CARES Act FAQ - Investor Shift

Can I pay for education using either of these loans?

Yes, you can, but it is not recommended, as the proceeds from a PPP loan would not be forgivable, and the proceeds from an EIDL loan are to compensate you for actual economic loss sustained in your business.

Can I use PPP/EIDL for loss of rent?

Yes. Once your rents have stabilized and you have a better understanding of the total amount of lost rent, you can submit an application for an EIDL loan. Be prepared to substantiate the loss of rent based upon the decline in rent beginning March or April 2020, compared to a year prior and compared to previous months.

Can I use it for loss of time on construction and/or houses not selling on the market?

Until you know the extent of your actual loss, that would not apply for an EIDL loan. Once you have the knowledge of the loss and can substantiate it with documentation, then yes, go ahead and seek such a loan.

Can I file for PPP/EIDL on multiple businesses?

Yes, you can file for loans in different businesses, but you cannot file for two PPP loans on two different businesses of which you own the majority or control the majority. You can file for a PPP loan on one business and an EIDL loan on another business for which you own or control the majority of interest in both.

Can I use Unemployment and PPP/EIDL together?

No. If you are unemployed, you do not have any reason for a payroll protection plan loan. You may have an EIDL loan, but that is also highly unlikely. You are better off under the enhanced unemployment provisions of the CARES Act.

Can I use EIDL/PPP proceeds to pay myself?

Yes, you can use the proceeds from the PPP loan to pay yourself, if you are a sole proprietor, as long as you are paying yourself the consistent monthly income based upon the average of the previous 12 months of self-employment income.

Can I use those funds to pay myself and not hire back my employees?

Yes, but if you let employees go after February 15, 2020, and do not bring them back or do not replace them, it will severely impact the forgivability of your PPP loan.

If I have multiple business interests, can I apply under both businesses?

The answer is that the loan application specifically asks you to identify any other businesses you own, so the application process will weed out the opportunity to file and borrow for PPP loans on multiple businesses you own.

In calculating the amount of money you are owed, you do not include rent, utilities, debt service and so on. That was removed in the final version of the Senate bill. The payroll cost is carefully defined at the beginning of the legislation and includes compensation paid in any form to individuals who work for you as well as yourself. It does NOT include rent, utilities, debt service, etc.

What if I don't pay myself a salary?

If you don't pay yourself a salary, then no payroll amount has been lost; therefore, you are not eligible. Instead, you may want to look at the EIDL loan. The timeline for applying for an economic disaster loan is much longer than applying for a PPP loan.

What if I pay for car leases and other equipment that was in place before February 15, 2020?

If you are paying for leases on vehicles, that will not be forgiven. It has to be rent on a physical location or interest on a pre-existing debt on your business location.

Can you give me any additional guidance on what bank I should select to apply for these loans?

Start with a bank that you already have a relationship with because the Bank Secrecy Act and Know Your Customer Laws will apply. It will be much easier to deal with a bank with which you already have a track record and existing accounts than with a new bank for the first time.

I'm retired and all of my income comes from rentals and notes owned in my IRA and Roth. Much of that money is going to be interrupted. Is there anything in the CARES Act for me?

The CARES Act indirectly benefits you by giving relief to your tenants who still need to pay rent in the form of the $1,200 per person subsidy, and through unemployment. It also gives their employers certain benefits should they be working for an employer who is going to stay in business. Directly, the CARES Act has nothing for you, but indirectly, it has significant benefits.

Rehabs: More than 50% into 2 rehabs with hard money and private money loans, some due starting in August through October. Will EIDL cover paying off these loans or only more conventional lending? t that was in place before February 15, 2020?

It is uncertain as to what EIDL loans will cover for you because it is on a case-by-case, borrower-by-borrower, SBA lender-by-SBA lender basis. It takes into account your overall financial picture, so it is too soon to know the answer to that question.

Two LLCs, one with rental and other has a flip in progress that's on hold. Holding costs keep building. What help is there?

Once you know what your holding costs are going to be, you may be eligible for an EIDL loan. Another opportunity is for you to reach out to another investor and bring them on as a private lender, giving them equity participation in the deal, assuming there is enough profit in the deal, to begin with.

EIDL advanced grant and 25% of PPP can be used for rentals or mortgage interest. I own a service business 9S-Corp) that pays rent to another LLC that owns the building. I own the building through that different LLC. If I am applying to the loan with my business, what should I report to get some of the loan forgiveness, rents or mortgage interest?

It appears as if you are in a properly structured self-rental arrangement. The Sub-S business that takes out a PPP loan can use some of those funds to pay the rent based upon the same rental history and schedule followed over the previous year. You would use the payroll of your service business to qualify for the PPP loan, and then you could use up to 25% of that loan to pay regular rent consistent with what you have been doing in the past.