveness and of course as we all recall over the course of this year a lot of small businesses were impacted very negatively by the unrest and rioting and looting that occurred in many parts of the country if you have expenses related to that losses that were uninsured or weren't otherwise compensated those now qualify as eligible expenses okay one thing about all of those new eligible expenses the one thing that didn't change is the 60 40 rule those familiar with the ppp program will remember that your loan forgiveness has a number of caps on it one of those caps is that at least 60 of the amount of your overall loan forgiveness has to be for payroll costs so while you have new expenses that count towards loan forgiveness you still have to meet that 60 threshold at the end of the day so those new expenses still have to be in that 40 bucket a few questions about what you just said when you talk about goods from suppliers you're not talking about inventory is that correct you're talking about goods that you need to run your business you're talking about goods that you need to run your business so um and importantly contracts you entered into before receiving uh the loan that's right right and these are the this is for the initial ppp loan so this is for people who already have the ppp loan is that correct so it applies to uh if you have an existing ppp loan today it applies if you go get a ppp loan um you know next week it applies if you get a second draw ppp loan which i know we're going to talk about in a minute it also applies so these are permanent changes that apply uh to anyone who has an existing loan or we'll get a future okay good so in terms of loan forgiveness timing has anything changed there yeah a few things have changed a big focus of the loan forgiveness aspect of it is your covered period meaning the period in which all those expenses that we just talked about count towards loan forgiveness where you have to spend the ppp money on certain things in order to get the loan forgiven um the the covered period as it's defined in the law still begins on the date that your loan is originated so the date that you receive the money from the bank is the date that you begin tolling for those expenses but now the borrower gets to choose the end date uh and meaning when you conclude that you've spent all of your ppm money it simply has to be a date that is between eight weeks and 24 weeks after you receive your loan so if you need more time that full 24 weeks to maximize your loan forgiveness you can if it turns out you maximize your loan forgiveness over the course of say nine weeks then you can go ahead at the end of that and apply for loan forgiveness so it gives borrowers small business owners a little bit more control over the process got it um let's talk about an issue that i still don't know the answer to which is rppp loans taxable they are not so this is a huge really important change that congress included in this legislation you may recall back when congress first passed the paycheck protection program they said that if your loan is forgiven it doesn't count as taxable income well then along came the irs and said okay well it doesn't count as taxable income but we're not going to let you deduct the business expenses that you paid for with ppp funds which of course is just a backdoor way of taxing your ppp loan congress fix this and so whether you you already have received a loan whether you're going to get a loan in the future it's retroactive all the way back to the very beginning of the cares act it says that ppp loans aren't taxable and that the irs can't limit your deductions as a result of receiving a ppp loan so that's a very big headline it's a very very great very good news uh we've talked to lots of small businesses over the last several weeks who um they're they're preparing their taxes and they're getting really big surprise tax bills that they weren't expecting now they won't have to worry about that okay that's great news um so let's talk about this second draw i guess under these new rules some companies can apply for a second ppp loan so tell us more about who can do that sure so if you've received a ppp loan and you've exhausted those funds and if you meet certain eligibility criteria you can apply for a second draw ppp the two most important eligibility criteria is that you have to have fewer than 300 employees you may remember that under the original ppp your first loan it's 500 employees so this is a little bit more targeted to smaller employers second you have to be able to demonstrate that you've had at least a 25 drop in gross receipts in a quarter of 2020 relative to the same quarter in 2019 so if it turns out your business is only slightly off let's say you're five or ten percent down each quarter over the over the past uh year over 2020 relative to 2019 you don't qualify but if you're one of those small businesses who was shuttered for four or five months or who are only barely open you and you you've lost more than 25 of what would be your normal gross receipts then you qualify for this second draw pvp um what if a company applied for a ppp loan and did not get one the first time for whatever reason would you encourage them to try again i i would whether you waited too long and the window was closed or whatever the situation we also know that by the way there are some entities some employers who were originally not eligible under the paycheck protection program 501 c 6 organizations for example housing cooperatives and local news media outlets whether that's a a local newspaper or radio tv outlet they were originally in many cases ineligible that's been changed and now those entities can go apply for a ppp loan there's also one other important change if you remember when we first