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This video and content was originally posted in the Beat The Box Stores Facebook Group.
UPDATE 4/3/20: Last night, new guidelines were released pertaining to the way in which PPP and EIDL loans are being underwritten:
- The new rules exclude subcontractors from the formula for wages.
- Owner’s compensation can be included as wages.
- The $100k per person limit includes employee benefits.
- The pay period in question is the last twelve months—not the 2019 year.
- Interestingly, you’ll need to subtract the Federal taxes withheld on employees pay from 2/15/20 to 6/30/20.
Please continue checking back for updates; we will continue to update this document as more information becomes available.
And for more details, check out this COVID-19 Stimulus Watch Party Follow-Up Q&A.
UPDATE 4/8/20: This is how you should count your employees when applying for a PPP loan for your flooring store.
For many, the upcoming federal stimulus package promises some relief from the economic hardships of the COVID-19 pandemic. But for flooring dealers, questions about the stimulus remain. What exactly does the package entail? How will it work? And what will it mean for the flooring industry?
To answer these questions, Broadlume (parent company of FloorForce and Creating Your Space) sat down with two industry experts—Bob Saunders and Marjorie Benson—for a roundtable Q&A on how the federal stimulus package will affect flooring dealers across the country.
Bob Saunders is the founder of Saunders CPA, an accounting & financial planning firm with 700+ SMB clients. Marjorie Benson is President of Friendly Floors, an Abbey Design Center. Together, they offered invaluable perspectives on the specifics of the federal stimulus package for flooring dealers, which you can read below.
While we’ve condensed this Q&A in the interest of readability, please feel free to watch the complete video!
Q: As we’ve read in the news, the federal stimulus was just passed. Now what? What does it entail?
A: Right now, many of the specifics are still in question, but here’s what we know:
- The stimulus is officially called the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
- An important part of the CARES Act concerns relief for small businesses.
- The US Senate has released a PDF called The Small Business Owner’s Guide to the CARES Act, which outlines almost all of the relief programs available for small businesses.
- These programs include:
- The PPP or Paycheck Protection Program—federal loans to help cover the cost of retaining employees.
- The Small Business Debt Relief Program—immediate relief to cover SBA loans for up to 6 months.
- Economic Injury Disaster Loans or EIDLs—loans for small businesses that suffer substantial economic injury as a result of a declared disaster.
- Emergency Economic Injury Grants—emergency advances of up to $10,000 for small businesses harmed by COVID-19 (must be within 3 days of applying for an EIDL).
Q: Why don’t we have more practical information or specifics about the CARES Act yet?
A: Right now, the CARES Act is around 800 pages. It will probably be around 5,000 pages when complete. It often takes months to interpret a law and make technical corrections to it.
Q: As a flooring dealer, how can the CARES Act help me continue to pay my staff throughout this pandemic?
A: There are two major options for flooring dealers with sizable permanent staffs.
- The Employee Retention Tax Credit, which gives you a tax credit (no surprise) for every employee you keep on your payroll, up to $5,000 per employee.
- The PPP we mentioned above, which is a loan of 2.5x your payroll. And: if you navigate it correctly, much (or all) of the loan can be forgiven, turning it into more of a grant than a loan. You can learn more about and apply for a PPP loan here.
Q: Which is preferable, the PPP loan or Employee Retention Tax Credit?
A: It’s impossible to say which is better, but many small business owners are going to go with the PPP loan because it’s easier to navigate and offers the chance of being forgiven. And worst-case scenario: if your PPP isn’t forgiven, you’ve gotten a loan at an extremely competitive interest rate (0.5% for 5 years). It’s a win-win.
Q: How can I get my PPP loan forgiven?
A: It depends how you spend your money over an 8-week period after receiving it. It’s a little complicated (so discuss it with your accountant), but if you only spend your PPP check on payroll and rent you should qualify for loan forgiveness.
Q: What exactly is an Economic Injury Disaster Loan or EIDL?
A: This is a federal loan of up to $2 million for small businesses that have been damaged by a declared emergency (COVID-19 qualifies).
Q: Does my flooring store have to have been directly damaged by COVID to qualify for an EIDL?
A: No—you can receive an EIDL regardless of whether your store or employees have sustained direct damage.
Q: Can I get a PPP loan at the same time as Economic Injury Disaster Loan?
A: You can, but you can not use the loans for the same expenses.
Q: For the purposes of PPP loans and EIDLs, who qualifies as an employee?
A: It depends on your lender and the way they interpret the CARES Act.
Q: When you talk to your lender, what documentation should you have prepared?
A: Lenders are understandably swamped at the moment, and you’re lucky if you can get someone on the phone. Rather than preparing documentation, prepare questions like “will you allow me to add subcontractors into the formula for wages?” and “will you let me add my owner’s compensation in as wages?”
Q: When can I begin applying for loans under the CARES Act?
A: You can begin applying on Friday, April 2.
Q: What records do I need in order to apply for a loan for my flooring store?
A: Your last 12 months of payroll records, your complete 2019 payroll records, your Certificate of Incorporation, how much you spend on health benefits—anything and everything related to your flooring store’s finances.
Q: Do the CARES Act benefits differ on a state-by-state basis?
A: Because the CARES Act is a federal stimulus, it’s a one-size-fits-all program and does not differ state-to-state.
However: if your store is in the midwest, your stimulus money is probably going to go a lot further than it would in say, New Jersey. To that end, some states are also setting up stimulus help for small businesses that you can look into.
Q: When you apply for a loan (PPP or EIDL) under the CARES Act, how long will it take to be approved? Lots of flooring dealers are counting on this relief to pay bills.
A: If you apply for an EIDL loan, you’ll receive a grant (up to $10,000) in your bank account within 3 days while the loan amount is determined. Given how new the PPP loan program is, nobody really knows yet.
Q: How do I select a lender for my PPP or EIDL loan?
A: Considerations for the underwriting of the loan include:
- All owners compensation (up to $100K)
- Compensation for employees that earn over $100K—and to include benefits in addition to this $100K
- Sub-contractors as payroll
- Flexible with the timing of the loan
As the situation surrounding COVID-19 continues to develop, Broadlume will continue to release informative content for flooring dealers. If you have any questions or comments about this Q&A, please don’t hesitate to post in the Beat the Box Stores Facebook Group. Thanks so much for reading!
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