By: imaubert
Read in 35 minutes

Obtain Your SBA Paycheck Protection Program Loan

 

Important note:

The video workshop is only available in Spanish, but you can find a complete transcription in English below.

 

PPP, What it is and How to Apply

Sean Salas

The SBA Paycheck Protection Program. This is the program that has a contribution of $349 billion dollars. This is the program that is in all the news. We already have almost 300 people listening right now and they have to pay attention because this is where the vast majority of the money is moving.

This program is intended to help employers cover their payroll costs. That’s the purpose. It’s called the Payroll Payment Protection Program. So it is important that you know the purpose, because you are going to hear some restrictions on what is forgiven and what’s not forgiven and you have to conceptualize the purpose. Now, if you are the only employee, well, your payroll is you, right? I mean, you are your expenses.

You have the possibility of having all or a large part of the loan forgiven. I’m not going to tell you it’s 100% or 80%. We will see those details in the calculation, but there is a potential to forgive the loan and, in fact, you do not have to make the first payment until after six months. So, the first six months you don’t have to make any payments.

Where do you submit your application? At a bank or a credit union. Many people say “but they are loans from the SBA, they are given directly by the SBA.” There is another program, the disaster loan, the EIDL, that we are going to enter a little later, and those are given directly by the SBA. But these are bank loans that are backed by SBA guarantee, ok?

The maximum size of this loan is $10 million, at a fixed interest rate of 1%, the maximum payment term of two years. And something to clarify: there are many people who were saying that initially the term would be 10 years and it is true, but last week the Government said “you know what, it’s not going to be 10, it will be two, ok?

How fast can you get this loan? Well, if you ask the government, they will tell you one day. The truth is that it is expected to be two weeks, ok?

Another important thing: these loans are “first come, first served”. That means that you have to get in line and those who get in line before are the first to get these loans. So it is very important that you request and apply now! If you have not done so, you have to do it tonight and we are going to give you all the information to do so.

Kenny Salas

In fact, the Government, that is, the Treasury Department, they give each bank a certain amount of loans and there are banks that have already run out of funds. In particular, there has been a comment from a Wells Fargo customer: “on Saturday, they started to lend and by Monday they had run out of money.” So that’s the point of “first come, first served” and you have to start right now. With that said, Sean is going to talk a little bit about what the future awaits.

Mariette Martínez

Before we continue, you said something very important: that this is the Payroll Protection Program and I think it is very important, before we move on, to talk a little bit about payroll. As an accountant, it is very important to understand that payroll really means payroll in English, but nómina in Spanish. 

But to explain it in a more simple way: if you are an employer and you are using a payroll company, say ADP or Paycheck, and when you pay yourself as an employee or if you pay employees, you are paying and deducting their taxes. If you are not using the payroll service that way, you are not paying payroll. You are paying differently and you are not going to qualify for PPP.

Sean Salas

Very good, how good that we have an accountant! Now, Alexander Torres also asks: “But if I do not have a payroll and I am a sole proprietorship, the only employee, then you don’t qualify for this, do you, Mariette?

Mariette Martínez

Very good question. Look: if you are a single owner, you are not an employee, you are the owner of your business and then you are under the rules of sole proprietors and independent contractors.

Sean Salas

And you can apply, the only thing is that the calculations of the loan are different but you can apply. I repeat Alexander: if you are the only employee or you are a 1099 independent contractor, do not worry, you can apply. The only thing is that you have to pay extra attention, since we will review those calculations too.

Kenny Salas

Sean, taking a step back, because I’ve received a lot of questions about the LLC, the type of entity. Go to “who qualifies” please. Just a tip there, very clear. This definition is very broad. Basically, if you were operating a business by February 15, 2020… if you close it or stop operating due to financial reasons later, don’t worry. But if from February 15 and back, in the past, you were operating and you have basically any type of business, there are very good chances that you will qualify since you satisfy that minimum requirement. Now, in terms of the calculations and how much money you can get, that is another question that we are going to review right now.

Mariette Martínez

Brothers, friends, very important. Because I saw it like a thousand times: contractors paying someone as a contractor is not paying someone on payroll, ok? That needs to be very clear. Paying a contractor is not paying someone under payroll, that is very important, please.

