Tax Deadlines

New Jersey tax deadline had been officially postponed to July 15th.

CARES Act Business Loans

As I mentioned in my email on Tuesday you can either get the business loans or the payroll tax credits, but not both. A lot of clients have asked me about the two main business loans: SBA disaster relief with EIDL grant, or the PPP (Paycheck Protection Program) loans. Each state also has their own programs, but they are usually very limited in terms of resources and availability.

The main additional information that I received, is that independent contractors and self-employed individuals are also eligible for the EIDL and PPP loan programs.

For independent contractors and self-employed individuals, depending on 2019 income, the PPP loan can provide higher compensation than unemployment in the short term, but unemployment can pay more in the long term. So it really depends on how long you feel that your business will be affected. The PPP is only limited for 8 weeks, so a self-employed individual with $100,000 profit will get about $1,900 a week for 8 weeks, whereas on unemployment (depending on the state) it can be $1,050 to $1,300 a week up to July 31st, and then $450 to $700 a week for a total unemployment of up to 39 weeks. If your income decreased, you can be eligible for partial unemployment as well.

EIDL and PPP Loans

Each loan program has advantages and disadvantages. Each business should evaluate which is a better fit for them. The decision should be based on their business structure and needs, should they decided to apply. Funds are limited for both programs, so the earlier you apply the better.

I prepared a chart for you with both programs highlights on a side by comparison:

EIDL

Paycheck Protection Program (PPP)EIDL

Application availability Application availability
Available now through the SBA April 3 for small businesses and sole proprietorships with employees.

April 10th for self-employed individuals and independent contractors.

Application is through a major bank who is an SBA lender or any federally insured institution. Most lenders won’t have applications ready until the week of April 6th, so please speak to your local bank.

Application eligibility Application eligibility
A business with less than 500 employees.

A sole proprietorship and independent contractors.

Nonprofit organizations.

Businesses that have economic losses because of the disaster

A business with less than 500 employees with certain exceptions for businesses with more than 500 employees.

Nonprofit organizations with less than 500 employees.

A sole proprietorship and independent contractors.

Must be in business before February 15, 2020.

Loan terms Loan terms
The maximum loan is $2M.

Can get a $10,000 grant (loan advance) within three days, you will keep the grant if a loan is not approved (grant isn’t taxable). The advance becomes part of the loan is approved.

The interest rate is 3.75% for businesses.

Up to 30 a year loan.

Payments are due one year after loan origination with interested accrued.

Loan uses for expenses that the business cannot pay because of the disaster.

Personal guaranty is required by the owner.

There is a lien against assets of the business for the loan amount.

Maximum loan is $10M

Loan calculation 2.5 times average monthly payroll cost (compensation, paid time off, health care benefits, and retirement benefits) for the business (generally based on 2019), with a limit of up to $100,000 per employee.

The interest rate is 1%.

2 year loan.

Payments are due at least six months after loan origination with interested accrued.

Permitted costs used for loan: employee compensation, health insurance costs, rent or mortgage interest for office space, and utilities.

Owners can be included with payroll up to $100,000.

Sole proprietors, self-employed individuals, and independent contractors, can use the lower of $100,000 or business profit for 2019 to claim benefit.

No personal guaranty on the loan.

No collateral.

Loan forgiveness Loan forgiveness
No loan forgiveness. forgiveness on permitted costs stated above for 8 weeks only. However, the entity must keep employment levels the same thru June 30, 2020. Note: the 8 weeks start on loan origination date, hence the business will have to pay more than 8 weeks payroll thru June 30, 2020.

Need full documentation to verify costs for loan forgiveness.

 

Stay Safe.

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