Accounting Advice

Webinar Recap: Understanding the New SBA Loan Programs

Accountfully and Keith Kohler of K2 Financing joined forces once again to discuss an evolving and serious subject for small business owners; the new loan programs surrounding business interruption and disaster assistance. It’s no secret that recent mandated closures and lockdowns due to the CoronaVirus pandemic have been felt by businesses nationwide. Layoffs and drastic changes in employee hours have been major for both the employees and the business owners. For some, being able to take advantage of these programs may be the difference between a lost job and holding on through the pandemic.

Copy of webinar series

As a company that supports startups and small businesses, it was important that we did our part to relay help and information to our clients and followers as soon as we could. We wanted to get the absolute latest information out, and updated slides right up until our webinar went live with the latest information from our local banks.

While it’s best to watch the full recording of the webinar, we have compiled a high level run down of the items we discussed. Our first webinar focused on debt financing strategies, and is also a helpful webinar to watch to get in the mindset of what you as an individual and business owner need in order to apply properly and with the best chances at getting your funding. You can find the recording of that webinar on our YouTube page, or access it directly here.

The Economic Impact Disaster Loan (EIDL)

What it is: This loan is through the Small Business Association (SBA) and has been in place for a few weeks. The SBA is offering up to two million dollars worth of assistance to eligible businesses. These loans are available to pay fixed debts, payroll, accounts payable, and other bills that can’t be paid because of the coronavirus’ impact. There are other options available to businesses that qualify, such as deferred payments, long term loans (up to 30 years) and the possibility of a $10,000 grant, which would not need to be paid back (still in the process of getting more info on this). It does have some limits on the types of businesses eligible, however. Some businesses like religious institutions and cannabis companies may not qualify, but non-profits are eligible.

What You Need: All of these factors will hinge on the business’s ability to pay back such a loan, so it is important that you have documents and records to show this. This loan requires the applicant/business to show the ability to pay back the loan, which means you will need updated and projected cash flow statements, as well as tax records and access to the business’s credit. It doesn’t have to be a spotless record, but it is important to show that the loan can be paid back. You will also need to put in some quality time to make your case for why you will need this funding. In the narrative portion of your application, this is where you will need to detail (and justify) your economic injury, as well as tell your business story. As Keith says in the webinar, “think of it as your college admissions essay.”

How to Apply: You will need to first check to see if you are in a disaster area here, then you can apply and register on the SBA website to establish eligibility and see what kind of terms you can receive. Pro tip: It is much more efficient to apply online, than attempt to do it the old school way, you can discuss how we may be of assistance in this with your Accountfully team.

The Paycheck Protection Program (PPP)

What it Is: This was implemented as part of the Stimulus (CARES) package March 27th, 2020. This one has a lot of details to go through, so more information will be available as it develops, and as of the date of our webinar, it can’t be “officially” applied for as it still needs more guidance from banks and the SBA. The basic gist of the program is to provide a bank loan to businesses for two and a half times payroll expenses each month. If it is used for payroll, rent, utilities, etc. there is a possibility of having the entire loan, or a portion of it, forgiven. Its goal is to incentivize small businesses to keep paying their employees.

According to the SBA website businesses that can qualify are as follows: Businesses - including eligible non-profits, Veterans organizations, Tribal concerns, sole proprietorships, self-employed individuals, and independent contractors described in the Small Business Act – with 500 or fewer employees may apply. Businesses in certain industries may have more than 500 employees if they meet the SBA’s size standards for those industries.

What You Need: Since this loan is focused on covering payroll and operating expenses, not only will you need your 2019 tax return or year end financials, you will need the last four quarters of payroll tax forms, verification of the number of employees and payroll incurred over the most recent 12 month period. You will also be required to provide a good faith certification that the loan is necessary due to the uncertainty caused by COVID-19 and that the funds will be used to retain workers and maintain payroll, lease and utility payments.

How to Apply: Since this is the more dynamic of the two options, more information will be needed in order to apply. You can always contact us to find out more regarding how we may assist your business in this process. We will be holding more FAQ forums and posting more important updates as these programs develop, so stay tuned via email and social media, or feel free to send us your questions via these methods too.

Documents and Accuracy Are Pivotal

Keep in mind, this is only a basic rundown of the two programs available, a lot more detail can be found in the webinar, itself. We encourage you to watch, learn and share. If there are two key takeaways for applying to either of these loans, they are; 1) accuracy is imperative, and 2) having current and accurate records to show your business financials will give you the best shot at getting the funding needed in this tough time.

Now is the time to engage in your business health. Dive in, learn and do your research. Consult industry professionals and be aware (and leery) of any scams out there. You are the number one advocate for your business, so by teaming up with a pro that can help navigate these opportunities, you can be in a great position to focus on using these loans to strengthen business operations for the future, versus using them as a quick fix or band aid. We are here to chat, should you think engaging an outsourced accounting solution could be the best option to move forward.

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