started discussing the cares act back in the spring we notified small businesses that you had to make a choice you could choose to either receive a paycheck protection program loan or claim the employee retention tax credit but if you claim the employee retention tax credit you couldn't get a ppp loan and vice versa that is now repealed so if you happen to be one of those small businesses who took advantage of the employee retention tax credit and had foregone the ppp you can now go apply for a ppp similarly if you've received a ppp loan and therefore not taking advantage of the employee retention tax credit you can now take advantage of the employee retention tax credit okay that's great information um on this second draw alone is there a maximum amount one tomorrow there is and it's a little bit different so the maximum now is two million dollars for that second draw loan i should also say by the way if you didn't receive a ppp loan before you're going for your first loan that new maximum is also two million dollars you may remember previously it was 10 million now it's been reduced to 2 million and there's also slightly different calculations potentially for the amount of money that you can borrow under that two million dollar cap so folks will remember under the original paycheck protection program it was your average monthly payroll cost times 2.5 in other words two and a half months of your payroll expenses that remains the same for most small businesses with respect to the second draw program unless you happen to be a small business that's in the accommodation or food services industries the so-called makes 72 that stands for the north american industrial classification system which is the way businesses are classified by type uh in our system uh if you're naked 72 then you qualify for a loan that is three and a half times your average monthly payroll so you're able to borrow a little bit more even though you're still subject to that two million dollar cap that'll be really important for a small hotel or a restaurant or food shop for example where you might be able to get a little bit more money than you otherwise would have under the original paycheck protection program great um so we've talked okay so we're talking about changes to the original loan and now the second draw alone can we just stop for one second because i'm sure there's a lot of people who are now confused what is the difference are there differences between those two things except that if you've already got one you can take a second one like should we think of them as two different programs or what what do you think well um you you should think of them as as two different programs with a very very similar sets of rules so the biggest difference is this the amount of your loan if you get a second draw ppp so uh and the eligibility for getting that second draw ppp so if you have let's say 400 employees um you qualified for the original paycheck protection program but you won't qualify for the second draw if you had losses of say you know five percent your business was off five percent as a result of the pandemic you qualified for the original paycheck protection program but you won't qualify for the second draw because you don't meet that 25 test so um very similar programs if you understand the rules for one the rules are very similar for the other it's really just these differences in loan amounts and eligibility and just to confirm even if you take a second ppp loan that wouldn't be taxable either correct that's correct that that the the tax changes cover you both in your original ppp and in any second draw ppp okay wait one more question about the second draw for the ppp you do you need you probably already said this but i can't remember do you need to prove a reduction in your business to get the second you do you do you have to have uh in any quarter in 2020 so first quarter second quarter third quarter fourth quarter you have to demonstrate that relative to the same quarter the year prior and there are special rules if you weren't in existence for 2019 so don't worry about that there are some similar transition rules you have to show that your business is off by 25 or more a 25 reduction in gross receipts in a quarter compared to the the prior year quarter in order to be able to qualify right okay i'm sorry you did say that and i forgot um one other question about it in the initial ppp loan you needed to prove that you did not lower your employee full-time employee account by a certain amount to qualify for the loan is that the same with this one that that's exactly right so the reduction in employees and the reduction in wages by more than 25 percent continue to apply but so do the safe harbors and the safe harbors you may recall said that if um by a date certain and by the way they've now extended that date certain to whenever the end of your covered period meaning the end of when you're using your loan proceeds if you've restored that head count or you restored those salary reductions you don't lose any of your loan forgiveness in addition the safe harbors remain that say that if you can't find workers qualified workers to hire to fill those open slots or if because of coveted health restrictions your business remains off and you don't have enough business activity to warrant filling back those slots you're held harmless so the the the limitations the requirements that you not reduce that count remain but so do the safe harbors okay got it so i'm sure we're going to get a lot more ppp questions during the q a but this is part of a bigger bill so i want to make sure that you and i just touch on some other things in the bill besides ppp so let's talk about the live venue provision what does that mean so this is brand new so this did not