SBA Loans and What Small Business Owners Need To Know

Founder Sara Khaki of Atlanta Divorce Law Group recently hosted Tax Attorney Jason Wiggam to educate small business owners on the SBA loan and tax benefits from the stimulus plan. Jason Wiggam breaks down the confusion of the SBA loans, the tax credits, and how to maximize this government benefit for your business.

Sara Khaki – What we’re doing tonight, here, with Atlanta Divorce Law Group’s series of We Won’t Back Down. This is Atlanta Divorce Law Group’s effort to give back to the business community by giving the business community as much information and empower them with whatever tools they need to keep their businesses going in our Atlanta community while we’re all facing having this shared experience of quarantining ourselves through COVID-19. And tonight I am so honored and so pleased to have my good friend, Jason Wiggam, from Wiggam Law, a amazing tax law firm, and Jason is the cofounder and partner of the law firm, and he has a master’s in tax from NYU. So, I can’t really think of anybody better to navigate us through these very confusing waters of the SBA loans and the stimulus plan that is here to help all the small businesses and help us keep our team going, and keep our A team players, and make sure that we stay afloat throughout all of this. So, Jason, thank you so much for joining me tonight.

Jason Wiggam – Thanks for having me Sara.

Sara – Absolutely. There’s a lot going on right now, every business owner is getting a big sense of FOMO, fear of missing out on these business loans, and it sounds like they are too good to be true. Actually, one of the first people I called to get some advice about all this was you, and I know you read that stimulus plan page-for-page, and really studied it, and still, it’s changing every day on us. From what I understand, the benefits to business owners, who is going to be our main audience watching this tonight, are the IEDL plan, which is the economic relief plan, and the PPP, which is the paycheck protection plan, and there’s also, obviously, some of the tax benefits and credits that are coming through. Let’s go through first the SBA loans, ’cause I think that’s what’s causing the most confusion and it’s causing a lot of people to get the sense of FOMO. The SBA site has crashed a couple of times since it was announced. And a lot of people just don’t know what the differences are. If you don’t mind, just first talk us through the first program, the IEDL, which is not going to be as powerful as PPP, but just so that we get clear on what these two different programs are and what we should be looking out for.

Jason – Yeah, so the economic injury disaster loan, which is a mouthful, so I’ll refer to it as the EIDL, apparently it’s a program that preexisted this crisis. If a governor asks for the federal government to approve their state as a disaster area to even qualify for this loan. They made it better when the COVID-19 crisis started. It’s a pretty good loan on it’s own, even if we didn’t have the PPP. So, I’ll just kinda run through it quickly. You can get up to $2 million, up to a 30 year term, 3.75 interest rate for for-profit companies, for small businesses, and 2.75% for nonprofits. It’s designed for small businesses, which they define as 500 employees or less. There’s a few exceptions there. But that’s gonna be most people. They’re deferring the payment on it for a year, which is very nice. So, what can you get the loan for, and what is it used for? So, you can use it to pay your fixed debts, your accounts payable, payroll, and any other necessary business expense that cannot be paid because of the disaster’s impact. So, this is a loan where you apply through the SBA, they have a web portal online now. And after a few weeks, someone will contact you. You have to provide financials and underwriting information and show that you need the loan and for what purpose. There is also sort of an interesting thing with it. In the CARES Act, in the stimulus bill, they added this $10,000 advance you can get, which can function as a grant. So, when you apply online, on the last page, this little checkbox that says, “Would you like the advance?” and you put in your bank information. The idea is, after they review your application, you’ll get the $10,000 within 72 hours. I had clients who did it earlier this week because the application became live earlier this week. As far as I know, none of them have received it yet. But I think they will soon. It’s really for someone who needs cash now. So, a restaurant, a gym, any business that, their revenues have fallen off a cliff, and they are struggling hard, because it is an advance on the paycheck protection loan, which we’re gonna talk about next.

