The last few months have proven to be challenging, at best, for most small businesses. While there have been a number of assistance programs to help lighten the financial blow, there are still many questions from small business owners. This article covers the most frequently asked questions. 

The Paycheck Protection Program (PPP)

How do I pay myself if I’m a sole proprietor in order to maximize the forgiveness?

Sole proprietors are not employees, so the pay period doesn’t apply. Your compensation forgiveness is determined by your 2019 tax return and forgiveness amount is capped at $15,385. The SBA has not requested any additional income verification on its sample application, however, eligible non-payroll costs including business mortgage interest, rent, and utilities are based on payments incurred during the eight-week forgiveness period and need to be verified.

My husband and I own an LLC together. Are we counted as 1 employee or 2 employees when applying for forgiveness? 

Owners are not considered employees. For purposes of loan forgiveness, your compensation is listed on Line 9 of Schedule A. A list of owners and their compensation needs to be provided and compensation for each is limited to $15,385.

Do I need to count employees who quit voluntarily in my FTE calculation?

The newest IFR explicitly answers this question: 

“When an employee of the borrower is fired for cause, voluntarily resigns or voluntarily requests a reduced schedule during the covered people or the alternative payroll covered period, the borrower may count such an employee at the same full-time equivalency level before the FTE reduction event when calculating the FTE reduction penalty.”

There is also no reduction for employees that you try to rehire but choose not to come back as long as you’ve made a written offer to the employee and informed the state unemployment department within 30 days.

Economic Injury Disaster Loans (EDILs)

I’ve heard the SBA has changed the rules regarding the maximum loan amount from 2 million to $150,000.  Is that true? 

The SBA website still lists $2M. 

What is the difference between the advance and the loan? 

The EDIL advance was given to most applicants who were able to apply for the loan and requested the advance. This amount does not have to be paid back, although it will be counted against any loan forgiveness you receive under PPP.

My EDIL was denied because of unsatisfactory credit history. What do I do now? 

You have the right to request reconsideration of the SBA’s decision. You should have received a formal letter of denial from the SBA. The letter must be in writing and either mailed, faxed, or emailed to the SBA.

Pandemic Unemployment Assistance (PUA)  

If I do not plan to apply for forgiveness, and will be paying my loan back at 1% over 2 years, can I just spend all the money on rent (even if it takes 6 months), and then legitimately claim UI for myself for the time when my business was mandated to be closed by the state?

If you’re not applying for forgiveness, you don’t have to abide by the eight-week time frame and can spend the funds on any of the allowable expenses including payroll, business mortgage interest payments, business rent or lease payments, and business utility payments.

There are many more questions that are answered in the full article, which you can read here.