exist before it was created as part of this new package and it's 15 billion dollars to provide grants grants not loans grants to live venue operators theaters movie houses museums you know essentially arts and entertainment as well as talent producers and so this is a new grant program you do have to demonstrate a significant reduction in in revenue and gross receipts as a result of the pandemic and then you can receive a grant up to 10 million dollars or 45 of your 2019 gross receipts for the entire year um as a grant to help you pay a lot of the same cost that you would use a ppp loan for so if you take one of these live venue where they're called live venue grants you can't also get a ppp loan so this is another situation in which you have to choose but obviously the the total dollar amount under the live grant program could be larger than your ppp loan and you don't have to worry about going uh and applying for forgiveness from day one it is a grant the one thing i'll note is this is dollar captain it's at 15 billion dollars so we expect there's going to be a lot of interest in this if you happen to be one of those in the live event industry if you will this is something that you're going to want to get started on right away pulling the information together to to be able to apply once the government opens the application window which we don't have a good eta on when that's going to be yet but i i think they're going to be working pretty hard to get that set up in short order i'm sure there's a lot of people listening right now who are wondering if they qualify so let me just throw a couple out at you and see if you think that they would qualify do you think a bar or restaurant that has live entertainment regularly and that's a big part of their business would fall into that category unlikely uh unless the the unless the the bar and restaurant the music and the excuse me that the food and the beverages are almost incidental uh to the performance so if you're earning money by selling tickets and that's the principal source of revenue and the the food and beverage is incidental to that you might qualify there are some pretty specific definitions of what constitutes a venue uh in in in this and they're really trying to target you know the the theaters uh music venues uh museums things like that um who you know obviously can't can't pull in a crowd during uh during the covet pandemic to fill seats one more question on that do you think that small businesses that serve those industries also qualify under that or they probably already qualified under the ppp loans i guess yeah they'd be more likely unless you're uh there is a special provision for talent representatives um so if anyone listening today is a talent representative you'll want to pay attention to that but if you're if you're simply a supplier you do um work for people in the live event industry you probably are going to have to focus on that on the ppp program okay i'm going to move us on from that we talked a little bit about the employee retention tax credit so is there anything else you want to say that has changed there and related to that since at the end of the year is coming what do people need to do between now and the end of the year okay this is huge now i really want people to focus on this for a minute i mentioned earlier that under the old law if you took a ppp loan you couldn't also get the employee retention tax credit that's changed as soon as this bill becomes law that's been overturned and you can take advantage of the employee retention tax credit in addition to that from january 1st of 2021 till the end of june the first two quarters of next year they've expanded the tax credit pretty dramatically so under the current the old law the tax credit was worth 50 percent of qualified wages paid per employee up to ten thousand dollars for the entire year so you know do the math fifty percent of ten thousand dollars it's a five thousand dollar per employee tax credit going forward for the first two quarters of 2021 it's 70 percent of wages per employee for the first 10 000 per quarter so that's seven thousand dollars in q1 of 2021 and seven thousand dollars in q2 of 2021 so that means the value of the tax credit could be 14 000 in 2021 per employee they also changed the eligibility program and who qualifies for this so under the old law you had to demonstrate a reduction in gross receipts of greater than 50 greater than 50 reduction in gross receipts in a quarter of 2020 relative to the same quarter in 2019 so pretty high threshold that's now been changed now you only have to show a reduction in gross receipts of more than 20 percent in a quarter relative to the prior year quarter so much easier for a small business to qualify furthermore there was a hundred employee threshold and how the 100 employee threshold worked is that if you had a hundred and fewer employees you could qualify for the tax credit irrespective of whether your employees were providing services doing their normal work or whether they were idled because of the pandemic meaning you were paying them but they weren't they weren't doing their normal work if you had more than 100 employees you could only claim the credit for employees who weren't doing their normal work who were idle that 100 threshold has now been moved to 500 so in short if you have fewer than 500 employees if in the if the next year you experience a reduction in revenue that's greater than 20 you are going to want to take advantage of the employee retention tax credit now jeanette you asked a very astute question if that's for next year what should people be doing this year well one of the provisions that's in this bill basically said recognizes that a lot of small businesses may have not taken advantage of the