19. Convince me a PPP loan is not for you.

Jovita Carranza, administrator of
the Small Business Administration

Calling all roasters who have not already applied for a Paycheck Protection Program (PPP) Loan - please convince me, 'why not?'

Over the past month, the U.S. Treasury has made several dramatic changes which, in my mind, wipe out almost every good excuse I've heard so far about why a roaster would not apply for a PPP loan.

A. H.R.7010, the Paycheck Protection Program Flexibility Act of 2020 passed on June 5. This made the application for forgiveness of the loan much, much simpler. (There is now an EZ form similar to the EZ form for your taxes.) See our blogpost on that act.
B. The PPP Flexibility Act act also clarified many vague technicalities that had some companies worried - including the 8 week "covered period." In short, the government recognized the 8 week period was irrelevant for most businesses and offered a second option, the 24 week covered period.
C. On July 3, the PPP Extension Act was signed into law, extending the deadline for application for a PPP loan out another month, to Aug. 8, 2020.

These changes and clarifications eliminate excuses for roasters who hesitated because, "what if I can't bring back my people until September or October?" Now that will be fine. I also heard the legitimate concern about, "will the loan actually be forgiven? I'm not signing up for a debt if the rules for getting out are not clear." Makes perfect sense. But now the rules are clear and they're not that hard to follow. If you find them confusing, no worries! Please contact us about our Loan Application Assistance for Roasters (LAAR) program!

Also, now it is relatively easy to find a bank that will work with you on your loan. Early on, it was difficult for some businesses to find a bank to make the PPP loan. Businesses cannot go directly to the Small Business Administration (SBA), they must apply via a bank. Now on-line banks like Paypal and Nav offer them, so almost every business can access the PPP, even if they have their business account at an isolated, small town bank.

Private-investment owners
The one excuse I've heard that does appear to be a show-stopper is when a roaster is part of a larger investment/equity group. There are prohibitions in the original law creating the PPP against lending to businesses owned by these groups. Data released on Monday, July 6, from the SBA indicates that many large restaurant groups did receive millions in PPP loans. However, the SBA is requesting these funds be returned.

"Companies applying for the money were required to certify that the money was “necessary to support the ongoing operations,” while taking into account “their ability to access other sources of liquidity,” the SBA’s website states. 

Industries receiving the loans
The new data released by the SBA this week indicates about half the loans went to five industries, according to a Washington Post report. They are:
12.9% health-care and social assistance industry received
12.7 % to professional and technical services; 
12.4% to construction; 
10.3% to manufacturing; and 
8.1% to hotels, restaurants and other food service employers.

My guess is many roasting companies belong to the latter two groups. If you have not already, consider whether now you have any excuse. With PPP you can essentially receive grants to help pay yourself and your workers and keep the specialty coffee industry alive.

17. New news from Washington DC on PPP

In case it's helpful, here are the 'rumors' I've heard about what may be coming

This week auto workers got back to work in Detroit.

down the pike from Washington D.C. in terms of the Paycheck Protection Program (PPP). 

• Next week, May 28th, the Treasury is expected to issue more guidance on rules related to PPP forgiveness.
• No new funding for the PPP program is expected right now. Once the current amount is gone, it's gone.
• Personal protective equipment (PPE) may become a deductible expense for tax purposes for businesses.
• The PPP forgiveness amount will hopefully soon be confirmed by Treasury as tax free.
• SBA might extend the 8 week covered period into a 16 or 24 week period. They are taking into consideration how businesses may have a hard time bringing back all of their employees if there are still governor's executive orders keeping them closed.

16. Apply for PPP Forgiveness Like a Pro

This week the Small Business Administration sent out Paycheck Protection

Page 1 of the PPP Forgiveness Application

Program (PPP) forgiveness applications and more guidance on usage. You should have received this document from your lender. The 11 page document (see image of pg. 1 here) is basically a 1 page application with many pages of instructions to help you get the numbers right. There are 11 lines requiring numbers, with the 11th being the "Forgiveness Amount" for which you are applying.