Sara – And I don’t want people to be intimidated because, typically, when you apply for a loan or you apply for a line of credit, you’re giving up so much information, and you have to go through so many hurdles to get it. As of, I think, a couple of days ago, they even upgraded the site, and even streamlined the online application more, and it might take you six minutes to fill it out. Before, where you have to submit profit loss statements, or any kind of previous information about your tax returns, you don’t even need to do that at this point. You just really need to know, I believe it’s like you’re rolling 12 month of gross revenue and cost of goods sold.

Jason – Exactly, yeah. I’m one of the people who applied–

Sara – Earlier.

Jason – Yeah. It was a lot more work. But yeah, it’s your gross revenues for 12 months. If you don’t have it perfect, I don’t think it’s the end of the world. I had a client who didn’t know January through March, so we just used 2019 and cost of goods sold. So, if someone has access to a profit and loss, they can pull that information off of it, or their bookkeeper could help them. Yeah, it takes five to 10 minutes, it’s super easy. It asks you information about your business, it asks some qualifying questions. If you’re in default with an SBA loan, if you’re been charged with a crime or convicted of certain crimes, apparently you’re not eligible. Whether you’re a US citizen, and just some kind of simple yes or no questions. So, that’s the first part, and then, my understanding is, in like three weeks someone from the SBA reaches out, and there will be more underwriting where you have to provide a personal financial statement, more information about the business. Basically the information that the old online system required. And then, I think they require you to justify what you’re asking for. I talked to a doctor today, and he has an equipment lease on this very expensive piece of medical equipment. It’s elective surgeries. All he does is elective surgeries, and apparently the jurisdiction he’s in, he’s no longer aloud to do them, so he has to service the debt on this equipment, but he can’t use it. It’s very expensive. I told him I thought that was a great argument to make. If someone has significant financial issues, I think they should try to get as much as they can through the EIDL, because you can do both loans. You just can’t use them for the same purpose. So, the PPP is more about payroll and some other things. Justify using them for both, why not? The loan terms for the EIDL, it has to be repaid, but up to 30 years, 3.75% interest, 12 month deferment.

Sara – Can’t beat it.

Jason – Yeah. Even if I didn’t need money, I would take that. Apparently, they will not require a personal guarantee up to $200,000, and possibly not collateral. I think at a minimum, try to get 200 K and maximize what they’re offering. That loan would never be offered in the private market.

Sara – No. And so, before we move on to PPP, I just really want, ’cause I know there’s people watching this who are private school owners, daycare owners. At Atlanta Divorce Law Group, we have many business owners that we represent. I know your main clientele are business owners. Pilates, yoga studio owners, restaurant owners, please apply for this. We’ll get to PPP, you should apply for that too, but please, please, please apply to this. Get the immediate relief. Don’t get intimidated or overwhelmed by having to apply, so just go to They’re really made it so simple now, it takes you six minutes to complete it. And then worry about all the stuff you need to get together, all the financials, the supporting documents you need later. I really hope that anybody that’s on the verge or already has shut down, takes a minute and fills this out. They’re basically, the government’s throwing money at business owners right now trying to save them.

Jason – 100%, I agree. You know, if you’re not a numbers person, call your person that is. Hopefully you have a bookkeeper, an accountant. If you don’t, feel free to call me. I’d be happy to help you, for a fee. But I’d be happy to help you if you’re unable to do it. It’s not that bad, and to Sara’s point, the application could get done very quickly. I think getting in line for the EIDL is important too, ’cause I think it’s gonna take a little while till businesses start to actually receive the funds. I personally applied. I haven’t heard back yet, I applied two weeks ago. The old system, so we will see. I did not take the advance. I could’ve reapplied and received it. I didn’t need immediate cash, so I decided to wait to apply for the PPP loan when it opens up on Friday.

Sara – So, let’s talk about the PPP loan, ’cause that’s the big one, that’s the really exciting one. It’s been everyday, the news seems to be a little bit different on it. You’re my go to source for this. What’s the latest on the street about it, Jason?