employee retention tax credit this year meaning 2020 because they took a ppp loan you now have the opportunity before the end of the year to claim that employee retention tax credit and you are able to look back into prior quarters in this year basically q1 q2 and q3 and be able to count those wages towards that 10 000 cap so my advice to folks is if you're talking to your accountant if you're talking to your tax preparer make sure you flag this for them ask them how to go about taking advantage of that employee retention tax credit because even at the reduced levels you're still talking about five thousand dollars per employee and because it's a refundable credit that means that's money that's going to be coming to you as the employer just one more thing to say about that just to to make sure that that people are thinking uh the steps through it does remain the case that you can't claim the employee retention tax credit and a ppp loan for the same wages meaning you can't double that so if you use the ppp to pay your employees in june you can't also can't claim the employee retention tax credit for wages paid but knowing that most small businesses have already exhausted their ppp this is a great opportunity to access an additional benefit okay that's great advice thank you um we have a lot of questions coming in and i'm gonna take us to the q a in a second i just want to ask you uh two more questions on my list uh the idle loans economic injury disaster loan just what's the latest on that are those can you get one of those still you can well you will be able to this is all reopening and importantly the idle grants uh you remember these were the ten thousand dollar grants that you could receive that you didn't have to repay 20 billion more dollars into those idle grants um and if you uh have experienced more than a 30 reduction in in revenue in an eight week period uh if you happen to serve uh operate in a low income area you get first priority for those idle grants and importantly if you're in one of those areas and let's say you got an idle grant that was two thousand dollars so the sba had reduced it from what you qualify for ten thousand you can go back and apply for that eight thousand dollars here's another important point it used to be that if you had both a ppp loan and an idle grant they would take the amount of the idle grant off of your ppp loan forgiveness they won't do that anymore so you'll get the full benefit of the idle grant up to ten thousand dollars and the full value of your ppp loan forgiveness great um sounds like they righted a lot of wrongs with this go around yeah a lot of problems we've been pushing them uh here at the us chamber to address uh they they fixed i wish they had won it sooner but as my mom used to say better late than never exactly all right one more from me and then we're going to go to the audience um one of the problems the criticisms we heard of the initial pvp loan program was that minority-owned businesses and businesses in under-served communities were having trouble getting those loans so is there anything in this new um package that addresses that there is for both the ppp pro well for the ppp program inclusive of both first time loans and second second draw loans what they've done is they've set aside an amount of money for those small community banks credit unions and cdfi type entities which as we learned kind of going through the summer are really well positioned to help serve those minority-led small businesses so in addition they've set aside some money for for the smallest of small businesses those with 10 or fewer employees to make sure that they get access to the ppp program so they've taken some important steps to to make sure that minority owned businesses and smaller small businesses have access to the program that's great thank you okay audience i am coming to you now i have a list of questions here you can keep putting them in um let's see now i'm gonna just start at the top with what looks like the most popular will the application for the second draw ppp come from the bank like the first ppp program and when do should we expect banks to have those applications ready yeah so first the sba the small business administration and the treasury department have to update the application form um they've been given instructions in this legislation to do so expeditiously i don't think they need instruction they know the need that's out there and i know they're working hard to put this together and then banks will utilize that for uh that for that program earlier you asked me about the number of changes and because while the changes that were made were important they haven't fundamentally restructured the program the hope is in fact the belief is is that they're going to be able to use the vast amounts of the loan application and the guidance that was a part of the original ppp for these second draws and that should make it a lot easier for both the sba treasury and your lending institution to be able to get the program up and running okay i think that you answered this next question but i'm going to ask it because i think it's confusing so maybe you can answer it again the earlier epp applications used calendar year 2019 to determine the amount eligible for ppp so and then this person says what period will be used for the new ppp applications generally it's going to be the same though there is some ability you you'll essentially have a choice you can choose that let's assume you're not a seasonal employer so for the sake of this explanation you are not a seasonal employer and then you can use the 12 months prior to applying for the second draw ppp which would obviously be very inclusive of 2020 or you can elect to use 2019 so you you might you know assuming you have