This week the SBA also sent guidance about when the eight week "covered period" starts. The period no longer has to start on the day the loan was disbursed. Instead the employer may start the eight week period on the immediately following pay period. So if the loan was distributed April 24 and the next pay period starts May 1, the eight week period may start May 1.

PRO-TIPS:
1. The application provides a worksheet to help you calculate payroll costs. I would augment this with spreadsheets many CPA firms have already developed to assist with PPP payroll monitoring and reporting. CLICK HERE for an example prepared by Capocore Professional Advisors. The slide deck and webinar that goes with this spreadsheet are available on this Small Business Association of Michigan (SBAM) website.

2. CLICK HERE for a webinar from a month ago with a CPA company provided by SBAM on applying for PPP loan forgiveness. TODAY (May 22) the same CPA company is giving webinar on forgiveness using the new SBA application.

3. Get your documents together. For utility costs this can get cumbersome. Remember, getting government money for free takes an investment of time. For example, your phone costs can be counted as utilities. But you've got to provide (to your banker) phone bills and evidence (statements, receipts or checks) showing you paid those bills. For payroll, do you have a third-party payroll company? Their reports will usually be accepted by your bank. If you don't have a payroll company, get ready to make reports with details on each employee.

4. Are you using a work-share program? I.e. with your state, to allow employees to partially come back on payroll, and also get unemployment insurance? This, in many cases, is good for employees because they will still be eligible for the $600 additional per week, but it's not going to help you get more forgiveness on the PPP. That's OK - being good to your employees is the right thing to do.

5. The big two questions are, did you maintain your employee count and did you maintain wage rates? So the application walks you through calculating whether you reduced your "full-time employee" (FTE) number, which (ironically) can be a decimal. Then it walks you through whether you reduced wage rates. This gets confusing because the application was on a quarter basis (13 weeks) and the forgiveness is on an eight week basis. The instruction from the SBA is now to use annualized numbers for both numbers.

6. Understanding the term "Safe Harbor": This is referring to the fact that SBA said they want you to bring an employee back to the time and wage rates you were paying (pre-February 15) and you have until June 30 to do this. If you do not bring them back to at least 75% of full hours and full wages by June 30, the payroll for this employee does not count towards your forgiveness. For employees that ramp up their time and wage rates over the covered period (reaching at least 75% by June 30), a partial forgiveness amount is calculated. This "partial forgiveness" is the Safe Harbor.

7. How do you calculate FTE? Many CPAs thought that 30 hours/week would be considered 1 FTE. Nope! U.S. Treasury has now confirmed you must use 40 hours/week as the definition of 1 FTE. They do offer a simplified method such that anyone less than 1 FTE can be counted as .5 FTE. If you use this simplified method, you must use it throughout your application.

8. Exceptions to FTE for employees who refuse to come back to work: if an employee refuses to come back to work, or resigned, you do not have to reduce your forgivable amount for this employee's wages (as long as you did not replace them). So for the wages

9. Owners payroll calculation - owners of the business have their wages calculated separately from employees on Line 9. This is totally separate from Table 1 and Table 2 in the Schedule A worksheet. Owners' "pay" will be calculated as 8/52 of whatever was the net income on the owner's 2019 Schedule C. In other words, the pay used to to apply for the loan is the limit of the pay that can be used for forgiveness.

10. Do not rely on your bank to catch calculation errors - this is like doing your taxes. The SBA will come to you, not the bank, with questions.

14. PPP Loans - It's Not Too Late

For any roasting businesses that have pursued, but not received a PPP loan yet, I have some tips from a small business briefing today.

