CARES Relief Act

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There are major provisions in this for small businesses. Other than the $1,200 stipends, how do you see this legislation affecting you? 

Arks's picture
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I got this today from the state tourism assn. It reminds us that things are in a changing condition, since congress keeps tweeking things.

As many states begin the reopening process, Congress will also be returning to Washington, D.C. to deliberate on the next legislative package in response to the COVID-19 pandemic.

We expect the next bill to expand on some of the provisions in the CARES Act, as well as address other concerns and issues brought forth by the pandemic. We are asking Congress to include the following provisions in the next phase of economic stimulus and COVID-19 relief legislation:

• Give small businesses increased flexibility within the Paycheck Protection Program (PPP) for which they seek forgiveness for the PPP loans. This will allow small businesses to make more appropriate decisions about staffing and payroll based on when they plan to fully reopen.
• Ensure adequate oversight over the distribution and loan forgiveness provisions in the CARES Act for PPP loans. This will guarantee that only those small businesses that were economically distressed as a result of the pandemic receive the funds and forgiveness.

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All saints can do miracles, but few of them can keep hotel. ~ Mark Twain

 

PhineasSwann's picture
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For those using their PPP funds to pay staff, my bank's spreadsheet pointed to a potential stumbling block. 

Under the PPP terms, you have to pay your employees at least 75% of what they earned during Q1 of this year. This is accounted for on an employee-by-employee basis.

So even if your total payroll is equal to what you were paying before the loan, if you have one employee that asks to work less hours and comes under that 75% threshold, you won't be forgiven for that part of the loan.  

__________________

Darren
Innkeeper & Owner

 

gillumhouse's picture
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Didn't everyone expect a "Gotcha!"?

Arks's picture
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I just found out that, for the PPP loan to be forgivable, you only have 8 weeks from the day you get the loan to spend it on eligible expenses. That may be a problem. They gave me a large amount, way more than normal payroll and utilities and other eligible expenses would be in 8 weeks.

I've messaged my CPA to ask if I can pay the extra to myself, or rent the building from myself, or something! Worst case, though, I'd keep the full amount and pay the 1% interest, then use the money to pay down my bank loan, which is at much higher interest.

Morticia's picture
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I think that’s what the huge hotel chains were planning to do. We should have gone for that loan instead of the disaster one. The interest rate is better. Altho, we haven’t gotten a loan yet, just the grant.

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What a long, strange trip it’s been.

 

PhineasSwann's picture
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As I read it, there are two ways they're going to look at repayment: Total payroll and FTE's. You are correct that right now it only accounts for spending for 8 weeks. The date your loan was transmitted to you is when the clock starts. 

You are allowed to pay yourself up to $100,000 with the proceeds, and that would -- as long as you pay yourself and do the proper withholding and reporting to the IRS and state) be able to be included in your total payroll numbers. 

Keep in mind that your bank is the one charged with gathering documentation and certifying how much of your loan you've qualified to have forgiven. So stay in touch with them and give them what they need. My bank yesterday sent me a spreadsheet they had developed to track spending.

Morticia's picture
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We got a grant. Not a big one as we only have one PT employee.

Arks's picture
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Morticia wrote:

We got a grant. Not a big one as we only have one PT employee.

yesyesyessmiley Sorry it wasn't what you needed, but BETTER THAN NOTHING! Glad to hear you got some help.

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Arks wrote:

Morticia wrote:

We got a grant. Not a big one as we only have one PT employee.

yesyesyessmiley Sorry it wasn't what you needed, but BETTER THAN NOTHING! Glad to hear you got some help.

 It will cover utilities for this month. And we are getting new reservations for June and onward.

PhineasSwann's picture
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Thanks. Researching this stuff is the only job I have right now, now that everything has been cleaned, repainted and repaired. Twice. 

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For those who might be applying for your state's PUA (Pandemic Unemployment Assistance) program for the self-employed, be aware that you can't claim to be eligible for PUA because you're not working, and then turn around and pay yourself with PPP funds. 

Morticia's picture
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Still waiting for my state to roll that out. 

Arks's picture
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Morticia wrote:

Still waiting for my state to roll that out. 

Yes. I'm on the state's e-mail notice list to find out when ours is ready. I keep getting e-mails saying, "Still working on it." It's about getting the application website built, I guess.

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PhineasSwann wrote:

For those who might be applying for your state's PUA (Pandemic Unemployment Assistance) program for the self-employed, be aware that you can't claim to be eligible for PUA because you're not working, and then turn around and pay yourself with PPP funds. 

