Surly Thread of Business Owners/Managers, Etc. & Current Business Climate

[2300 Nueces 163]

1 minute ago, VABuckeye said:

Care Act Loan Information

This is important.  It's the only criteria listed for a Care Act loan.

 

What is the interest rate?

[troph 24781]

I'm in a similar boat. We're a startup but didn't start paying anyone till September. Can we average from September till now or is our average going to be dragged down by having to add all those months where we didn't pay anyone anything?

Hang on...

 

If you started business after June 30 2019 then you get to look at Jan 1 2020 to Feb 29 2020. Page 19 of the senate bill.

[VABuckeye 2472]

Just now, 2300 Nueces said:

What is the interest rate?

Not to exceed 4%.

[troph 24781]

Negative......

You can if the contractor is subject to SE tax...

See page 12 of the senate bill in definition of payroll costs.

[2300 Nueces 163]

3 minutes ago, VABuckeye said:

Not to exceed 4%.

Not great.  It's going to be hard to pull that in this environment.  If you have unsecured debt, maybe default and come back later.  4% in this economy might be considered slavery.  I doubt many CC balances ever get paid.

[2300 Nueces 163]

1 minute ago, troph said:

You can if the contractor is subject to SE tax...

See page 12 of the senate bill in definition of payroll costs.

I saw that.  New territory for banks. 

Edited March 28, 2020 by 2300 Nueces

[VABuckeye 2472]

Just now, 2300 Nueces said:

Not great.  It's going to be hard to pull that in this environment.  If you have unsecured debt, maybe default and come back later.  4% in this economy might be considered slavery.  I doubt many CC balances ever get paid.

You saw the part where it's 100% forgivable if you use the money for the intended purpose, right?  That makes it 0%.

[troph 24781]

Ok that makes sense completely 
2 questions for the board:
1) Do you have to actually lose money in order to get this loan?  I’m asking for my boss on that one as I think he probably got enough revenue from before shit shut down to be better than q1 last year- but projecting out Q2 things might get dicey. If
you have to lose money how much and over what time period
2) I just started a new 4 employee business   February 18, 2020. My first payroll was February 29 and I’m total we’ve had 3 payrolls. Can I get in on this action?  How does one get in on this action- I’ve never done a business loan before because I have never had any interest in saddling my companies with debt- but if they are essentially giving away free money...

You can get in on the action but the loan will be small.

Lose money? No this is a bank loan. You gotta look bankable with the exception of the virus crisis.

[2300 Nueces 163]

1 minute ago, VABuckeye said:

You saw the part where it's 100% forgivable if you use the money for the intended purpose, right?  That makes it 0%.

Wow, no I didn't see that.  Inflationary?  Well, stagflationary. 😕

[troph 24781]

You saw the part where it's 100% forgivable if you use the money for the intended purpose, right?  That makes it 0%.

100% so long as you maintain your pre Covid employment levels both head count and amounts paid

[troph 24781]

Care Act Loan Information
This is important.  It's the only criteria listed for a Care Act loan.

For eligibility purposes, requires lenders to, instead of determining repayment ability, which is not possible during this crisis, to determine whether a business was operational on February 15, 2020, and had employees for whom it paid salaries and payroll taxes, or a paid independent contractor.

 

Right. Bankable businesses prior to the crisis but if a toilet dweller or high growth with lots of losses then no/possibly no.

[troph 24781]

I saw that.  New territory for banks. 

1099 coverage is intended to cover the fig economy. You can’t include companies you 1099, only individuals that are essentially being paid comp via 1099 and not W-2.

[Samson's Wig 3190]

6 minutes ago, VABuckeye said:

You saw the part where it's 100% forgivable if you use the money for the intended purpose, right?  That makes it 0%.

This.

[VABuckeye 2472]

Just now, troph said:

 

Right. Bankable businesses prior to the crisis but if a toilet dweller or high growth with lots of losses then no/possibly no.

I didn't read it that way at all.  The criteria for a loan seems to be that you prove that you are a business as of February 15th and you document your expenses.

[ChiTownDoc 21139]

4 minutes ago, troph said:

1099 coverage is intended to cover the fig economy. You can’t include companies you 1099, only individuals that are essentially being paid comp via 1099 and not W-2.