1. As of May 6, $183 billion of the latest $310 billion has been spent. So there should still be some money out there.

2. PayPal comes through! A lot of companies have been successfully switching away from the first place they apply when the first institution isn't able to help them. Today, one story was conveyed of a Michigan business where the owner got started late, just this week, because it was only this week that a customer failed to renew a contract. He started on Monday, May 4, went through three banks where he had relationships, and all 3 said they couldn't help. Then he went through Paypal, and got approved within 24 hours!  Click here for more info on PayPal PPP loans.

3. Another "online bank" that I've heard is helping businesses get PPP loans is NAV. https://www.nav.com/

10. PPP Tips: Covered period vs. Forgiveness Period

"Speaking to you" today from the state that ranks fifth in the country for cases and fifith for the number of deaths per million residents. Testing remains in the bottom fifth, (read: public health crisis). Michigan also has the third highest unemployment rate in the nation, (read: economic crisis)! Telltale headline, "Detroit hospitals say they've begun storing bodies in refrigerated trucks to handle the surge."

Jamie Lopiccolo, CPA at Capocore, gives small biz advice.

With that grim reminder, it was helpful earlier this week to hear a few tips on how to operationalize your Paycheck Protection Program (PPP) loan, should your roasting company be lucky enough to get one! Yesterday we learned the first $350 billion allocated for that program has been spent. Companies are being asked to wait for congress to approve more.

It appears there are two key time periods to understand. One is the "covered period" and the other is the "forgiveness period." We attempt to clarify below:

"Covered Period": Feb. 15, 2020 - Jun. 30, 2020 is the 4.5 month period in which qualified business expenses qualify to be used for the loan proceeds. Qualified business expenses are payroll, rent, interest on loans and utilities.

"Forgiveness Period": the eight weeks that commence on the day you receive your loan funds. Let's assume you receive loan funds on May 4, so your forgiveness period will be May 4 - Jun 26, 2020. This means that qualified business expenses in this period can be reported and if approved, that amount will be forgiven. The PPP regulation states that not more than 25% of the amount forgiven can be for non-payroll expenses. In other words, prioritize using PPP funds for payroll. That is the intent of the program.

On this SBAM webpage you can find the link to a recording of a great webinar given by CPA firm Capocore, titled: "What You Need to Know About Spending & Tracking Your PPP Loan." (Presented in partnership with the Michigan Association of CPAs April 13, 2020)

8. LAAR webinars continue this week!

Sign up today for tomorrow's Loan Application Assistance for Roasters (LAAR) webinar!

Just click here for our contact page and send a message saying you'd like the call-in details!

LAAR Webinar - Tuesday, Apr. 7, 11 am EST. Use the CONTACT page to request call-in details.

Can't make it on Tuesday, join us...
LAAR Webinar - Thursday, Apr. 9, 11 am EST. Use the CONTACT page to request call-in details

The two webinars we held last week were uplifting, interactive sessions with the handful of roasters on the call. Everyone finishes the hour feeling more confident about the right next step for their business.

"I could have spent half an hour digging into some rabbit hole on a government website to get to just one tip out of the dozen good pieces of advice Artisan shared during this webinar." ~ Andrew Timko, Blueprint Coffee, St. Louis, MO

Can't make any webinars? Click here for easy resources from the SBA of Michigan (which is doing an excellent job of updating small businesses across the country).

7. MONDAY - Apr. 6 UPDATE for Roasters on SBA resources

Last week was a hurried run-up to the April 3 deadline for "banks to be ready" to start accepting Paycheck Protection Program (PPP) applications. (See this blogpost to learn about the PPP program.)

From what I've heard, some banks did start accepting applications on Friday but the federal SBA did not give final guidance to SBA lenders until Friday morning (Apr. 3rd). So the biggest banks postponed even accepting PPP applications until today (Apr. 6) or even tomorrow, April 7. I understand the big banks are creating website portals on which applicants -- LIKE YOU, IF YOU ARE A ROASTING COMPANY -- may use to apply for PPP funds.