Phineas, your level of digging into all the details is so valuable for the rest of us...the clueless. Thanks again!

Arks's picture
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The Paycheck Protection Program loan program is currently out of money and no longer accepting applications. Below is the notice now on their website. Maybe they'll get more funding later...

The SBA is currently unable to accept new applications for the Paycheck Protection Program based on available appropriations funding.

Arks's picture
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Great, Phineas! I read somewhere yesterday that the PPP loans MAY be forgiven...don't have to repay. But that's probably another tease, they mention it then they take it away.

My own bank isn't a certified PPP lender, but another bank in town is, so I filled out forms yesterday to open a business checking account with them. Once that's finalized I can apply for the loan. Yes, it will be nice to have some money to draw on without having to drain my savings.

Hillbilly's picture
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Our loan was just approved today.  We are now just waiting on a closing date that we will do through the drive through.  Money will then be deposited into our account at that time.  We are staying on unemployment Until June 30th.  That is when we have to hire ourselves back.  So with being on unemployment we can get that plus the extra $600 a week for both my wife and I.  Something to consider before you write a paycheck to yourself.  You wont be able to be on unemployment after you take this for payroll.  If you play your cards right you can do both.

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Hillbilly

 

PhineasSwann's picture
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The government has tasked the banks as being responsible for determining if you qualify to have the PPP loan forgiven. (There's no forgiveness on the EIDL loan). You will need to keep records to show that the money was spent for payroll (including pay, taxes, etc), utilities or mortgage interest (not principal). 

So you'll need to hang on to receipts for utilities, and get a breakdown of mortgage interest/principal from your lender. Likewise, you'll have to have copies of your state and federal payroll tax filings to show how much you paid in payroll each month compared to the average for 2019. 

Since you are also allowed to count whatever you pay to yourself up to $100,000, you shouldn't have difficulty proving to the bank you spent the money as the loan expects, and thus you're eligible for forgiveness. It will all come down to giving your bank the paperwork. Mine has been very good with me, and when this is over I plan to move my last business account over to them. 

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Update on PPP and EIDL. You'll recall we applied the Monday after the bill passed, right after they updated the online forms the first time.

Just received my PPP loan deposited into my bank account this morning. It was $3k less than I originally thought, because they calculated my payroll on FY2019, not on a rolling 12 months that included my busy first-quarter ski season. 

SO & I also got our personal stimulus  payment deposited into our personal checking account today. Since we do taxes direct deposit, we're not affected by the delay caused by the Orange Cheeto holding up the physical checks so he can stamp his obnoxious signature on it. 

Finally, it looks like we got a $5,000 deposit into our account from the IRS. I'm guessing that's the EIDL loan, although we got no documentation or paperwork about it. We had 5 employees at the end of February, so it seems to make sense. It's half of what was promised, but I guess it would be obscene for me to complain at this point. 

So in short, we have money in the bank, and are no longer draining our savings, which was getting pretty thin. Today I get to figure out how I can make this money last until the end of June. It seems like a windfall, but I know what payments are sitting out there unpaid, and I know if I paid them all, my bank account would be empty. I described it as a 400-pound man trying to cover himself with a fig leaf.

I wish everyone luck going forward. If I can help any of you with discussions about these two programs, let me know. 

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PhineasSwann wrote:

Finally, it looks like we got a $5,000 deposit into our account from the IRS. I'm guessing that's the EIDL loan, although we got no documentation or paperwork about it. We had 5 employees at the end of February... 

I finally got my $5000 deposit yesterday. I also had 5 employees. I applied for more, to see me through a few slow months. We'll see if they eventually get around to looking at that application.

Also hoping for some PPP money from the newly re-funded program. We'll see.

But the best news is that I currently have 4 rooms occupied! Last Friday I got a reservation, arrived yesterday, for 2 rooms, 4 nights! It's a family from central Arkansas, just looking for a getaway.

And yesterday I got a business traveler reservation for 2 rooms, 2 nights, arriving today. So I can afford to eat steak this weekend!

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Front page of our newspaper this morning was exclaiming the average loan in my state was $150k. The letters to the editor page? ‘We don’t know anyone who got a dime.’

 

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Morticia wrote:

Front page of our newspaper this morning was exclaiming the average loan in my state was $150k. The letters to the editor page? ‘We don’t know anyone who got a dime.’

