Hope everyone is enjoying your weekend. We know we have beat the PPP thing a lot and for good reason. We felt it's the single biggest part of the bill for our business clients. We have only briefly touched on the economic recovery payments. If you have questions about those please visit our website and look at the Forbes article at the very top of the Covid section, this is a good guide on how to determine where your payment may be. The IRS website is also a good tool, get my payment section. For those that have not filed for 2018 or 2019, or anyone not required to file a return there is a section on the IRS website for non-filers.
On to PPP. Wanted to give everyone an update on the status of the PPP loans and what is on the horizon. As you may have heard, the first $349B of funding ran out on Thursday. Congress is currently negotiating adding $300B to the PPP program along with another $50B
to the EIDL program. PPP applied for with banks, EIDL applied for on the SBA website. Several of you were in the queue when the well dried up on Thursday but were able to get through, but many were not. The banks I spoke with over the weekend plan to keep whoever was in line with their bank in line. We have heard over and over that many who had gone through the big banks were never contacted. We stressed from the onset of this, it was likely going to be easier working with smaller community banks. If you have a local bank you work with, reach out to them, if not maybe reach out in the coming days to determine if they are taking on new customers for the PPP loans. A lot of banks have jumped on the train, so I would reach out immediately. If you are in Illinois or Indiana, we have found some banks who are willing to work with us to help get you funds. We are trying to secure a bank for everyone else, but that is tough as many local banks are not chartered to do business in all 50 states.
Those who have already received funding or have approval, please reach out to the PPP email address for H&T so we have your final loan figure as well as loan number. We very much appreciate it.
I do believe this next go around should be a much smoother process since a lot of the unknowns up front now have some answers. If you are a sole proprietor for whom we submitted the application prior to 4/15/2020 that was not accepted, it may need changed. They issued "final" guidance for the sole proprietor/independent contractor on Wednesday, that disallows the owner's health insurance premiums and retirement contribution (employee side allowed, not owner). Do we agree with this change? No, but must do the calculation based on the rules the day we are preparing. Hoping they see what they did was wrong, however not holding our breath. Like everything in this process, the rules changed almost daily, sometimes hourly. I counted 7 various calculations in the first 11 days. If you are a sole proprietor and have not filed your 2019 tax return, they are now requiring a Schedule C be filed with the application whether it has been filed with the IRS yet or not. Contrary to what some have told us, the SBA is NOT allowing 2018 as a baseline for 2019 profits and no longer allowing a 2019 profit and loss. A schedule C is required to be submitted with the PPP application.
Now that we are on our way to most PPP applications being submitted and hopefully funded in the next 2 weeks, the questions are coming in about how the forgiveness works. Much to our dismay, the answer is we don't have clear guidance nor do the banks. We have seen some banks treat this like a draw, telling customers to submit the expenses and the bank will release funds. Others have put in their final loan documents that any amounts not used for payroll, rent, utilities or interest on debt will be returned to the bank after the forgiveness is calculated. I do know banks do not want 2-year, 1% loans on their books, they would like most of the loans to be forgiven. Problem is, we need to know what the SBA guidance is going to be. I am speculating, but when the application states you must spend 75% of the loan on payroll costs for amounts to be forgiven, I am going out on a limb and would say you should spend 75% of the loan amount on payroll related costs. Question is, to whom and what happens if I don't? I know some of you are funded and are looking for answers today on this, but we don't have them. I expect a LOT of guidance this week on the forgiveness part. I apologize for not having answers on this, so I want to leave you with a quote from my buddy Tony Nitti in his latest Forbes article which is posted on our website (it is quite a long read, so I wanted to share the last paragraph of the article):
"If you've stuck with me this long (you have not), you appreciate the severity of the situation. We don't know what costs are forgiven. We don't know what will determine which costs are allowed - is it incurred, paid, or both? We don't understand the time frames. We don't know if we can deduct the expenses paid with forgiven dollars. We have no idea how to compute the reduction in forgiveness related to lost employees or reduced salaries, or how to restore that reduction if it occurs. And lastly, NONE of it may matter, because the banks are going to make the rules, and they don't know what the hell they're doing.
Other than that, we've got this all figured out." ... Tony Nitti