more employees and business was better you might want to elect to use 2019 because you had more payroll costs in 2019. conversely if you're worried about the loan forgiveness on the back end you want to avoid having a loan that ultimately you you have to repay maybe you'll apply for the the smaller amount using 2020. um if you're a seasonal uh employer then you basically pick a 12-week window from february of 2019 to february of 2020 for purposes of of calculating your loan amount got it this one is about the idle grant if companies now get the amount of the idle grant return to them now that it's not part of the deducted from the pvp forgiveness um i guess they're asking how they get it back how do you get the money back if you i guess already applied for forgiveness and and the idol counted against you i think that's what they're asking yeah and this is this is one of the unknown aspects of this so um you know in the coming days um we're gonna have to figure out between treasury uh and the small business administration how all of that works so um it's pretty straightforward if you haven't already gotten your loan forgiven uh but if you have gotten your loan forgiven and you're kind of done with the original ppp they're going to have to establish processes to resolve all of these issues okay so we don't know yet that's right if a business received ppp funding but has since permanently closed are they eligible to apply for a second fund a second draw to cover debt obligations even though the business is closed well um generally debt obligations aren't an allowable use of your ppp proceeds um and um you wouldn't receive forgiveness for using the ppp proceeds for debt forgiveness um you know if it may be possible if you were in operation let's say february 15th of of 2020 you closed for a period and you're reopening um you know under as the same legal entity that you could you might be able to access a second ppp but i think based on what the question was asking i'm not sure you could get a ppp loan if you have no plans of reopening and incurring those costs um you can't you can't use it for for existing debt forgiveness right okay um this says that you need to show a 25 loss of income in the first three quarters to qualify for a ppp loan does that include any financial help from the federal government or state during that time so i think they're asking if you received any kind of assistance do you count that towards your income and therefore would that offset your 25 loss yeah this is an issue that we're looking for clarity on um as to what if it constitutes gross receipts for those purposes so um you know if if the the aid pushes you over that threshold this is something that that obviously will look to get more clarity as we dig into this and as we see guidance coming out of the administration uh on that point so i'm not prepared to say no absolutely not yet but i'm also not prepared to say yes absolutely yes okay um this person's asking about pvp loans under 150 000 being forgiven i think that's a thing that it was decided they would automatically be forgiven is that correct yeah a lot of people refer to it as automatic forgiveness but what the law says is that if you have a loan less than 150 000 then you have to be allowed to apply for forgiveness using a one-page form and it's essentially very minimal information and an attestation that you complied with the requirements of the program which will effectively operate as automatic forgiveness i want to stress to people if you if you have a loan less than 150 000 you still have to go through a process it's just going to be a much more simplified process one page you fill it out it's an attestation uh and they should be able to expedite your loan forgiveness but you you still do have to request that loan forgiveness so don't assume that it's been automatically forgiven because that's not the case you still have to go through a process it's just going to be a lot easier for you right just still you still have to do the paperwork if there's one thing the government likes its paperwork and you know we applaud them when they get the paperwork down to a page but it's still paperwork um and that would apply do we know if that hundred and fifty thousand dollars automatic forgiveness which we know isn't really automatic applies to the second draw as well it does okay um although the form will end up being slightly different because you'll have to also attest to the 25 reduction for example but yes effectively yes just out of curiosity knowing what people what we know now that a loan under 150 000 is automatically forgiven not automatically i know but it's easier to get forgiven if you were applying for a second draw could you is there a way you could just request a number that was less than 150 thousand dollars to make the for so that you knowingly would make the forgiveness process easier uh i i suspect you probably could you don't have to take you don't have to uh request and receive a you know a full amount of the loan right so i suspect some people will potentially look to do that now of course you still you still have to meet the underlying requirements for example um the fewer than 300 employees that shouldn't be a problem at 150 000 and the reduction in revenue so i i would warn people about thinking about trying to to gain the system um and say well they're not going to really check if it's that small of a loan you know if they start seeing a lot of that you do have to attest and you will have to demonstrate uh the reduction in gross receipts so um you know as they say don't don't play games with the tax man well just to be clear that really wasn't what i was suggesting but what i was thinking is if you did the math and your numbers added up to 155 000 and you might say