Sean Salas

Very well Mariette, perfect. We have to keep going because we have a lot of information. Now how much capital can I get? Use the following formula: You multiply your average monthly cost of payroll payments by 2.5. That equals your maximum loan, ok? So it’s perfect, great. Easy or difficult? Well, either, because there is a lot of science, a lot of science and details on how to calculate your average monthly cost of payments. Let’s go step by step, ok?

How much is your average monthly cost of payroll payments? Perfect. There Mariette was already explaining a little bit about the context of how it can be interpreted. But let’s go into the details because here, I think, are many questions and we have to get into the details.

First you have to bear all the included costs. After that, the excluded costs and adjustments are reduced, which we are going to define later. That will equal your average payroll payment cost for the year. And there are different ways to calculate the average. Right now we are going to see them, don’t worry.

First you have to define what are the included costs and what are the excluded costs and adjustments. But basically for employers they are: salaries, commissions, tips, paid vacation days, benefits, etc., ok? Now, someone had asked me: “But if I am a sole proprietor, independent contractor and do not have employees, how do I do it? Don’t worry. They are the same compensation and income in the form of wages, conditions, income and net profits self-employment or similar annual compensation that is less than $100,000 a year. Because, for example, you can’t pay yourself a salary of $200,000 and say that those are your payments. No, no, of course, the Government already knows that. So you have to put a limit. On that point. Mariette, anything to add to these costs?

Mariette Martínez

Yes, great. Only to explain: when we are talking about your net earnings, which are your net profit, it is very important that you understand that this is money that you have already reported or will report in your 2019 taxes or possibly you have been reporting it in previous years. If you have not been reporting your earnings, think about it and possibly, you will qualify for something lower, or not, because many believe that it is good to report less profit. But this is going to affect your calculation.

Sean Salas

Interesting Mariette. In Camino we have always told people “everything has to be reported”. Believe me, there are ways and you should always report the whole truth because it will always cost you in the long run, if you don’t report everything. So, very good point, Mariette, because you still have these costs, formally, those expenses, but you have not reported it, and then that will limit the calculation, right Mariette? Very good point.

Mariette Martínez

That’s right.

Sean Salas

Very good point. Now, there are other costs or adjustments. If you are an employer, you cannot add more than $100,000 of salary. For example, if my friend Miguel earns $120,000 or pays his employees $120,000, only $100,000 can be calculated. You cannot calculate more than $100,000. So if you would exclude $20,000, ok? Retirement payroll taxes are excluded; compensation to employees living outside the United States are excluded; and paid sick or family care days. Now, I know this is a lot of information.

How much capital can I get? How is it calculated? Because there are companies that were just formed this year, there are others that are seasonal employers, there are others that are normal. So I’m going to tell you what multiplies that 2.5.

If you are a normal company, 2.5 is made on your average monthly payroll costs incurred throughout 2019. So, easy example: you had payroll payments of $120,000 in 2019. Divide that by 12. Your payments, your monthly cost average, how much is it? $120,000 divided by 12 is $10,000. Multiply that by 2.5. So you can get $ 25,000, ok? So: $10,000 for 2.5 is $25,000. Perfect.

Now. If you are a business that was not formed in 2019 and barely settled in 2020, then the calculation is different. You’re going to make 2.5 for your average monthly cost of payroll payments incurred in January and February 2020. So that calculation is different. 

And there is another calculation for seasonal employers, right? Because there are certain times that are lower and less. I put the formula here. We are not going to go step by step of how you do it, I just put it there, because how you do it depends on the company, when you were formed and if you are a temporary employee.

Mariette Martínez

Sean I want to include something very quickly there, because we are talking so much about the average monthly cost of payments, and something very important that I want our community to start thinking about is how they are going to get these documents. A very easy way to start collecting those documents to do this calculation, is, for example, if you have payroll employees (again that point) you can go and collect their 941.

Those are your forms that the payroll has been reporting each quarter. And you grab all four 941s and that’s going to tell you how much you paid in payroll. Also, if you already made your W3, which they should do in January 2020 (it had to be done, hopefully they did), you can also use your W3, which says the total payroll payment you made in 2019. 

Sean Salas

Ok. How much of my loan can be forgiven? Now that’s the big question. How much am I forgiven? That’s easy. Of those payroll payments, among other payments between mortgage interest, rent, for this loan can be forgiven, those costs, for the first eight weeks after you have obtained it. So, for the first eight weeks, when you use that money towards these things, you will be forgiven that sum that is carried out with payroll payments, mortgage interest, rent, public services, etc.