Jason – In case anyone doesn’t know what it is, the PPP loan is the Payroll Protection Program loan. It is a loan that will be administered by banks who are licensed to lend under section 7A of the SBA. So, apparently, this is a special type of loan that you get that the SBA guarantees for the bank. Here, it’s 100% guarantee. So, banks are really looking to do them. They get a percentage of the loan, and Congress approved $349 billion, so there’s a lot of money. If you described this to me, and I hadn’t read the bill, I would’ve said, “I don’t believe you.” It just sounds too good to be true. So, basically, it’s a forgivable loan. So, you receive the loan, and then if you use it for certain purposes, the government forgives the loan, and it’s basically free money. Normally, when you have a loan that’s forgiven, it is taxable to the borrower, because they didn’t have to repay it, and the tax code says that’s cancellation of indebtedness income. Here, they exempted it from that, so it’s literally free money. The government wants to hand you a check. The only hitch is you have to keep your people employed, which you probably wanted to do anyways. So, first of all, what are the terms? If the loan is not forgiven, so the goal is to get it forgiven, but if the loan was not forgiven, it’s a 10 year loan, up to a 4% interest rate, so banks could compete. Some could be lower interest rates. A six to 12 months deferment on payments, no personal guarantee, no collateral.

Sara – It’s amazing.

Jason – Which is insane. I was just thinking about my business credit cards. They’re unsecured. But I have to have a personal guarantee, even though it’s a business card, and the interest rate’s probably like 25%. Here’s it’s 4% or up to 4%. So, how much can you get? The game is played in how much can you get and what can you get forgiven? So, you are able to get two and a half months of your payroll costs, which is defined.

Sara – Yeah, and payroll is pretty loosely defined, correct?

Jason – Yeah, that was my bad attempt at bunny ears. But, yeah. So, it is your average payroll for the last 12 months. So, you would take that total number and divide it by 12, and then multiply it by 2.5. But payroll includes payments to independent contractors, payments for group health insurance including premiums, retirement contributions, state and local taxes, it does exclude federal income tax withholding and the federal payroll taxes the employee pays. So, you really need a breakdown of all of the categories that go into your payroll, and then you have to look at other items. You can include severance payments, if you laid someone off in the last year and paid them severance. So, it’s really important to make sure you’re maximizing that definition. So, the SBA released paperwork yesterday and guidance. And when I read the paperwork it didn’t really highlight the fact that, when they say the word payroll, that it includes a lot of other things. So, if you weren’t aware of that, you could not get the maximum amount of the loan. When I see the word payroll I assume wages. I don’t necessarily assume everything else I just discussed.

Sara – So, that’s the payroll piece. How does the rent and utilities piece play into this as well?

Jason – Yeah, so you get the loan, and then certain expenses for eight weeks are covered, and you can apply to have them forgiven and taken off of the balance of the loan. So, it’s your payroll costs, oh, and I didn’t mention, with payroll costs, they will not include any compensation per an employee over 100,000. So, you get it up to then it stops. So, it’s the same definition of payroll costs for eight weeks, rent, utilities, and interest on a mortgage obligation, and all of those just had to exist before February 15th. So, you had to be in the lease before February 15th, you had to have the mortgage before February 15th, and I guess, you were incurring the utilities in the normal course before February 15th. So, the idea is after eight weeks you total up those costs, and if they meet or exceed the amount of the loan, it’s completely forgiven. You don’t have to repay it. You make an application to the bank, and the bill does require that you actually prove that you spent the money. So, you will need to have good accounting records and potentially someone to help you with that. ‘Cause I do assume they will audit it, right?

Sara – Right.

Jason – I think they are worried about abuse.

Sara – I think right now they’re just throwing money at us, and then later on they’ll start looking, when they get the chance to breath, they’re gonna start looking through it a little bit more carefully.