Yes, big controversy over that. Big corporations got in there first and took millions, leaving little or none for small businesses. I think some of the corporations have given the money back after the criticism. I haven't followed it closely. Too depressing!

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We don’t have big businesses here. I do know several resorts got a loan, but most of them are locally owned. 

 Doesn’t really matter, we’ve pulled ourselves out of deeper holes in the past, we’ll do it again!

 And, the DAV gave Gomez $250 yesterday, so there’s that. 

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Our PPP loan for $17K landed in our local bank account yesterday here in Maine.  Applied for on April 6.  We also received $1K EIDL on Monday.  Sole Proprietor/No Employees.  There is new guidance for the next loans for LLCs & S-Corps, etc.  I would approach your local banks now to get the process rolling.  Was actually very very simple and our loan guy was terrific.  Again, two year term, 1% interest, no payments for six months. 

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The Truth and an Open Mind Shall Set You Free

 

Momma Smurf's picture
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That's great news.  Our PPP was approved last Saturday.  Waiting for final paperwork.   Isn't the EIDL subtracted from the PPP somehow?

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Yes - from what I understand its forgiveness counts against any sort of PPP forgiveness. 

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Just got our deposit today. I worked very closely with our local bank, mainly in making sure all our t's were crossed and i's were dotted. The $250 billion allocated loans ran out today.

Having a good relationship with a local lender was absolutely clutch in all this. As was pretty quickly figuring out which loan to apply for. Now it's a matter of how to allocate they money (payroll vs. utilities) to make sure we use all of it within 8 weeks. 

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PhineasSwann wrote:

Finally, it looks like we got a $5,000 deposit into our account from the IRS. I'm guessing that's the EIDL loan... 

I ran and checked my account, hoping for the EIDL advance. Nothing. Nothing there but withdrawals withdrawals withdrawals. The last deposit into my inn account was March 31 Crying, sad

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In our case, COGS includes Food Costs, Alcohol Bought for Consumption, Gift Shop items cost, any items we purchase and resale. 

All of your other expenses in inn keeping are just expenses, not COGS.

Arks's picture
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I put in a 6-month estimate of lost rentals.

Sadly, I don't really think things can return to normal until we have a successful vaccine, which, even if they bend the rules a little*, is still a year or more away. Maybe people can eventually figure out a safe way to travel a little and do it safely, but at this point nobody's sure, so we err on the side of extreme caution.

-------------------------------------------------
* The reason they can't bend the vaccine testing rules much is that they just cannot risk giving all of humanity a vaccine only to discover that, a few months later, the vaccine ends up killing more people than the disease did. They have to get it right. Over a period of 100 years they've figured out the safe way to do it, and they'll stick with that.

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This a tax-free grant (they call it an Advance) of $1000 they're giving to every US business that applies, while the $10 billion fund holds out. This is separate from a loan. Everybody should apply. You get the grant whether you get a loan or not. It's a grant. It doesn't have to be repaid. They WANT you to get the money, and spend it to stimulate the economy.

I filled out the "old" application over the weekend. This evening I got this message from them:

If you wish to apply for the Advance on your EIDL, please visit www.SBA.gov/Disaster as soon as possible to fill out a new, streamlined application. In order to qualify for the Advance, you need to submit this new application even if you previously submitted an EIDL application. Applying for the Advance will not impact the status or slow your existing application.

It said it would take about 2 hours to complete, but because I'd recently gotten info together for my taxes, it took me about 20 minutes.

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Arks wrote:

If you wish to apply for the Advance on your EIDL, please visit www.SBA.gov/Disaster as soon as possible to fill out a new, streamlined application. In order to qualify for the Advance, you need to submit this new application even if you previously submitted an EIDL application. Applying for the Advance will not impact the status or slow your existing application.

What number is being used for COST OF GOODS since we are not selling physical items? Are we using our operating expenses as costs of goods?

__________________

Jim & Maxine

 

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Arks wrote:

This a tax-free grant (they call it an Advance) of $1000 they're giving to every US business that applies, while the $10 billion fund holds out. This is separate from a loan. Everybody should apply. You get the grant whether you get a loan or not. It's a grant. It doesn't have to be repaid. They WANT you to get the money, and spend it to stimulate the economy.

I filled out the "old" application over the weekend. This evening I got this message from them:

If you wish to apply for the Advance on your EIDL, please visit www.SBA.gov/Disaster as soon as possible to fill out a new, streamlined application. In order to qualify for the Advance, you need to submit this new application even if you previously submitted an EIDL application. Applying for the Advance will not impact the status or slow your existing application.

