Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) a $2 trillion coronavirus stimulus package passed into law through the House and signed by the president.

The law provides support to small businesses of $350 billion small business loan program; increases SBA loan amounts; delays payroll taxes for employers; and allows for other tax delays and benefits.

The most attractive for small businesses is the Payroll Protection Plan. In addition to small businesses, sole-proprietors, independent contractors, and other self-employed individuals are eligible for these loans. Non-profits and churches designated as 501(c)(3) organizations may also participate in the Paycheck Protection Loans (“PPL”) to cover payroll costs, interest costs, rent, and utilities.

It is a 100% guaranteed SBA 7a loan program with a debt forgiveness provision. It should cover 2.5 months of payments towards payroll costs, interest costs, rent, and utilities. The loan will be forgiven if you continue to pay the same number of hours to employees. Any amount used for business purposes but not payroll costs, interest costs, rent, and utilities will continue as a loan.

Please let us know if you have any questions: 219-230-3600 or Isaac@ccsklaw.com.

Full Text of the Law: https://www.congress.gov/bill/116th-congress/house-bill/748/text

About the author

Author profile

Isaac Isaiah Carr, JD MBA is founder, CEO, and business attorney of CCSK Law, a kingdom-driven law firm. Launched 5 years ago, CCSK Law grew from a single member firm to a 10 person team. His areas of focus include business formation and strategy, contract writing, sales, and corporate finance. Often referred to as an entrepreneur with a law degree, Isaac is able to offer business strategy utilizing creative solutions guided by legal and accounting principles that are then well executed in law. Experience in a variety of industries including real estate, hospitality, automotive, e-commerce, professional services, and healthcare. Successfully negotiated and closed multi-million-dollar transactions, ranging from $1.8M to $10M, with private investors, corporate leaders, and municipalities. Ultimately, he builds sustainable structures for systematic growth. Graduated from Valparaiso University Law School summa cum laude with his Juris Doctorate as well as the AACSB-accredited Valparaiso University School of Business with his Master’s in Business Administration. Passionate about education in all forms, Isaac is involved in the nonprofit organizations of SCORE, Neighbors’ Educational Opportunities (NEO) and New Vistas High School, ValpoNext, and Music Neighbors.

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17 Responses

  1. Isaac,
    Is there a provision for new hires that have not previously been on a payroll or have been functioning as 1099s? Is there a tie back to previous payroll for justification. (ie We had employees quit so existing employees or new employees would be getting the additional hours).

    Thanks for your help.
    Dave

    • Great Question. The way it works is in two parts:
      1. How much you qualify for.
      2. What you can spend it on to be forgivable.

      1. How much you qualify for: You will take the last 12 months of payroll (and related payroll expenses such as health insurance, payroll taxes, retirement matches) and add them up. Take that total and divide by 12 to get a 1 month average. Then multiply that by 2.5. That is the amount you qualify for.

      Payroll costs include: employee salary, wages and commissions; payment of cash tips; as well as sole proprietor income or independent contractor compensation not in excess of $100,000. So Independent Contractors are included.

      2. You can spend that on any business expenses you wish, but there are only certain expenses that qualify for forgiveness. This includes payroll, rent, utilities, interest, health insurance, payroll taxes. If you spend the “loan” on these expenses, then that amount will be forgiven.

      To answer your question, if your new hire is replacing a prior employee so payroll was the same, then that new employee will be covered. If you added a brand new position on your staff in Feb 2020, then the last 12 months will not have them as a very significant part of the payroll. However, you can spend the money to pay that new hire, and that amount will qualify to be forgiven.

    • Not yet. I talked with multiple banks on Friday (3/27/20) and they were just finding out about the process. Any current applications available are for the SBA Economic Injury Disaster Loan. Banks should start taking action on the Payroll Protection Plan on Monday. This will go through any bank that is insured through the FDIC.