Now. There is a disclaimer there: due to the high demand for the program, it is expected that no more than 25% of things not directly related to payroll payments will be forgiven. So the big part you want forgiven, 75% of what’s gonna be forgiven, should go to your payroll payments in the first eight weeks after you get the loan. Agree?

Mariette Martínez

Yes, perfect.

Sean Salas

Very well. Now, there are conditions for loan forgiveness. Remember, I told you at the beginning of this talk: The purpose of this loan is for you to keep your employees, to keep your employees, and you pay them the same to keep running this economy. So if you reduce it… There are many people who got so scared that started to cut wages or unfortunately, fire people. So this is an incentive for you not to do that.

So what are the rules? You can’t cut salaries more than 25% before all this happens, ok? And you can’t reduce the total number of full-time employees by that percentage. That said, suppose you said: “I fired many people.” Do not worry. You have until June 30 to tell them: “No, don’t worry. You can return to this company, because if I use the money to keep you employed, they will forgive me that part of the loan, ok?

Now, it could be that many people say: “Look, I prefer not to employ people back”, that’s fine. I mean, the purpose is for you to do so, but if you don’t, it’s just a loan and it’s not forgiven. That’s the end. If you don’t meet the end, it is a loan and you pay it at a percent, which is not bad. Mariette, something?

Mariette Martínez

I want to share a point here because it is very important for you to know that when you are talking about employees, and you all know as Latinos, I know you understand that they are talking about families, about how people are going to eat, right? We are giving the example of possibly you are going to grab all your people behind. But if you just have work for a little time and then you are going to take out again, and right now they are in unemployment, possibly they need to think that. If they are earning more while unemployed and you only have two or three weeks of work and then you are going to take them out again…

Please, friends, think about it because it will be more difficult for them to come back and qualify again for unemployment, if you are bringing them to win this loan and then you are going to take them back. That’s what I’m talking about and it’s my opinion. But I say it because I know that your employees are your family and they also need to eat.

Sean Salas

Very well. Brilliant. So important questions that I already know you have. Can I apply if I only have ITIN? The official answer is no. Unfortunately these PPP loans and the other government program do prevent people from applying if they only have ITIN. Now I want to tell you something. First: the rules are changing day by day. Believe me, on behalf of all of you who only have ITINs, I am fighting for these rules to change for you.

Number two: There are other resources and funds that are available to you, in the form of a loan, to assist you in these times. There are other options and I want you to listen anyway. I want you to keep up to date. I want you to fill out an assessment at the end of this presentation, because if you don’t, I can’t direct you to the proper resources to keep you informed.

Second. Does Camino Financial offer PPP loans? At the moment, no. The rules at this time do not allow us to lend these PPP loans. That said, I tell you again: the rules are changing day by day. There are different banks that want to affiliate, either with Camino Financial or with other associations, and when that happens, we will help you.

But go to your bank. If you already have a relationship with your bank, go to your bank immediately, because they have the infrastructure and the banking relationship so that they give you a loan and accept applications. But each bank is different, and we already heard the Wells Fargo example that it was accepting applications, but unfortunately it had to close the application website after 36 hours. Kenny, were you going to comment something?

Kenny Salas

Thanks Sean. In fact we received a great question from Henry José Alcalá. If you have the social security number but the residence is pending because it is in process, you do qualify. Now, to say our position on this is that technically there is a box that says that you are not committing an illegal act, ok? Technically, depending on which lawyer you ask, that prevents you from applying for a loan. In Henry’s case, he has his social security number, he is in the process of getting his immigration, and therefore he can qualify.

Again, it is important that you know: at the end of the day, it is the bank that is going to give you the loan and the SBA guarantees or is going to provide the funds for that loan, but it is the bank that is going to lend it to you, ok? So it is important.

Another question related to this is: If I am in the process of getting my documentation, my documents to be a resident of the United States, does it hurt if I apply for this loan? You know, these procedures depend on each situation. That question is great for your lawyer or to whom is advising you on getting your citizenship, because depending on the situation, maybe you can, maybe it will hurt you or maybe it won’t. We can talk about many scenarios, but we still put up with it.