It said it would take about 2 hours to complete, but because I'd recently gotten info together for my taxes, it took me about 20 minutes.

 

Are you putting in lost rents?  Or just putting in Gross Revenues less Cost of Goods?

And thanks for posting this.

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We got the email this morning. Glad to know the short form takes 2 hours. The long form took 8.

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FYI, for those filling out EIDL requests, the website was updated Monday morning to include a click box to request an immediate $10,000 if you qualify. 

If you haven't completed your application, make sure you go back and reload the page so you don't have the old one from your cache. 

In filling out the new EIDL application, they ask you for the basic information and then you submit. They say they'll email you back to ask for any additional documentation, so I would recommend going back and having those forms filled out and ready so it won't slow things down. 

Advice from my SBA and a VC friend is go ahead and apply for the EIDL - you can always roll it into the PPP if you decided to go that route as well later. 

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We called today and the local sba had no additional info. They are still waiting for info from the main office. We’ve already filled the paperwork. It’s possible that we jumped the gun by filling yesterday.

Momma Smurf's picture
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I would wait to file with your local bank which should happen very soon.

Silverspoon's picture
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Our state government has told all that want to file for unemployment CARES benefits to wait until the state receives information from the feds.  In fact, I hate to tell you that applying early, before the new forms etc are in place, can foul up the system.  

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Gardens are not made by singing "Oh, how beautiful" and sitting in the shade.
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Morticia's picture
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Anyone else applying for unemployment?

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My only question filling out the form is on the supplemental form (P-019) where it asks for our past 12 months' revenue and COGS.

After that, it asks "Rental properties  (residential and commercial) only. Lost rents due to the disaster:"

I don't know whether I fill in a projection of my lost reservation revenues or leave it open. My instinct is the latter, since anything I put in will be a WAG (wild-ass guess). They know what we did last year, so I would assume they would calculate based on that. 

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Sounds like ... wait until next week and talk with local bankers?

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I work with a local non profit.  We will phone local banks on Monday.  You might think of emailing in advance since so many are working from home, loan officers likely among them.

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I know there is only so much available so am letting all of you know that I will NOT be applying - leaving mine for those of you who really need it. I will be OK as I am not dealing with a mortgage. I stopped the extra payment on the principal of my loan so I think I can weather this. It is the only way I know to help all of you. (Not dealing with Himself and his meds, supplemental insurance, & diet is a BIG help. Although miss his part of the income.)

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I think we are in the same boat, mortgage is on an adjoining property, not the business, donation towards utilities would be nice, yet with being required to be closed and the time of the year hopefully they will be low, no employees, so just us and the kids to suck it up and get by, if life gets somewhat back to normal in a couple of months, hopefully we will survive.

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This is long.  I got it from a FB bed and breakfast post.  Maybe you've already seen it.

To all my fellow Entrepreneurs and Small Business Owners. We receive updates from a company called Directed Equity which we use for our 401K investments in our small business. With each change or opportunity presented for small businesses now, they send out an interpretation of what this means to the small business owner.

I'm sharing here as I know it is hard to know exactly what it all means, or what you need to do to participate, hopefully this email will help to shed more light on the situation for those interested and in need.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Directed Equity Client,

We have what appears to be Great news.  For many small businesses, the $349 Billion available under the Paycheck Protection Program (PPP) authorized by the CARES Act stimulus package passed by the House today and signed by the President, will provide even greater relief to small businesses than the Economic Injury Disaster Loan (EIDL) program we outlined in our Monday email blast. There are MANY questions that are yet to be answered about the PPP and the SBA has been given two (2) weeks to develop and publish written interpretation and guidance on the Act.

Here is what we do know:

Unlike the EIDL program, PPP loan applications will be submitted to SBA lending institutions, not directly to the SBA. I would therefore suggest that you speak with your business banker and request that you be added to their distribution list regarding PPP notifications and also ask what information you can start gathering in anticipation of applying for a PPP loan. Based upon the legislation, following are items we anticipate you will need to gather:

•    Average total Monthly Payroll cost incurred in the one-year period before the loan is made (gather 941 Payroll journals dating as far back as 1/1/2019).

•    Average Monthly Employee Benefit Cost including 401(k) matching contributions (dating back to 1/1/2019).

•    2018 & 2019 Federal Tax Returns. If the 2019 Federal Return is not yet filed, then internally prepared financials for the 2019. (Note: The Act allows loans to be made solely on Credit Scores of the principals).