See this blogpost for the "steps to take as a roaster." But here are some further tips given what we've learned in the last few days:

1. It is important to decide whether a PPP loan-that-turns-to-a-grant is right for your business. One roaster I talked to last week was thinking that for her small, single-location business, with 15 - 17 staff total, the Economic Injury Disaster Loan (EIDL) Advance grant, which is an $10,000 outright grant, was the best fit for her needs. (Click here to learn about the EIDL and why it has the confusing term "loan" in its name.)

2. If your bank is not an SBA lender already, this is a major obstacle. That is actually the case for my business. So first, as advised in the paragraph above, I applied for the EIDL. Then I started calling banks and institutions where I had relationships with an individual loan officer because I had applied for business loans at their institution. I asked if they would help. All three flatly said "no." They are only helping current customers, with a checking account. It is understandable.

• OTHER POSSIBLE OPTIONS for my PPP application and yours: 
• My credit card is with Chase. I called Chase customer service on Friday and learned they are one of the big banks which will only be opening their portal on Monday or Tuesday (today or tomorrow) and the service representative had no idea whether I'd have access as a credit card customer. (I kind of doubt it, but I will try.)
• A group called NAV serviced one of my student loans years ago and got in touch with me (by email) with links to their portal for PPP applications. Click here for their on-line application, but I suspect it is only for people that banked with them previously. My suggestion here is to broaden your search for a lender that will help you by even thinking about your student loan banker! In case it helps, check out NAV's SBA loan Facebook group . 
• A local SBA lending bank might consider taking your "non-customer" PPP application a week from now. I had one local bank in my town tell me this. This is nice, I must say, since 4 other banks flatly turned me down, but it is a tenuous offer and does not reassure me that my business would be considered before all the PPP funds are gone.

The key is persistence, as is so often the case as a small business owner!

Click here for easy resources from the SBA of Michigan (which is doing an excellent job of updating small businesses across the country).

6. What are roasters doing? Which SBA programs seem to apply?

Eileen Tausch in Cincinnati, Ohio

I've been talking to every roaster that will talk to me. The summary seems to be that roasters are all practically reinventing their business every week as the conditions change, sometimes due to governor executive orders and often also due to evolving circumstances with employees. Stressful and overwhelming for most, such that finding a clear path with these SBA offerings has been confusing. 

I hear a lot of distrust of anything that smells like debt. But yesterday I was on a town hall call with Sen. Gary Peters who oversees the committee in charge of FEMA. He was absolutely adamant that the Paycheck Protection Program (PPP) (see this blogpost) loans are meant to be forgiven and your lender will have the tools to help you be qualified to have your loan turn into a grant.

Where do you apply? At an SBA Lender. BIG NEWS today is that there is now a way to easily search for a lender new you! (This link JUST came on line today - thank you SBAM for dogging SBA to create this!)

Would you consider joining the webinar we're having Tuesday, Apr. 7, 11am EST? There are usually only one or two roasters on the call and it is a great time of discussion among colleagues, as well as me offering insights on the 'loan landscape.'

Join Zoom Meeting  

Topic: Loan Application Assistance for Roasters
Time: Apr 7, 2020 11:00 AM Eastern Time (US and Canada)
https://zoom.us/j/8108385927
Meeting ID: 810 838 5927

Look forward to seeing you there!

3. Which is better for a Roaster - Economic Injury Loan or the new PPP?

The big news in the past few days has been the Paycheck Protection Program (PPP) coming out of the CARES Aid package. See yesterday's post to get an overview of that program. It is a loan that can be partially or totally forgiven (i.e. turned into a grant) at the end of the 8 week span, if (among other criteria) you document how all the proceeds were used and the bank verifies that all the expenses qualify.