Sean Salas

Yes, after all they have to accept that they are not committing, and we are not going to get into politics here, but it can be interpreted that they have committed or are in an illegal situation, ok? That is the box that has to be said I test this, ok? And there are certain people, and the Government, who can interpret one thing or another. And well, after all, what I do not want them to do is that, technically, if you say that something is true and it isn’t, that is an act of fraud and that can hurt a lot.

So. At the end of the day, we are just paying attention to that particular box that says about legal or illegal activities and one can interpret one against the other, but people who are in the process of being legal, well you ask that to your lawyer, because you’re still going through the process properly and everything is fine. Perfect, thanks Kenny.

Ok, so are there any other questions? The second one was on that slide… Kenny had already answered that question. So what do I do if I don’t have an accountant or payroll system? They have to connect to an accountant. Gladly, answer our survey and we ask you that question, if you have an accountant, and we will gladly put you in touch.

What do I do if I pay wages in cash? There things can get complicated so discuss it with your accountant. Gladly if you answer the survey we will help you with that.

Is a guarantee requested? The answer is no. This loan does not request collateral or personal guarantee.

Where can I apply? With the bank, we had already discussed it.

Does it affect my chances of getting a PPP if I ask for a loan from another company? Very good question. The answer is that, first, you can only make one PPP application at a time. You can’t make a PPP application with different financial institutions, because otherwise it can harm you.

Now, if you have another loan that is not PPP nor from the Government, that will depend because I imagine that the banks are going to see if there is a hard shot of your credit and if you have too many loans… They may or may not see it. Right now, the banks, just so you know, are also learning the new rules of this. So we can’t say yes or no, ok? But what I can tell you is that this loan itself focuses less on what you can repay, because if you use the money for payroll payments, you will be forgiven. So the philosophy itself is that it may not necessarily harm you, but we are not sure.

Mariette Martínez

I want to make a few points of these frequently asked questions. Number one, on your point you should call your accountant. I know that many of you don’t have an accountant or not one that can help you with that, because they may not know about this. And I don’t want them to be struggling or worrying.

Camino Financial, after this call, will send you a spread sheet where you can put your payroll, you can do the calculation and you can know how much you qualify for. It is very important that you see what Camino Financial will send later, because many times if you are waiting for an answer, right now, we are all busy, the accountants more than anyone.

The second thing that is very important is that you cannot do PPP twice, but if you have more than one business, you can qualify for each business. Very important. 

Sean Salas

Very good point. Someone had asked that question, so thank you Mariette. Jesús García had asked that question because he has three businesses, if he could apply for all or only one. Very good point, as long as it is at the business level, one for each business, it is another way to say it. Wendy, hello how are you?

Wendy Soto

Very grateful for all this excellent information. And my question is the following, now that the accountant spoke: I have a company that has already been registered for three years. However, I have another one that has around seven or eight months, but is not yet fully operational. What can I do in that case?

Mariette Martínez

I did not understand. I did not understand the last part.

Wendy Soto

I have the first company that has been operating for about three years, but I have another one that I opened, that is, I registered it, about 7 or 8 months ago, but it is not fully operated yet. Right now what I’m doing…

Sean Salas

Wendy, are you generating income or sales?

Wendy Soto

Sales. I work in the sales area.

Mariette Martínez

And in those two companies, do you have payroll or are you the sole proprietor in both companies?

Wendy Soto

Yes, just me.

Mariette Martínez

You have two separate companies with two different EIN numbers, right? 

Wendy Soto

Yes.

Mariette Martínez

Ok. You can see if you can apply separately for each company as the sole proprietor.

Sean Salas

But another thing Wendy. The second company you just opened does have to have reported income before February 15, 2020, ok? So if it’s just expenses and you haven’t had any income or commissions or wages, then you can consider that this business is not operating. That is a detail. And of course, we would have to know more about this business finances to tell you clearly, but as long as there is a form of income that was reported before February 15, 2020, you can apply separately for the two. Perfect, thanks Wendy and God bless you. 

Wendy Soto

Ok, thanks.

Victor Troccoli

Good evening, how are you?

Sean Salas

Very well, thank you.

Victor Troccoli

Thank you very much for your collaboration, helping us with all this information, we really appreciate it. Well, my question is in the case that, for example, I already applied for the disaster loan, the credit that gives you the emergency access, the $10,000, could I also have access to the PPP?