•    Monthly Rent or Interest Expense on Business mortgages (Gather your last 3 months rent payments/invoices or Mortgage statements).

•    Monthly Utility payments (Gather your last three months bills and payments).

Loan Attributes -

The maximum loan amount will generally be:

•    2.5 times the average total monthly payroll cost incurred in the one-year period before the loan is made, PLUS

•    The outstanding amount of a loan made under the SBA’s Disaster Loan Program between January 31, 2020 and the date on which such loan may be refinanced as part of the PPP program. Note: It appears that a borrower cannot receive a PPP loan in addition to an EIDL if they are for the same purpose (ie, COVID-19). A borrower who has a disaster loan unrelated to COVID-19 may apply for a PPP loan with an option to refinance the disaster loan into the PPP loan. It is our current recommendation that you APPLY for both the EIDL and PPP loans. However, prior to closing, we would suggest that you discuss both loan options with your SBA professional.

•    These loans will be guaranteed 100% by the US Government.

•    The covered loan period will be your anticipated operating expenses beginning on February 15, 2020 and ending on June 30, 2020.

•    These will be 10-year term loans from the date of application for forgiveness.

•    The maximum interest rate will be 4%.

•    There will be no borrower fees for participating in the program.

•    There are no credit elsewhere tests for funds provided under this program.

•    There will not be any personal guarantees necessary or collateral requirements for loans of $200,000 or less.

•    Any loan amount that is not forgiven by June 30, 2020 will amortize over 10 years.

•    Loan payments will be deferred between 6 months to 1 year.

•    There will be no prepayment penalties.

Eligibility –

•    Businesses or Non-Profits that employ fewer than 500 employees.

•    Business must have been operational on February 15, 2020 and had employees who it paid salaries and payroll taxes. (Businesses paying independent contractors might also qualify).

•    Business must certify that the loan is necessary due to the uncertainty of current economic conditions caused by the COVID-19 virus.

Loan Payments –

•    Current SBA 7(a) borrowers -We expect the SBA to cover 6 months of payment for all current 7(a) borrowers that are in regular servicing. The details about how they will pay and report this aspect of the Act are yet to be determined, but the Act includes language for this purpose.

•    10-Year term with a maximum of a 4% interest rate and No prepayment penalty.

Conversion of Loan to Grant (Loan Forgiveness) –

•    The Act provides for a portion of the loan to be forgiven. Specifically, indebtedness is forgiven (and excluded from gross income) in an amount (not to exceed the principal amount of the loan) equal to the following cost incurred and payments made:

•    Payroll Cost (Excludes individual compensation above $100,000 per year)

•    Interest payment on mortgages

•    Rent, and

•    Utility Payments

NOTE:  Forgiveness amounts will be reduced for any employee cuts or reductions in wages by applying an approved formula.

We will continue to keep you updated as we learn more about the PPP/CARES Act and the SBA publishes its interpretation and guidance.

Invested in your Journey,

Mark Challis

— feeling thankful at The White Orchid Inn &  Spa.

PhineasSwann's picture
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The initial page says the application process for the grant isn't in place yet. You can apply for the EIDL, but will have to go back in later to apply for the grant once that's set up. May wait until Monday to submit to see if they have it set up by then so I don't have to go back and duplicate work. 

Morticia's picture
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So, Gomez is doing this now. He says it is going to take at least 2-3 DAYS to gather all the info and fill out what he says is 20 pages of forms. Is that what you’re all seeing?

 They need to know where you were born? seriously?

Morticia's picture
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So, Gomez is doing this now. He says it is going to take at least 2-3 DAYS to gather all the info and fill out what he says is 20 pages of forms. Is that what you’re all seeing?

 They need to know where you were born? seriously?

Arks's picture
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Yes, I applied this afternoon at https://disasterloan.sba.gov/ela/ for a $60,000 loan to cover my huge monthly mortgage payment, utilities, insurance, etc. for the next few months. The first $10,000 is a grant. Doesn't have to be repaid. The balance is a 30-year loan at, I think, 3.75% interest.

The webinar I watched said 90% are being approved, and even if you don't get approved, you get the $10,000 grant. But there's "only" $10 billion set aside for this, and it's first come, first served.

The application sounds like it's for a flood or tornado or something, but one of the categories it pays for is "Economic Injury". That's the one we are suffering.

Momma Smurf's picture
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Does our state have to be officially declared a disaster area?

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