Jason – I represent businesses, business owners who have tax debts and who have financial issues. We do bankruptcy too. So, I have a lot of clients that are looking at this as a potential windfall to just use their payroll costs to get a cheap loan to pay the IRS, ’cause it’s a much better loan than the loan the IRS gives you when you owe them. So, you could take the loan and not apply for forgiveness, but even those people, I think, will still incur over the eight weeks after they receive the loans, I still think they would get something. The other hitch is your payroll cost forgiveness is reduced if you’ve laid off employees, if you were forced to. But the act allows you to, as long as you reemploy them by June 30th.

Sara – And so, let’s be clear on that, because I think there’s a lot of confusion there. They’re not looking that you reemploy the same employees. They’re literally looking at the number of employees.

Jason – Yeah, that’s correct.

Sara – But their giving you all the incentive to keep your A team players. But if you’re in a situation where you have an employee that you’re not laying off but you’re having trouble with them and they’re not performing, and you want to let them go, as long as you replace them, you’re fine for the forgiveness.

Jason – Yeah, that’s exactly right. It doesn’t say it has to be the specific people who were let go. And yeah, I could see a situation where maybe you’d want to rehire them, and they’ve moved on, they don’t want to come back. And it’s interesting too, the measuring stick for what they’re comparing it to. You can use the prior year. I fortunately haven’t had to let anyone go, but if I did, our headcount has increased by four people year-over-year. Let’s hypothetically say I let one member of my team go, I would be fine, because when you compare it to last year, the headcount has not decreased of full-time equivalent employees.

Sara – Which quarter to which quarter are they comparing, Jason?

Jason – Yeah, it’s February 15 through June 30th of 2019. There’s a few different ones you can do, so, I’m gonna have to pull this up to make sure I don’t butcher it. So, you can either do… February 15th to June 30th of 2019.

Sara – For that period of time, how many employees did you have during that time? That’s one of your options.

Jason – Compared to when you apply for forgiveness. Sorry. When you originate the loan, the eight weeks after. That’s what they look at. So, in that eight week period, you need to make the numbers the same. Or in my case, they would be the same unless I laid off four or five people.

Sara – So, you can really either go for right before this thing hit for what was your net number of employees during that time, or you can choose to have them compare it to what your number of employees was last year. Did I get that right?

Jason – Exactly. So, there are three different options. You can picture January 1st through February 29th of 2020, and also elect… Make sure, that doesn’t make sense. It’s two, sorry, not three. So, I think you would look at, if you’ve laid someone off, where am I at now, and then, I’m gonna receive the loan funds, and I could put them on payroll right away, hopefully, or maybe within a week. But I would be in contact with your employees and make sure they’re coming back and work out all those kinks. If, ultimately, let’s say you had eight people and now you have seven, you still get seven eighths of the benefit. And then you still get to include your rent, you’re utilities–

Sara – Yeah, all is not lost. Even if you let somebody go, you still can get a big portion of the forgiveness.

Jason – Yeah, I hope everyone rehires everyone. I hope we return to normalcy here in a month or two.

Sara – So, Jason, let’s talk about that, ’cause we both know there’s already businesses who have laid people off before all this came out. They laid people off within the first week or a week and a half into it, or two weeks into it. Now that they are more well informed about this plan, and I hope everybody’s really hearing you on how amazing this is, can they go back and rehire those people and still reap the benefits of this?

Jason – Yeah, 100%, 100%, and they should.

Sara – Because they can choose the timeline they want to go for.

Jason – Sure. Let’s say you intended to rehire everyone, and some of them just don’t come back, for whatever reason, through no fault of your own, you still get to include your rent, your utilities, and interest on mortgages, if any. So, that number might be enough to make up the difference. Does that make sense?

Sara – Yeah.

Jason – ‘Cause the loan is based off of payroll costs, and then they give you two and a half months worth. So, I think the idea was they’re gonna cover two months of payroll, and then half a month of rent and utilities. But we’re talking eight weeks. So, instead of incurring a half a month of rent and utilities, you incur two, so I can see a scenario where even if the payroll costs were reduced, you still get the full forgiveness because of the other costs. I think the main thing is making sure someone’s looking at it and looking at your data and projecting out, and then if you do need to make a change, do it. If you’re gonna receive this loan and you want to get back to business, hire your people and go, and start talking with them, or hire new people, to your original point. Maybe you want someone better. I suspect there’s a lot of people looking for work right now.

