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Thursday, 09 April 2020 15:32

New Pro Training Series Opens with 'COVID-19 Stimulus Package – What’s in the New Law for Small Businesses'

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Hunt Demarest Hunt Demarest

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“This is speeding up the process, and we’re already seeing people get funded,” Demarest said.

 

Eligible businesses can obtain up to 250% of their average monthly payroll costs through the PPP. Some banks are calculating payroll based on a trailing 12-month period, while others are using the figures from the 2019 calendar year.

 

Payroll costs include total gross wages for all employees for the full year, the portion of health benefits paid by the business, the retirement account matches paid by the business and the state unemployment tax, which is 100% a company cost.

 

For employees who earn more than $100,000 annually, their wages must be capped at $100,000 when calculating the payroll cost.

 

Adding those four items provides the annual cost, which should be divided by 12 to calculate a monthly cost. Multiplying the monthly cost by 2.5 supplies the PPP loan amount for which a shop is eligible.

 

While the PPP is a loan, “the beauty of it is that it’s a forgivable loan,” Demarest said.

 

“If used for qualifying expenses within eight weeks of getting funded, the amount used on qualifying expenses will be forgiven. You won’t have to repay the bank or the SBA, and it won’t be taxable to you; it’s as close to free money as things get if you use it correctly.”

 

Some clarification has yet to be released, but qualifying expenses include the four items used to calculate monthly payroll costs, as well as up to 25% on utilities, rent and interest on qualified mortgages or loans.

 

“What they’re really trying to do is bring people back into the workforce or keep them there. They want to see you maintaining your employees,” Demarest said. “If you laid people off, bring them back to maximize the forgiveness amount of the PPP. If you use it for qualifying expenses, the majority of this loan will be forgivable.”

 

For any amount of the PPP used on unqualified expenses and non-forgivable, shops will have to repay the 10-year loan at a rate of 4%.

 

Quelling rumors the EIDL makes a business ineligible for the PPP, Demarest assured attendees they can apply for both, though the $10,000 grant through the EIDL would lower the forgivable amount of the PPP.

 

During the Q&A session, Demarest confirmed sole proprietors are still eligible for the PPP; one-man shops would use the portion of their income subject to self-employment tax for the wage estimate. He said applying for state/local grants will not make a business ineligible for the EIDL or the PPP, which he anticipates will start being funded very soon.

 

Demarest also provided clarification on FMLA, how utilities may be defined, the process for newer businesses and the possibility of using the PPP for backpay or back rent if those things were delayed in order to continue funding employees’ paychecks.

 

Although 1099s are not eligible to be included under a company’s PPP loan, the 1099 employee can apply for the PPP on their own.

 

“We’ve seen a lot of terrible things during this crisis, but the good is that small business are getting together," Demarest concluded. "We’re all going to get through this by sticking together and taking care of our teams.”

 

“Stay safe, stay healthy, and please join our future webinars," Cushing added. "We’ll come out of this stronger, together.”

 

A complete webinar schedule is available here or here.

 

A free copy of Demarest’s book, "Your Perfect Shop: How to Start, Run & Sell a Profitable Shop," is available here.


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