to yourself you know what i could save myself a lot of headache by applying for 149 000 and i'll just forget the rest of it i just wondered if you could actually do that you could ask for i suspect you can do that i would work with your lender um and the example you just used i would i would absolutely uh it might be worth it might not be worth the six thousand dollars of paperwork that was my question okay so can self-employed individuals apply for a ppp for their businesses if they've been receiving um pua benefits which pandemic unemployment assistance yes so um remember um independent contractors the self-employed qualified for the original p uh ppp program you also are eligible for the second draw ppp you'll have to demonstrate the revenue reduction so that continues to apply um there um generally you can't uh receive benefits for the same time period but you probably will have some overlap in some differing periods um where you might be able to take advantage of both the ppp um and be on pua or come off of pua the pandemic unemployment assistance so that's one of the things that if you are self-employed you're going to want to take a take a look at remember pandemic unemployment insurance was also extended in this package it was extended through the middle of march and in addition they've restored a part of that additional weekly benefit it used to be six hundred dollars you remember that six hundred dollars additional per week that expired uh over the summer for uh from december 26 through mid-march it'll be an extra 300 per week for those individuals who are on unemployment assistance right okay great so neil it's almost 240 if it's 241 and we were supposed to end at 245 but we have a lot of questions are you able to stay till three let's do it okay let's do it so audience we're gonna stay till three so you can keep answering your questions um neil okay first of all just this person wants to say thank you to the chamber for all this hard work on this so i feel like i want to share that with you and they say they are very happy that 501 c 6 organizations are now eligible but they have a lot of members who are 501 c 3 non-profit members are they going to be eligible they are 501 c 3s were eligible under the original paycheck protection program they remain eligible under the reopen program and are eligible under the second draw great um this is i'm surprised wasn't the most common question because i've heard it so many times if we use independent contractors rather than employees can we get the new ppp no that has not changed so independent contractors are eligible to apply themselves for the ppp as we discussed a moment ago but you as an employer can't claim the payments to your your independent contractor your 1099 uh contractors as part of your loan application now i'm almost right i'm almost sure i asked you this question the last time we talked about this but if you have 1099 contractors who work for your company we know that you can't count them as payroll but do they fall does the money that you pay them fall under any of the other allowable expenses like if you you know what i mean are there services or anything like that so it's certainly the case that they wouldn't have fallen under any of the prior um allowable uses um i think we're gonna need further clarity um you know on for example some of the essential business services those con those uh accounting services if maybe some of that is kind of captured under it i i would not assume that that's the case i don't think that that's um what they were intending uh i'm certain that's not what they were intending with the legislation so i i wouldn't count on that but this will be something that we'll be looking for further guidance and clarification on you know in the days ahead okay um this person asks if you didn't get a ppp loan last time because you didn't apply will you be given preference over businesses applying for a second time um there is there is some money set aside within the overall ppp program uh for first-time appliers so there is at the top of my head i want to say it's like 30 or 35 billion i would need to double check those numbers but something around there that is set aside for first-time ppp applicants and so um you won't necessarily get preference uh but there is at least a pot of money that you know that is set aside for for those first-time applicants i know you don't know the answer probably to this but if you had to guess i i'm just i'm we're talking about these programs like they're two different things now right there's the first ppp and then the second pvp but i'm guessing that the way it's going to be handled at the bank is there's going to be a ppp application and then it's going to say did you already get one like are you is there language that you think people need to be using when they go to the bank to say i want to apply for the second draw or do you think do you understand what i'm saying yeah yeah so um you can't get a second draw unless you've got a first ppp so um you know if you're going and you're talking with your lender um you're either going in as a first time borrower or presumably you're going back to the same lender and saying you know we've exhausted the the first ppp loan i want to apply for for the second and i expect they'll have probably slightly different well they'll have to have some slightly different uh forms uh to capture who's eligible uh for that that first round ppp and who's eligible for the the second round ppp okay this person's question is pretty specific to their industry but i'm gonna i'm gonna read it and then i'm gonna ask you a broader question they say is there any help for landlords that have renters that are way behind on paying their rent we don't have payroll just expenses so i'm