Sara – Yeah. I think the purpose of this is, the heart of it is for small businesses to not let their people go and to keep them employed. The government’s throwing money at us, which is, at the end of the day, gonna be all of our tax money for us to keep our team employed. And if you have a team of A players, they’re giving you every reason right now to not lay them off. And I just feel so strongly about this, because it’s heartbreaking to watch, for businesses laying superstars, team members off, and I think that there’s still a chance to get them back and get some help for your business. Now, let’s talk about this part that personally has been a little bit frustrating, which is the banks.

Jason – Yeah, how does it work? How do you get it?

Sara – Yeah, first of all, I’ll get to the part that I’m finding frustrating, but first let’s inform them that, PPP, you have to go through your bank to get it, you have to get your bank to basically secure the loan for you. That’s the only option, correct?

Jason – Before I dive into that, I think one thing I left off was, so, what businesses qualify. So, it’s like the EIDL, it’s a small business defined as 500 employees or less, and you have payroll, and you make a good faith certification that the crisis is affecting you, which I think, obviously, it’s affecting everyone. So, there’s no requirement that you’re in financial distress. So, even if your business is fine, you should 100% take advantage of this. I think that’s kind of our scenario. I know both you and I are gonna do it.

Sara – I mean, thankfully, the professional services industry, we’re fine. Like you said, it’s the nail salon, it’s the Pilates studio, it’s the dentist offices, those are being hit the hardest with this.

Jason – 100%. So, how do you get it? You want to talk to your business banker, whoever you’re working with now. Hopefully, they’re nimble and they’re working on this. From what I’ve seen, the large banks and most banks are gonna prioritize their current clients. The feeling is that the demand for this is very high, and the demand will exceed supplies. While it’s 350 billion, which is just a ridiculous sum of money, I think it’s gonna get used up. I’ve heard people say two, three weeks. I have no idea, that’s just speculation. I think everyone’s gonna try to maximize it and get as much as they can. So, you want to contact who your banker is and you want to find out who does SBA loans for them. If you’re with a major bank they definitely have an SBA person. There are other companies outside of banks doing it. So, today, I Googled, “Who produces the most SBA 7A loans?” which is the type of loan it is, and there’s a list on the SBA website, and there are these companies that are in business of just doing loans. And some of them have portals on their website where you can fill in your business information and submit it. I did like six of them, I just did every single one that was available. I’ve contacted my bank, I bank with SunTrust and Regions, I’ve contacted both of them. Whoever is the fasted will get my business. I also wanted to know for my clients too, because some of them have great relationships with their bankers and some don’t. And the ones that don’t, it’s like they’re dealing with a teller at the branch, and the teller at the branch doesn’t really know anything. Even if you have a dedicated banker, they might not know anything either, ’cause this is all brand new.

Sara – That’s the frustrating part I’ve experienced, ’cause I have two separate banks. I bank with Chase and I bank with Wells Fargo. I have a personal relationship with our person at Chase, and I want to give a huge shout out to Chase bank. They’ve been fantastic. My friend Joey at Chase has been such a partner through all this. You know, beyond that, they were one of the first, I think maybe the only one that’s issued a statement, a night or two nights ago, to all their customers saying, “Here’s what we’re doing with this loan, with the PPP loan, “here’s how we’re gonna support our customers. “We haven’t gotten all the guidelines from the SBA yet, “but we’re working on it, and here’s what “we want you to start preparing for this.” Now, on the other end we have Wells Fargo. Crickets, nothing. I don’t have, and this is the part where I’m sure a lot of other people feel my pain, is I don’t have a person inside of Wells Fargo. I obviously know a few couple people in there, but nobody that knows where to guide me or get to me. And you email anybody at Wells Fargo right now or a lot of these banks, it’s going to an automated message, ’cause I’m sure they’re all bombarded. What do you advise for somebody who is in that position where they don’t have somebody inside of the bank, and the banks are shut down, it’s not like you can go inside of a bank right now, and you try to call them, you’ll be on hold for hours. So, I think this is causing a little bit of anxiety for a lot of business owners who may not have that personal relationship that I have with Joey at Chase. I don’t have that in Wells Fargo, and I’m trying to get a hold of somebody there and can’t.