Seth Chapman at Water Street Coffee Joint in Kalamazoo, MI

Roasters ask: "is the PPP better for me than an Economic Injury Disaster Loan (EIDL)?" Answer: Probably YES, because it can become a grant. But you need to make sure you understand how much of your loan will be forgiven at the end of the 8 weeks. If you are not able to hire all your employees back (your employees prefer the new beefed up unemployment insurance benefits), then you may be better off without the PPP.

Roasters also ask: "CAN I apply for both the EIDL and the PPP, or are they mutually exclusive?" Answer: Yes. In fact, I would now encourage you to do both, if you need that much money. As long as you do not apply the proceeds to the same expenses, you are allowed to apply for both. In other words, if PPP covers all of your payroll expenses for April and May, you cannot also tell the banker that you need the EIDL loan to cover payroll for April and May. Same for utilities, rent, etc.

• Bottom line: Apply for both if you can show that business expenses match the total amount for which you are applying.

Roasters also ask: "Is the EIDL a grant or a loan?" A: There is a new part of the EIDL loan program that is a grant. So it is both! The grant part is called an "Advance" or the "EIDL Advance." You fill out the application for the EIDL loan (using access on the SBA.gov website) and at the end there is a checkbox question asking if you want to be considered for the EIDL $10,000 grant. There's a chance that you qualify for the grant, but not the loan, and vice versa.

• Note: If you apply for EIDL and PPP and qualify for the EIDL grant portion ($10,000), this may just be given to you as part of the PPP. Bottom line, "go ahead and check the box for the EIDL grant" which is at the end of the EIDL loan application.

Today's Note for Michigan Businesses: Some Economic Development Organizations (EDOs) have closed applications for the Michigan Economic Development Emergency Relief Grants - which are $10,000 grants. Bars and restaurants were the target beneficiaries for these.

The main Q today: Which is better for a Roaster - Economic Injury Loan or the new PPP?
Probably the PPP (as stated above), but lets look at a comparison. The EIDL, as I understand it, is more of a traditional loan. Your banker (who is an SBA contracted bank) will require a guarantor (the PPP does not), there is not a "forgiveness option" (like the PPP is offering). The interest rate is low, one lender told me 3.75%, and it can be used for business growth investments. That is a key difference to the PPP. With PPP you will be forced to only use the proceeds for on-going business expenses: payroll, health benefits, rent, utilities, interest on pre-existing loans, etc. With the EIDL, you can use the funds for other parts of the business. See Table 1 for a summary.

TABLE 1: Comparison of PPP, EIDL Loans and EIDL Grants

	Funded by	Old or New?	Grant or Loan?	Where to apply?	Funds - proceeds	Max. Amount
Paycheck Protection Program (PPP)	SBA National	New	First a loan, can be forgiven on a sliding scale up to 100%	Applications will soon be available at banks that are SBA lenders.	MUST be used for qualified operating expenses, including payroll.	2.5 x the average monthly payroll
Economic Injury Disaster Loan (EIDL)	SBA National	Old	Loan	Access application on-line at SBA.gov. (Or ask Artisan) Submit to an SBA lending bank.	May be used for a variety of operating expenses. Less restrictive.	Up to $2 million
Economic Injury Disaster Grant (“EIDL – Grant”	SBA National	New	Grant	Application is the same as an EIDL loan (see above).	Targeting immediate operating expenses for businesses forced to close.	$10,000

Great new resources have come on line! We love what Michigan's SBA office is putting out there.

Click here for a 1 pager summarizing three possibly relevant SBA loan programs for you:

• PPP
• Entrepreneurial Development Programs
• Emergency Economic Injury Disaster Loans (EIDL)

Click here for a 2 page document summarizing only the PPP.

REMEMBER to contact us for assistance! Click here for our contact page or use the comment section below. We had one brave roaster on today's webinar. He left with a raft of tips and more confidence that he knows which directions and questions he needs to explore quickly, talking to his banker, his partners and his employees.

Next webinar is Thursday, Apr. 2, at 11am EST.  Sign up today!