  2. You have said you need to calculate your payroll cost for the past 12 months and to come up with an average monthly payroll cost. What are the dates that should be used? For example, 3/1/19 – 2/28/20?

    • The average total monthly payments by the applicant for payroll costs incurred during the 1-year period before the date on which the loan is made, except that, in the case of an applicant that is seasonal employer, as determined by the Administrator, the average total monthly payments for payroll shall be for the 12-week period beginning February 15, 2019, or at the election of the eligible recipient, March 1, 2019, and ending June 30, 2019.

  3. Hello,

    Thank you for the great video.

    I wanted to ask, I’m a little confused with PPP and the unemployment insurance.
    How would an employer be able to decide to take unemployment insurance for their staff or go with PPP instead?
    Or can you apply for both? and have sba 7a 8 weeks portion forgiven?

    Thank you in advance.

    • Hi Chris,

      Your question is certainly on a case-by-case basis.

      I believe a driving force behind the bill is to get people off of unemployment, so I do not believe that you could both pay your employees and let them get unemployment insurance. If you pay your employees as outlined int the PPP, then that portion of the loan will be forgiven.

      However, the PPP is not enough to sustain a business for rent/mortgage, utilities, and payroll for very long given the qualifying amount is only 2.5 payroll costs. You may choose to only pay part to your employees and part to rent/mortgage, but know the part you do not pay employees may be reduced from the amount that could be forgiven (but a non-personal, non-collateralized loan with a 4% interest rate with up to 10 years is not a bad loan).

      I know its a tough decision, but let me know if you have any other questions!

  4. Thanks – but I’m still confused:

    If I qualify for $100,000

    why can’t i pay rent *$5000, $3000 payroll, and $65,000 for me, the sole proprietor?

    • Hi Kevin, you can, it may have an impact on the amount of the loan that may be forgiven:

      1. if you do not keep the average number of “full-time equivalent employees” versus the period from either February 15, 2019, through June 30, 2019, or January 1, 2020, through February 29, 2020, as selected by the employer, or

      2. by the amount of compensation for any individual making less than $100k/year is reduced by more than 25% compared to their most recent full quarter.

      Basically, don’t sacrifice your employees payroll to pay rent or yourself, and you should be good. And if you do choose rent or you need to pay yourself to even keep the business running, then that portion would be a loan at 4% interest rate with up to 10 year term.

  5. How can you calculate your expenses as a real estate professional? The past twelve months have included expenses that have ebb and flowed. Notes on projects, 1099 for contractors, materials purchased. I can calculate the set expenses such as insurance, salary but i am trying to figure out the rest?

    • Thanks for the comment!
      So this process is handled in two steps: First what you qualify for, and second what you may spend it on. Your question seems to address the first part, what to consider for calculating how much you can qualify for.

      The calculation for how much for which you can qualifying is limited to your “payroll costs”. Under the text of the law, the term ‘payroll costs’ means salary, wage, commission, or similar compensation of any employees or independent contractors as well as the amount you paid yourself (along with health insurance, retirement benefits, state and local taxes on the payroll) all for the 1-year period preceding the date of the loan. Except any amounts over $100k for an individual will not be counted. Your materials purchase and other expenses do not count for how much you may apply for. You take the total over the preceding 1-year period and divide it by 12 to get a monthly average. Multiply that by 2.5 and that is the amount you may apply for.

    • The text in the law states: “the term ‘payroll costs’ include the sum of payments of any compensation to or income of… an independent contractor… that is a wage, commission, income, net earnings…” but not more than $100,000 in 1 year, as prorated for the covered period. So, yes 1099 workers may be covered under the PPP.

  6. my business bank is not a SBA lender and I have asked about 10 banks and unless you had a business checking account with them since Feb 2020 they will not process your application. Do you know how to find a lender

  7. My business bank does is not a SBA lender, I have called several banks that will not process your application unless you have had a business checking account with them since 2/2020 do you know how I can find a lender?

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