Jason – Yeah, so it’s interesting, ’cause Wells Fargo on this list I was talking about, they probably had the first or second most SBA 7A applications last year. 692, total loan amount 144 million. But it’s interesting, there’s a lot of smaller companies that did a heck of a lot less loans that actually originated much higher loan amount. I can just read of a few of them from the list, and people can Google. But what I am talking about is, if you Google the 100 most active SBA 7A lenders, and it apparently has their volume through the end of December listed here. Newtek Small Business Finance Inc, if you just Google Newtek, it comes up. ReadyCap lending, anything that doesn’t have bank in the name. Let’s see, who else here? Harvest Small Business Finance, Hana Small Business Lending, Fountainhead SBF, Fountainhead had the most detailed online form that literally asked what were my sales, what’s my payroll, a lot of information which I think Fountainhead’s probably going to sort it by size, because it’s percentage. If you can do a very large loan in the same amount of time it takes to do a small loan, just rationally speaking, if I was them I would focus on the larger ones first. They had an interesting lead magnet where you could self sort yourself. So, I threw my name into the hat with them. Capital One, which is a bank, but I guess I view them more as like a credit card company. Let’s see…

Sara – And so, for people’s benefit that are listening to this, you don’t have to have a banking relationship with these companies for them to represent you on this PPP application.

Jason – Yeah, so NewTek, they’re pretty large, they are just in the business of lending money. So, they do 7A loans, they do merchant advance loans, they do a lot of loans like that. So, I would think they’re probably better positioned to adapt to this than a slow moving large bank. I could be wrong. In terms of volume of applications, Wells Fargo and the Huntington National Bank, whoever that is, and US Bank had the highest total amount of applications. But just to give you an idea, Wells Fargo had 144 million at 692 applications, NewTek had 205 million at 253 applications, so a third of the applications, and they originated more. Just tells me they’re more efficient at their job, or maybe it’s the clientele, I don’t know. It’s worth a shot, ’cause if it’s gonna run out, I got in line with a lot of people to maximize my chance of success.

Sara – Yeah, that was smart. That’s a smart tip, is to go through as many of those as you can now. The applications, you can start applying as of this Friday, correct?

Jason – Yeah, yeah. So, there is… There’s a website I can give to everyone if you give me one second. So, if you just Google, it’s a long web address, I’ll just to tell you what to Google. If you Google “US Department of Treasury “assistance for small businesses,” and I think if you even go to the US Department of Treasure website, it looks like they have a banner at the top that says, “For small businesses seeking direct relief,” you click on it and it comes to the page. But the application’s there, some information about the program. I was told today that that’s probably not the application banks will use, it’s just a start. But, at least, you can look at it and complete as much as possible. I would start calculating my payroll cost now so you make sure you get the maximum amount when you apply. And even if you end up being wrong, I would err on the side of too much if it’s gray. And if you’re wrong, you’re just stuck with a good loan. Obviously, you sign these forms under penalties of perjury, so I wouldn’t lie. For example, the group health, were they envisioning the share that’s with health and the employees’ paycheck, or is it the entire amount paid by the employer? I’ve read it a few times, it’s unclear. So, I am including the entire amount that I pay. I pay 100% of my employees’ health insurance, but even if they paid half, I would include both. You know, and then if I interpreted it wrong, which I read the text, it doesn’t say that, it just says group health insurance including premiums, I’ll just ask for forgiveness later. But yeah, I would prepare the application, I would annoy the shit out of your banker. I would find a person and then, maybe not a daily check in, you don’t want them to hate you. But every couple days. The goal would be to apply Friday or Monday, early next week. I think a lot of these banks won’t be ready, just from what I’m seeing. So, that’s why I put a lot of lines in the water. So, hopefully one of them will–

Sara – Yeah, that’s a great tip. And Jason, one other thing that’s important I think for people to know is that, once you are granted the loan, once the money hits your bank, you have, I believe, two and a half months, which is eight weeks.