Sean Salas

Yes, yes, yes. Very good question. So, and in the next section we are going to go into details about that one, but the answer is yes you can apply for both, ok? But I am going to give you some important things that you should know.

First: the purpose of the capital has to be used for different things. So for PPP, the purpose is payroll, right? So you can’t use the EIDL for payroll, you have to use it for other things. Now EIDL does give you more flexibility to use it for other things, but you can’t use it for the same things.

Number two: the $10,000 cash advance that they are going to give you in the EIDL, that is going to lower the adjustment of how much you can forgive under the PPP, because let’s suppose you grabbed the EIDL before the PPP. In fact you can refinance the EIDL within the PPP, you can do it, but when you do the forgiveness calculation you have to reduce those $10,000 that they gave you, understand? 

Victor Troccoli

Oh yes, of course.

Sean Salas

Perfect. Thank you Victor.

Kenny Salas

Hi Jaime, how are you? Goodnight.

Jaime Hernández

Very well and concerned. 

Kenny Salas

Yes, we are all concerned. How can we help you today Jaime?

Jaime Hernández

There are different applications from the Government; I was looking at one called SBA. Is it different from the one you are transmitting or the one you are telling us at this moment?

Sean Salas

No, it is no different. In fact, the SBA stands for Small Business Administration. Now, traditionally, they back up bank loans, that is, they give a guarantee to loans that banks give and that is what they call themselves SBA Loans.

Now, there are many different types of SBA Loans: there’s the 7A, the 504… There are many types of SBA loans, ok? Now, in this presentation, and where you want to focus Jaime, it’s in two programs in particular that are designed for this moment. One is the PPP program, and it will sound a bit confusing to all of us, but the PPP program is sub-ruled under the 7A program. 

So when you go to your bank, you just tell them PPP and don’t get confused if they say 7A. Yes, it’s 7A technically, but under different rules for this situation, ok? So you say to them: I want a PPP loan and with pleasure they can share the application that is available.

There is another program that is the Emergency Injury Disaster Loan, EIDL, which we are going to get into detail next. That program, as an exception to what I just told you, is given directly by the SBA. They anchor it directly towards you. It is not normal, but the program is designed for emergencies, so the SBA gives it directly. And Jaime, that’s a very good question because the second part of this presentation will focus on the EIDL.

Jaime Hernández

Because I made the application. When you begin you said they didn’t accept the ITIN number. I only have the ITIN number, and they even asked me for the account number and they asked me for the RTN number in case there was a deposit, but nothing has really happened and I don’t know what to think.

Sean Salas

Yes, the thing is this. Our interpretation of one of the attestations that are given, possibly (we cannot say it definitively) puts people with ITIN at risk. So we are telling people: right now there is not enough clarity from the SBA for us to say with all the confidence in the world that you can apply if you only have ITIN.

That said, and Mariette if you don’t mind answering this part, there are other benefits that these two particular tax programs don’t include. Mariette, can you talk to Jaime about those other benefits? Because I think Jaime can use them there.

Mariette Martínez

Yes, let’s see very quickly, because it is very detailed. When I started I said that there are almost three trillion dollars in this CARES. You can see if you can qualify for credit. There are some credit, tax credits. If you are reporting on your taxes, they will lower your earnings with tax credit. A lot of people right now are worrying about loans, but credits are also great because if you have credits in your taxes, that will lower your earnings and that means that you will pay less taxes. There you are also saving your money.

Sean Salas

Another important part, Mariette, very good point: those advantages of tax credit, you cannot take advantage of those and ask for the loan; it is one or the other.

Mariette Martínez

That’s right.

Sean Salas

So Jaime, with pleasure we can share information with you. Fill out that survey because part of the purpose of that survey is asking people: tell us how things are. If you don’t want to tell us it’s fine, right? But if you only have ITIN, what resources am I going to push? I’m going to push you the tax credits, because you can take advantage of those and that is a very big benefit for many people.

That said, we are not going to get into details about this in this program, but we can gladly follow up and we will send you information about it, okay?

Kenny Salas

And one last point, and if you want Sean you can start presenting the next section, it’s the fact that if the bank has not answered you yet, it does not mean that you have not qualified. Keep in mind that banks now, for example the Bank of America have received almost 180,000 applications in a matter of days. So, as you can imagine, the banks are a bit saturated, so you also have to have a little patience to wait for them to respond.

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