Financial Relief and Support Everything You Need to Know as of - - PowerPoint PPT Presentation

Financial Relief and Support

Everything You Need to Know as of April 9, 2020

Snapshot: The Funding Landscape

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Clarity

Government funding

• As a result of the CARES Act, the US Government

is launching unprecedented levels of government support for small businesses

• $377B of funding from the CARES Act is directly

allocated to small businesses, making it the largest SMB funding program in US history

• There is speculation of a CARES Act V2 launching

in the next month expanding the total provided to $599B. However, it is still very important to apply to V1.

Private funding

• Private funding options exist, but the

specifics vary across providers

• Loan terms will be less flexible and have

higher interest rates

• We consider this to be more prevalent in

the future. We will update when we have more information.

Focus for today

• A long-standing loan program that has now been expanded through the CARES

Act.

• Intended to assist businesses in regions affected by declared disasters
• Major benefit - potential to receive a grant of up to $10K within days of being

contacted by a loan officer

There are Two Primary Federal Funding Options

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Clarity

• A new $349B program as part of the Coronavirus Aid, Relief, and Economic

Security (CARES) Act

• Intended to provide American small businesses with eight weeks of cash-flow

assistance through 100 percent federally guaranteed loans

• Can be forgiven and essentially turned into a non-taxable grant

Paycheck Protection Program Economic Injury Disaster Loan

How much can be forgiven?

Economic Injury Disaster Loan (EIDL)

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Who can apply

Clarity

How much funding can you expect?

• The grant received in advance of the loan will not have to be repaid
• The loan amount will need to be repaid, though interest is low (3.75%) and the

term-is long (up to 30 years)

• Any entity type that has suffered substantial economic injury by a disaster,

including Sole Proprietors/contractors

• Your business must have been in operation before January 1, 2020
• Up to $2M is available in the form of a working capital loan
• An emergency grant of up to $10K can be issued within days of being contacted

by a loan officer—however, we are hearing of SBA delays at this time

• Applications are now open through SBA’s website:

https://covid19relief.sba.gov/#/

Economic Injury Disaster Loan (EIDL)

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How to Apply What to Consider

Clarity

• The are restrictions on what the funds can be used for, it can only be used for
• perating expenses
• There’s a high volume of applications—so be patient when waiting to get

connected with a loan officer and potentially receiving the grant!

• The initial disbursement for any amount approved will be no more than $25,000.

We currently don’t have word on when the rest will be disbursed.

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EIDL: An Overview of COGS/COS

Guidance

• Cost of Goods Sold (COGS) is the total cost associated with making or acquiring any goods

sold during the reporting period.

• It’s all about the production costs you incurred, and doesn’t include operational expenses

for the general operation of your business.

• Cost of Service is harder to define as it’s industry-specific. Think of a direct input (e.g. a car

part if you’re a mechanic) that cannot be used in more than once in a service.

• Subtracting COGS from your Gross Revenue gives you your Gross Profit - this is why the

SBA is asking for both on your application.

• Additional reading is available here.

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EIDL: Best practices

• Apply —While there is uncertainty around grant receipt times, our perspective is that given

the ease of applying, the potential return on your time is well worth it

• Being up to date on tax filing is strongly recommended before you apply
• Confused with the application? We have a dedicated team offering support and guidance
• Have your 2019 Gross Revenue and total Cost of Goods Sold amount prepared. Unsure what

constitutes a Cost of Goods Sold? Check out our blog post here.

Guidance

How much can be forgiven?

Paycheck Protection Program (PPP)

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Clarity

How much funding can you expect?

• If you spend a minimum of 75% of the funds on payroll, and the remaining on rent, leases,

utilities, or interest payments on mortgages, the full amount is eligible to be forgiven

• Maintain your number of staff and level of pay—otherwise the total forgivable amount is reduced

proportionally

• Bench recommends keeping the deposit and use of PPP funds to one bank account. It’s also

imperative you collect all relevant payroll documents, invoices and statements. This will make it easy to apply for loan forgiveness.

• Any entity type, including Sole Proprietors
• Your business must have been in operation before February 15th, 2020
• 1099 contractors can apply for this assistance on their own, and should not be included in the

business owner’s application

• 2.5 times your average monthly payroll expense—up to $10M
• Payroll is defined as W2s that are US-based residents and citizens, up to $100K annually (e.g. If

you/your employee makes >$100K annually, it will cap at $100K)

• For Sole Proprietors and contractors this amount is equal to your average monthly net profit

Who can apply

Paycheck Protection Program

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How to Apply What to Consider

Clarity

• Applications will be run through SBA backed lenders
• At this time, some lenders are requiring a previous relationship with applicants
• While the base requirement is average monthly payroll expenses, supplemental

documentation may be requested depending on the institution

• Payments are deferred for 6 months but interest will accrue during that time

(interest = 1%)