Ok so we pay the doctors 1099 and since we sold to PE I'm paid 1099.   Will the doctors being paid as 1099 have some recourse?  The physician assistant and nurses etc are employed so starting April 1 we'll get some help on those that can't work.  We do have an HR dept but I like to know at least a little bit on my own.  Appreciate any help. 

[VABuckeye 2472]

Are you a company receiving a 1099 or an individual, Doc?

[ChiTownDoc 21139]

8 minutes ago, VABuckeye said:

Are you a company receiving a 1099 or an individual, Doc?

I get paid my CEO pay as a salary.  I get paid on patient care/billing as a 1099.  I honestly don't care one bit about my own pay.  But some of our doctors are in a tough spot.  One lady's husband is undergoing chemo so she can't go in.  We have her set up via telemedicine but she's only gonna be at 50% productivity doing that.  Her and a few others (couple positive COVID) can't work and I don't think we have guidance on how we can help.  Our PE group is very fair and we're looking at giving bonuses early etc to help on our side but we will likely need govt help too. 

Edited March 28, 2020 by ChiTownDoc

[troph 24781]

I'm outlining the whole thing (like law school days or something, wtf).  happy to post later.

quick note - someone asked about utilities - it's not defined at the beginning of the bill but then "covered utility payment" is defined later and includes electric, gas, water, transportation (?), telephone and internet access.

 

[troph 24781]

30 minutes ago, ChiTownDoc said:

I get paid my CEO pay as a salary.  I get paid on patient care/billing as a 1099.  I honestly don't care one bit about my own pay.  But some of our doctors are in a tough spot.  One lady's husband is undergoing chemo so she can't go in.  We have her set up via telemedicine but she's only gonna be at 50% productivity doing that.  Her and a few others (couple positive COVID) can't work and I don't think we have guidance on how we can help.  Our PE group is very fair and we're looking at giving bonuses early etc to help on our side but we will likely need govt help too. 

looks like the affiliation rules are waived for this loan.  PE owned companies usually don't qualify because when you count affiliated companies they in the aggregate aren't small businesses.  I assume someone up the chain is all over that.  while we represent some portfolio companies we aren't a big firm so we aren't advising the PE firms directly.

[ChiTownDoc 21139]

1 minute ago, troph said:

looks like the affiliation rules are waived for this loan.  PE owned companies usually don't qualify because when you count affiliated companies they in the aggregate aren't small businesses.  I assume someone up the chain is all over that.  while we represent some portfolio companies we aren't a big firm so we aren't advising the PE firms directly.

Interesting - so would we qualify as over 500 employees if the portfolio companies are combined?  Or does it break against you both ways?  And thanks for the info, it's more than I had.  We have an HR call Monday that should be a blast. 

[troph 24781]

41 minutes ago, ChiTownDoc said:

Ok so we pay the doctors 1099 and since we sold to PE I'm paid 1099.   Will the doctors being paid as 1099 have some recourse?  The physician assistant and nurses etc are employed so starting April 1 we'll get some help on those that can't work.  We do have an HR dept but I like to know at least a little bit on my own.  Appreciate any help. 

standard SBA rules an individual sole proprietor or independent contractor couldn't qualify.  they can now. this is a HUGE change in the rules.  yes doctors who are paid 1099 and are subject to SE tax on those wages are very likely to be included.  but I'll be honest, my focus is on mid-sized companies and I'm looking at this piece from the inclusion of those payments in the calculation of payroll for purposes of increasing the size of the loan. so you'll want to get advice from someone looking at it for doctors as 1099s specifically.

[troph 24781]

Just now, ChiTownDoc said:

Interesting - so would we qualify as over 500 employees if the portfolio companies are combined?  Or does it break against you both ways?  And thanks for the info, it's more than I had.  We have an HR call Monday that should be a blast. 

the prior rules when you combine you bump up past 500 and you were ineligible.  It appears these rules disregard the affiliation from two separate businesses owned by the same PE firm... I *think*.  again, i'm focused more on standalone businesses at the moment.  the big law firms advising their PE clients have to be all over this.  I bet there are updates out there specifically for PE firms.  I saw one from Squire Patton Boggs prior to this bill warning the affiliation rules were going to be an issue, so I'm extrapolating here that the waiver of the affiliation rules in this bill fixes that problem.  So, a business under 500 employees would qualify even if their parent PE firm owns other businesses that if combined would make each ineligible.  make sense?

