PPP vs EIDL loans

Gareth's Tree

Active Member
Location
Ashtabula
Anyone sorted these out yet? I have been going back and forth with my accountant about the PPP loan. And I'm not sure if possibly the EIDL loan might be better for me.
My challenge with the PPP loan is that I just changed my guys from 1099 workers to employees several weeks before we got shut down with the Corona virus. So, they don't have really any payment history for me to declare on wages. so I don't know that I can really keep them on payroll, but technically I have employees now that I am supposed to keep on payroll if the loan is supposed to be forgiven...
My accountant suggested I just go for the PPP loan and they may not take into account that I have had employees for several weeks at this point.
As far as the EIDL loan they say up to $10,000 is forgivable but, I have to find someone who knows more about it because if you have to apply for a much larger loan to get the first $10,000 forgiven I probably can't justify a much larger loan than that to make it through this shutdown. So, if all I need is a $10,000 loan I'm not so sure that they're just going to give me that without me making that just a part of a bigger loan.
Anyone figured any of this out yet?
 

evo

Well-Known Member
Location
My Island, WA
For larger outfits ppp is better, and will supply much more cash. For smaller shows the $10k is pretty solid.
Under the ppp there are a number of items you can use the funds for which are forgivable. The fact your crew (likely Unrightfully) are now 1099 workers you might be able to use these funds for their pay and have that amount forgiven.
 

Gareth's Tree

Active Member
Location
Ashtabula
For larger outfits ppp is better, and will supply much more cash. For smaller shows the $10k is pretty solid.
Under the ppp there are a number of items you can use the funds for which are forgivable. The fact your crew (likely Unrightfully) are now 1099 workers you might be able to use these funds for their pay and have that amount forgiven.
I was leaning towards the $10k...

And just to clarify, I just changed my guys from 1099 to w2 employees a few weeks before we got shut down, so they are technically now employees. However, since it was during the winter we were hardly working at all. So I don't really have much payment history from them being on actual payroll as w2 employees.
 

Gareth's Tree

Active Member
Location
Ashtabula
Post up a link... And under the Care's act they should still be able to get UI insurance.
This was just a quick search. I originally learned about it on a utube video.
 

Gareth's Tree

Active Member
Location
Ashtabula
Also, as long as I rehire my employees by June 30th I should be good.

Another note, if you are taxed as an S corp you can only claim your payroll compensation, not any owners draws.
 

Gareth's Tree

Active Member
Location
Ashtabula
Post up a link... And under the Care's act they should still be able to get UI insurance.
Yes, Unemployment should be an option. I know one of my employees applied for it and because he had only been an employee for a few weeks in the winter when we weren't hardly working he barely got anything. I know there is supposed to be an additional $600 per week, but as of yet he wasn't seeing it. He might be able to apply for the PPP as a 1099 contractor since he was one last year.
 

arborandearth

Active Member
Location
Chico
I'm not an accountant, but I have been researching and talking to my bank and accountant in case the economy gets really bad. PPP would be the best direction for me with 3 full-time employees. Plus, all the funds would be forgiven as long as all employees are retained up to 75% of their hours for 2 months. 25% of the funds can go toward overhead.

Here is the issue for you - they will be basing the loan amount for the PPP off of your 2019 FTE (Full Time Employee) equivalent and quarterly Federal 941 (payroll taxes). So if you 1099'd them last year to avoid payroll taxes then they were not employees - they were independent contractors - they should be applying for their own emergency loans under their own "business" entities or names.

As for the owner, it probably depends on how you pay yourself. Do you pay yourself a monthly salary or hourly wage with the associated payroll taxes? If you just take draws, I'm not sure how you could count it that toward an employee (FTE) - I'm also pretty sure you must pay yourself a reasonable salary or wage as the owner of the S-corp - but I could be wrong. My lawyer said I had to put it in my by laws. For my S-corp, for example, I pay myself an hourly wage through payroll. Each quarter, the business pays all associated taxes on my wages and all the other employees. Anything the business profits at the end of the quarter is reinvested into the business or provided as a bonus. This way I don't get hammered with a huge tax payment at the end of the year.

In the PPP, there is also a clause about new businesses and a different application process for those who started after 2019. Not sure how that would factor into your scenario.

After talking to a lender, they said they would request all my 2019 941 tax records, 2019 Schedule K, P&L, Balance Sheet, Payroll up to Feb 15, and S-Corp articles and By Laws. Just in case, I gathered them all last weekend.

I am not that familiar with the EIDL because the funding wouldn't be sufficient to keep everyone employed for more than a month.
 
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