gonna ask you so the is there an answer specifically for people who are landlords but also just in general i'm sure there are a lot of businesses where they do have a lot of expenses that are not payroll is there any consideration for that in this package yeah with respect to the first question um there is 25 billion dollars in um rental of housing rental assistance so um people who are behind on their their housing rent um this is a brand new program we've never had something like this before um it define the money is going to go through the states but it's designed to help people who are behind on their rent in exchange for that the eviction moratorium was extended from the end of december through uh the end of january jeanette you're exactly right about the other expenses that a lot of employers have and so that that aren't payroll and again here this this is really still around the payroll construct with respect to ppp and the employee retention tax credit of course there remains other loans the economic injury disaster loan the traditional sba loans which obviously have broader uses that can be of benefit to small businesses but the ones that have the the most favorable terms at the moment um are those um for folks who are you know a traditional sba 7a loan for example that might be something worth looking at one of the provisions that is contained in this bill is a continuation of where the government picks up for a set period of time the monthly principal and interest payments associated with those loans and so if you had a loan before you know last spring you generally received six months of forbearance payments you can qualify for an additional three now if you go out and get a loan in in the coming month you can also qualify for that six months of forbearance but again those are loan programs uh sba traditional loan programs that do have more flexibility but obviously don't have the forgiveness associated with them generally have can have higher interest rates and other trade-offs got it um this we already covered this but i think it's worth repeating this person says they were notified by the bank that they need to consider the ppp as income and pay income tax and they said has this changed so we know the answer but why don't you repeat it for them if your ppp loan has been forgiven that is not income to you so you do not have to pay income tax on that if you paid expenses as you did with your ppp loan and you in the normal course of business would deduct those business expenses as deductible business expenses you can continue to do that now even though those expenses were paid for with your ppp loan so um the the great way to think about this is no tax consequences from the ppp loan and just in defense of the bank that's a relatively new development it's not that the bank was wrong when they technically it's awaiting uh the president's signature so you know until until uh you know he he puts his name on it that is still the law of the land but it's not going to be the law of the land from for much so they weren't wrong it's just changed that's right yeah um this person says does the status of the first ppp loan forgiveness application impact eligibility for a second loan so you you in order to receive a second loan you either have to have exhausted or you will exhaust that first loan the proceeds from the first loan by the time you receive the second loan so if you have a first loan application pending and you haven't received the money um it'll be a little while before you can obviously assert that you've exhausted those funds and be able to access um you know a second draw loan so the second draw is for borrowers who have exhausted their original loan proceeds by the time they received the second loan okay um i'm going to be really impressed if you know the answer to this question it says you said that money was set aside for minority and underserved businesses do you know how much exactly was set aside uh well the money was set aside generally for smaller businesses in uh low-income communities and then i think it was about 25 billion that was set aside for those financial institutions small banks small credit unions cdfis that happen to serve generally as a general matter serve those areas so it is not a specific set aside for a minority owned business it's a set aside for smaller lending institutions and then smaller employers in low-income areas got it we covered this but i want to ask it against because i think there's some clarification to be made here the person says do you have to use the money within a certain amount of time like eight weeks or 24 weeks so there was a change on this so can you the end date now can vary is that correct that's correct so remember you you get your loan that money shows up in your bank account that starts the clock ticking on your loan forgiveness period and the expenses that you incur during that period determine your amount of loan forgiveness so if you get a loan and you don't spend a penny of it let's say for 30 weeks then you're not going to qualify for loan forgiveness because you didn't do any of the qualified expenses during that period so what is that period the period where your expenses count towards loan forgiveness begins on the date that you the loan is originated the date that you get the money and then it ends at some point between eight weeks after origination but not at before 24 weeks and so you get to choose the window between eight weeks after origination and 24 weeks after origination for the end date of that period and so um under under the old law it was a full uh 24 weeks and so they just made it simpler for people who who want to say hey you know it's been it's been 15 weeks i've exhausted all my ppp funds i want to apply for loan forgiveness