[troph 24781]

52 minutes ago, VABuckeye said:

I didn't read it that way at all.  The criteria for a loan seems to be that you prove that you are a business as of February 15th and you document your expenses.

you are still asking a bank for a loan.  I've spoken to several banks already about this.  rules will be relaxed sure, but as far as I'm seeing it's not a guaranteed handout.  that said, i'm sure some lenders will treat it as such given the 100% SBA guarantee.  YMMV depending on which lender you chose to work with.

[ChiTownDoc 21139]

13 minutes ago, troph said:

the prior rules when you combine you bump up past 500 and you were ineligible.  It appears these rules disregard the affiliation from two separate businesses owned by the same PE firm... I *think*.  again, i'm focused more on standalone businesses at the moment.  the big law firms advising their PE clients have to be all over this.  I bet there are updates out there specifically for PE firms.  I saw one from Squire Patton Boggs prior to this bill warning the affiliation rules were going to be an issue, so I'm extrapolating here that the waiver of the affiliation rules in this bill fixes that problem.  So, a business under 500 employees would qualify even if their parent PE firm owns other businesses that if combined would make each ineligible.  make sense?

I think so.  Goodwin and Polsinelli send a million emails but it’s a bitch to dig through and get info we need.  I’ll push them this week.  Thanks again

[Brew 3049]

https://www.gibsondunn.com/sba-paycheck-protection-loan-program-under-the-cares-act/

Gibson Dunn has a good write up on the affiliation and PE rules. Having a PE investor does not preclude you from this funding like it does other SBA money, but there are several things you need to look at including the ownership structure and control.

 

[G650 14229]

2 hours ago, troph said:

you are still asking a bank for a loan.  I've spoken to several banks already about this.  rules will be relaxed sure, but as far as I'm seeing it's not a guaranteed handout.  that said, i'm sure some lenders will treat it as such given the 100% SBA guarantee.  YMMV depending on which lender you chose to work with.

I have to imagine most businesses will go to their own bank for this?

[Reagan1k 3024]

May have been covered above- forgive me if so, but am I reading this CARES Act correctly that in calculating the average monthly payroll number you exclude compensation above $8333/mo ($100k) for each individual or is it saying that you exclude all payroll cost for each $100k employee.   I hope it’s the former. 

Edited March 28, 2020 by Reagan1k

[Wulaw Horn 19064]

19 minutes ago, Reagan1k said:

May have been covered above- forgive me if so, but am I reading this CARES Act correctly that in calculating the average monthly payroll number you exclude compensation above $8333/mo ($100k) for each individual or is it saying that you exclude all payroll cost for each $100k employee.   I hope it’s the former. 

Consensus here seems to be exclude all comp above $8333 a month- not that you can't get comped for an employee that makes more than that. 

[troph 24781]

23 minutes ago, Reagan1k said:

May have been covered above- forgive me if so, but am I reading this CARES Act correctly that in calculating the average monthly payroll number you exclude compensation above $8333/mo ($100k) for each individual or is it saying that you exclude all payroll cost for each $100k employee.   I hope it’s the former. 

statute says exclude "in excess"...

[troph 24781]

1 hour ago, G650 said:

I have to imagine most businesses will go to their own bank for this?

depends.  some companies don't have debt.  some banks don't do SBA.  one of our lenders isn't in the SBA business.  another lender I talked to is only working with existing customers. another I talked to is using it to market for new customers.  it can be all over the map and with this loan unsecured, you have many more options.  I typically advise clients to start with their bank and then go from there.  for those that don't want to, we have backups for them.  and in each case lenders vary for what they want to do.  personally, I would see this as a way to easily shore up customer cash flow which makes my loan to them more secure.  the SBA will pay fees on the back side for originating and servicing and will pay interest on the forgiven amount with the 100% guarantee as well.  it should be a no brainer.