• The PPP application is live as of Friday, April 3rd
• You can apply through an SBA backed lender, or an SBA agent (such as Fundera)
• Contact your bank to inquire if they have opened applications to their clients
• For contractors and self-employed individuals, applications are expected to open on

Friday, April 10th (more detailed information is expected this week)

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• Make sure you have the required documents ready to calculate your average monthly

payroll expenses. This includes: ○ Salary and wages per employee (up to $100K in a year) ○ Payment for vacation, parental, family, medical or sick leave ○ Payment upon dismissal ○ Group Health Insurance premiums and benefits ○ Retirement contributions ○ Employer paid portions of state and local taxes

• For Sole Proprietors and Contractors

This will be your net income in 2019 as reported in your Schedule C divided by 12. Our blog post with more details can be found here.

PPP: Payroll Expenses

Guidance

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PPP: Banks Update

Guidance

Bank of America Application site: https://about.bankofamerica.com/promo/assistance/latest-updates-from-bank-of-america-coronavirus/small-business-assistance Requires previous accounts?: Yes US Bank Application site: https://apply.usbank.com/applications/business/InquiryForm Requires previous accounts?: No, but they will focus on current clients first Status: Available PNC Application site: https://www.pnc.com/en/customer-service/paycheck-protection-program.html Requires previous accounts?: Yes TD Bank Application site: https://www.td.com/us/en/small-business/covid-sba/#/ppploan Requires previous accounts?: Yes JP Morgan Chase Application site: https://recovery.chase.com/cares1 Requires previous accounts?: Yes Citigroup Application site: https://online.citi.com/US/JRS/pands/detail.do?ID=smallbusinesspppinfo Requires previous accounts?: Yes Wells Fargo Application site (must log in to online banking): https://update.wf.com/coronavirus/paycheckprotectionprogram/ Requires previous accounts?: Yes Unavailable Capital One Application site: https://www.capitalone.com/updates/coronavirus/small-businesses/ Requires previous accounts?: Yes

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PPP: Best Practices

Guidance

• Contact your existing financial institution to find out if they are taking PPP applications, or

will be in the future ○ If you cannot apply to a bank you have a current relationship with, follow up with other community banks in your area

• Keeping up to date with IRS compliant bookkeeping is more important than ever
• Tracking the use of PPP funds to apply for forgiveness is essential

○ Opening up a new bank account for the loan funds is an easy way to stay on top of all

• f the activity you are using the funds for

○ Keep payroll documents and any applicable invoices or supporting documentation

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We recommend applying to both the PPP and EIDL

• We consider this the “no regret” move—you are potentially able to take advantage of the

strengths of both funding options. The only thing to consider is that your credit will be checked for the EIDL

• Being approved for either loan does not mean that you need to accept it
• If approved for the EIDL and later the PPP, the funds from the PPP (partial or full grant) can be

used to cover the remaining balance of the EIDL

• If you are able to secure both loans, the $10k grant (EIDL) will be subtracted from the

forgiveness amount (PPP)

Guidance

• If you are paying W2’s through payroll, to maintain eligibility for forgiveness on the PPP funds,

it’s best to keep them on payroll rather than have them pursue unemployment benefits

• If an employee has been let go before April 26th, 2020, they can still be rehired to maintain

the eligibility of forgiveness if rehired before June 30th.

• If you are a Sole Prop/contractor, your state unemployment program is an option but will be

dependent on you shutting down operations

• As unemployment benefits are state based programs, communicate with your state

Department of Labour regarding your potential unemployment benefits payments

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Unemployment

Guidance

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We're here to help you take action now.

Actions

Other Resources

• Our dedicated client portal has additional detail and resources for small businesses:

bench.co/disaster-loans-financial-relief-programs/

• Client information page with latest news, FAQ, recordings of past webinars, and signup

for future daily webinars here

• Chat function on the client information page to connect you directly with our research

team, who can quickly get you answers on specific questions during business hours

Dedicated Financial Relief Page Services

• Work with your bookkeeper to make sure your books are up to date
• Catch Up Bookkeeping—Now is the time to get any missing months in your Bench

account completed. Schedule a call, or contact your bookkeeper to get a quote

• BenchTax—Make sure you are up to date with your tax filing. If you aren’t, and don’t

have a way of filing taxes, we can help. Schedule a call to learn more about BenchTax.

• Application support—If your financial institution will not be servicing PPP loans, we

suggest using Fundera

Questions

Let’s pause for a few minutes, so everyone can submit their questions.

What’s Next?

Join us Monday to Friday 11 AM PDT for our Webinar and Q&A period Visit our FAQ page where we’ll put our most up-to-date information: bench.co/blog/resources/client-financial-relief-faq/ We’re here to keep you informed, and to help protect your business