and go through that process great you know one thing i want to ask you um we've had a long time now of people starting to apply for forgiveness for ppp loans they got earlier in the year have you seen anything like lessons learned for people who are applying for forgiveness or who are just getting loans like mistakes that people made just things to keep in mind that you're going to need to be thinking about later when it's time to apply for forgiveness now that we've had the benefit of time to see it play out well you know i think a good best practice is always just keep track of keep track of your expenditures right and so um you know even though they're they're simplifying the process particularly for those loans under 150 000 um you know it's still the case that you have to maintain uh paperwork for a certain period of time and so you know just as a best business practice that we should all be doing anyway is to to keep those records about what you spent the money on um so that when you get to the forgiveness period it's just a lot easier and should there be any questions after the fact um you're not scrambling so i think that's probably a good best practice i think it's always good to check in with your lender ask your lender kind of ahead before you show up ask them what they're looking for what they need it should be more standard and simplified now but you know it never hurts to to check in with them and just make sure you have everything in order when it comes time to fill out that application all right great we have five minutes and i have a few here that i think we can do like a lightning round okay all right let's do it okay so they say do you know how long the 300 additional unemployment will run they heard it was march but do you know believe it's march 14th march 14th okay this person says we always include tips on paychecks do you know if uh tips can be included as i guess as payroll when they calculate payroll yeah so a great question um and i'm searching in the back of my memory for the original ppp discussion um there are some ability there's a definition of payroll costs um and i believe in certain circumstances that you can include that um so you're gonna that hasn't changed so you're gonna gonna look back there's a guide on the us chambers website that actually spells out what counts as payroll costs and if you take a look at that that will be a quick answer to your question i think it's worth looking at because i think the answer as i recall is yes okay um do you think it would hurt a business right now to change they don't say why they would do this but to change their tax entity from sole proprietor or to llc or llp with regards to eligibility for these loans um i don't know with respect to that between an llc i i don't um so you're still you're still using um the the same schedule uh for your application i i don't know that it would make it a terrible a bit of difference um because self-employed or llc unless you're having a multi-member llc or if you have a partnership multi-member partnership there could be some implications there but if you're talking about a sole member it'll likely be the same forms but before i made that change that would be something i would definitely double check okay idle loans um this person applied and march was denied do you think it's worth reapplying and my addition to that question is you would assume they would have if they even had a chance they would need to reapply they're not going to look at applications that were denied right you would have to start the process over again yeah and if it's an idle grant and they meet the certain threshold they might be able to get priority for that idle grant but not knowing the reasons that they were denied yeah i can't i can't say for certainly if something would be different i think jeanette your point is exactly right though they're not going to do it for you so any if there's a possibility you're going to have to to reach out and do the application yourself okay i would also be pretty impressed if you knew the answer to this question but it's our last one so i'm going to give you a shot they say and if if the pvp loan is now not taxable do you have any idea how companies reconcile this on their books so in other words it's a liability now but they need to write an office in like how do they handle it on the books do you have you heard anybody talk about that yeah so admittedly it's a little bit of weird treatment right so uh when it's a loan uh it's a liability on your books when the loan is forgiven we traditionally think of that as income what the federal government has said is that may be income to you but it is not income for tax purposes so um you don't have to worry about it for tax purposes though you know depending on your accounting and you know what kind of company you have and who the account reports to this is something i would definitely talk to my my accountant about about how to appropriately reflect this um the good news is is that you just won't have to reflect it as income for purposes of paying taxes on it right all right well thank you thank you so much neil i think that's all we have time for today so thank you very much for joining us i have a feeling this is not the last conversation we'll have on this topic but it is it is all we have time for today so thank you to everyone for joining us now if you need more information the us chamber has released hot off the presses just today a guide on this new package if you look at your screen you should see right under the viewing window the the url is uschamber.com backslash sb loans so you can check it out there thank you to our audience thank you to neil thank you to everyone have a great holiday and we will see you soon take care everybody [Music]