I think the real issue is planning on how to use it.  which loan to get and if the PPP loan, how to manage the layoffs and reductions in salary to maximize loan forgiveness.  the more I look at it, the easier the program is to understand but the more complexity I see for the planning.  

you've got to treat highly paid differently, you've got to watch reduction in pay at the 25% level and you need to avoid lay-offs and/or bring them back by June 30, 2020 and with any of those moves you'll want to pay attention to the unemployment aspect, both state and federal to help maximize for your employees.  If you want to zero in on it, it's not that easy, especially when you then try to measure the numbers with the way the statute reads.  and when you're talking $8M loan for a larger company, the numbers really start to mean something.  Someone is going to have an impressive model built for this before it's all said and done.  

Edited March 28, 2020 by troph

[VABuckeye 2472]

But if your plan is no layoffs and business as usual with no reductions in pay it's fairly straightforward, no?

[troph 24781]

15 minutes ago, VABuckeye said:

But if your plan is no layoffs and business as usual with no reductions in pay it's fairly straightforward, no?

small companies with no layoffs planned should be easy, yes.  

I'm talking more for businesses that are in the epicenter of hospitality, travel, leisure and service businesses that work with those companies.  they can't afford not to lay off and in fact most already have made drastic cuts with more pending.  those are the clients I'm working with right now.  

[VABuckeye 2472]

Thanks.  I'm the little guy looking to keep my team intact and whole (financially) through this.

[G650 14229]

48 minutes ago, VABuckeye said:

Thanks.  I'm the little guy looking to keep my team intact and whole (financially) through this.

Yeah, we are a middle guy looking to do the same. I have no layoff or reduction plans whatsoever.

[troph 24781]

18 hours ago, Brew said:

https://www.gibsondunn.com/sba-paycheck-protection-loan-program-under-the-cares-act/

Gibson Dunn has a good write up on the affiliation and PE rules. Having a PE investor does not preclude you from this funding like it does other SBA money, but there are several things you need to look at including the ownership structure and control.

 

this is a great link.  thank you.  just sent it to a colleague.

[Brew 3049]

7 minutes ago, troph said:

this is a great link.  thank you.  just sent it to a colleague.

Their entire Covid-19 resource center is full of good information. They have gotten deep into the weeds on several things.

DOL has released an updated FFCRA Q&A that clears up some of the questions that are out there on that bill. The biggest one being that employees of businesses that have closed or temporarily closed even due to state/federal order are not covered.

Edited March 29, 2020 by Brew

[troph 24781]

25 minutes ago, Brew said:

Their entire Covid-19 resource center is full of good information. They have gotten deep into the weeds on several things.

DOL has released an updated FFCRA Q&A that clears up some of the questions that are out there on that bill. The biggest one being that employees of businesses that have closed or temporarily closed even due to state/federal order are not covered.

thanks I'll check it out.

there is a least one bust I think in the formula for PPP.  and the re-hire, raise wages by June 30 component that allows forgiveness of the PPP loan appears to be an all or nothing provision which seems odd.  the SBA is going to have a lot of power in this.  we are all reading laws and asking questions but for the complicated scenarios, that SBA guidance is going to be critical. 

[Brew 3049]

4 minutes ago, troph said:

thanks I'll check it out.

there is a least one bust I think in the formula for PPP.  and the re-hire, raise wages by June 30 component that allows forgiveness of the PPP loan appears to be an all or nothing provision which seems odd.  the SBA is going to have a lot of power in this.  we are all reading laws and asking questions but for the complicated scenarios, that SBA guidance is going to be critical. 

It’s standard operations. Congress puts together a hastily thrown together pile of crap, we all try to advise on it, while also waiting on Treasury and other agencies to provide clarifications for all the holes. Sometimes it’s month before the answers to the questions come out and by then it’s too late. The FFCRA wasn’t a long bill and DOL is going to be issuing Q&A’s for a while. CARES was 800+ pages, so there is no telling how long it takes to clear it up.

[troph 24781]

senate small business staff put out a flyer that indicates EIDL and PPP can be obtained together.  not either or.

[FORTY NINE TO ZERO 2652]

So how do you actually start looking into these loans?  Through a bank? CPA? Lawyer?   Do I need to fill these out myself?  So far all three of mine haven’t been able to provide me with much details.  My lawyer, who is badass straight up said it’s moving to fast for him to make solid recommendations (we mostly use him for b2b and contract stuff) 

 

we furloughed two people last week for two weeks, it looks like we might still be able to apply for a loan if we back pay them?  

Edited March 30, 2020 by Xian

[VABuckeye 2472]

Call your business banker and see if they are participating. I’m PNC. I’m sure they are. 

[FORTY NINE TO ZERO 2652]

16 minutes ago, VABuckeye said:

Call your business banker and see if they are participating. I’m PNC. I’m sure they are. 

We mostly deal with frost and they haven’t responded with anything when asked. 
 

im going to be really pissed if he is trying to hold out to get us to sign a standard loan or line of credit. Way to throw 7 years of relationship down the drain 

[Brew 3049]

1 hour ago, Xian said:

So how do you actually start looking into these loans?  Through a bank? CPA? Lawyer?   Do I need to fill these out myself?  So far all three of mine haven’t been able to provide me with much details.  My lawyer, who is badass straight up said it’s moving to fast for him to make solid recommendations (we mostly use him for b2b and contract stuff) 

 

we furloughed two people last week for two weeks, it looks like we might still be able to apply for a loan if we back pay them?  

EIDL goes through SBA directly, go to the website and you can download the materials. PPP will go through your local bank, but most banks are still trying to figure out what is going to be involved. Probably be the end of this week before more information is available.

[Brew 3049]

8 hours ago, troph said:

senate small business staff put out a flyer that indicates EIDL and PPP can be obtained together.  not either or.

You can’t use the same expenses as the basis for the loan. Other than that, you can apply for both.

[luke duke 6412]

So.  I have a friend I met in Cabo a few years ago.  It turned out that we are in very similar businesses.  He has a pool of guys he can move all over the country and we've used his people to supplement our labor in California.  We've decided to share our larger opportunities and collaborate.   
My family and friends make fun of me because I talk with everyone I meet but if I hadn't had that conversation in Cabo I might have missed out on huge opportunities for my company.

You both film gangbangs?

[Travo 15]

2 hours ago, Xian said:

...

we furloughed two people last week for two weeks, it looks like we might still be able to apply for a loan if we back pay them?  

Christian, I don't think furloughing the two people will make your company ineligible. Given a review of the CARES Act there might be some small limit on the amount forgiven, but it's hardly going to matter as long as you maintain pretty close to the same payroll 3/1/20 - 12/31/20 as the average for the previous 12 months.

 

Question to anyone who has read the bill:

Is anyone else surprised that the max loan amount is 4x the avg monthly payments for payroll, mortgage, rent, other debt? I thought it was expected to be 2.5x.

Spoiler

(c) Maximum Loan Amount.—During the covered period, with respect to any loan guaranteed under section 7(a) of the Small Business Act (15 U.S.C. 636(a)) for which an application is approved or pending approval on or after the date of enactment of this Act, the maximum loan amount shall be the lesser of—

(1) the product obtained by multiplying—

(A) the average total monthly payments by the applicant for payroll, mortgage payments, rent payments, and payments on any other debt obligations incurred during the 1 year period before the date on which the loan is made, except that, in the case of an applicant that is seasonal employer, as determined by the Administrator, the average total monthly payments for payroll shall be for the period beginning March 1, 2019 and ending June 30, 2019; by

(B) 4; or

(2) $10,000,000.

Link to the CARES Act

 

[VABuckeye 2472]

4x?

Edited March 30, 2020 by VABuckeye

[Travo 15]

23 minutes ago, VABuckeye said:

4x?

Am I reading it wrong? The bill says multiply the average monthly payments by 4, not 2.5. See the excerpt in the spoiler in my previous post above.

[Travo 15]

9 minutes ago, Travo said:

Am I reading it wrong? The bill says multiply the average monthly payments by 4, not 2.5. See the excerpt in the spoiler in my previous post above.

33 minutes ago, VABuckeye said:

4x?

Am I reading it wrong? The bill says multiply the average monthly payments by 4, not 2.5. See the excerpt in the spoiler in my previous post above.

 

Ah fuck me, looks like I was reading an earlier version of the bill.

[VABuckeye 2472]

Here's a link I received from PNC Bank this morning about the PPP loans.

PNC PPP Info Page