Jason – Eight weeks, yeah.

Sara – Eight weeks, sorry, not two and a half months, eight weeks to spend it on items that are part of the program, which is your payroll, your rent, and your utilities.

Jason – Correct, and interest on mortgages. So, yeah, you want to have those costs coming from the same account. Me, personally, I intend to put the loan into an operating account and pay everything from the operating account. And then, when I apply for forgiveness, I’ll have payroll records, I’ll have copies of my rent checks, I can produce a lease. They would like to see it for utilities, same thing. Most are paid with a credit card, so I can produce credit card statements. I can produce my QuickBooks accounting records. I’m not sure how, I represent people in IRS audits, they tend to want you to prove every little thing. They’re like, “Oh, here’s your QuickBooks P&L,” and they’re like, “Well, how do I know your client “didn’t manipulate that, Mr. Wiggam?” and I’m like, “Well, my client’s an honest person, “you terrible IRS agent.” I don’t know how stringent it’ll be, but I’ll just keep records, which in the ordinary course, you’re probably already doing. But if not, now is the time to hire a bookkeeper, maybe invest some of those PPP proceeds into getting a good bookkeeper.

Sara – Yeah, and I had a phone call with my bookkeeper today. One of the things that we’re doing is in our chart of accounts we’re adding a line item specifically for the expenses we’ve incurred for the past two and a half weeks because of COVID-19. Like all the Zoom accounts we have to open up, and the equipment we have to buy employees to be able to work from home. What are your thoughts on that? I’m thinking may or may not do anything, but I’d rather have it than not.

Jason – I like it for the EIDL. I think you are gonna have to prove the need. Yeah, that’s great. I guess I would compare it to an audit. Normally, someone comes to me with no records, and I have to kind of come up with a story or work with what I have. You’re doing the work for yourself, person who ends up doing it for you. But yeah, I like that, for sure. Obviously, I would look at, has my business decreased in any areas. Let’s say you had multiple lines of service, or just overall. Yeah.

Sara – Yeah, so let’s say for like a criminal defense attorney who was representing people on DUIs and domestic violence, but now domestic violence has gone up because of the quarantine. And I shouldn’t even say that with a smile on my face, ’cause it really has, it’s terrible. But yet, their DUI cases have decreased ’cause people aren’t out on the roads as much. Is that something that they should be tracking or they could use in any way?

Jason – Yeah, I mean, I think they would be able to show just the decline in revenue. You could look at year-over-year, quarter-over-quarter. Yeah, I think, you’re gonna have to tell the story with the EIDL loan. There will need to be a justification. Financial records, the example with the doctor. It’s like, hey, he doesn’t have any more surgeries, and we can produce the cost of this equipment. I told him, “Let’s start looking at your change in revenue.” I represent a Chick-fil-A operator. We were about to negotiate his installment agreement with the IRS, and then this happened, and he has a very successful Chick-fil-A, I guess franchise isn’t the right word, it’s not a franchise, but a location. Literally, his revenues have declined 50%, and it started mid-month. So, we had already submitted everything to the IRS, and we’re like, hey, look, we’re gonna need to get a full month to have the real picture here. If I hand you his March P&L, when things didn’t start to get bad until mid-March, that’s not gonna be accurate. We need to get all of April. So, I think it’s just kind of understanding what happened, where you’re at, and then good data in, bad data in, bad data out, good data in, good data out.

Sara – And Jason, let’s talk about the forgiveness process. When do we need to start preparing the app, let me back up. You apply this Friday, if you can, get your PPP application in. If you haven’t already applied for EIDL, go ahead and do that. And then, hopefully, within we don’t know how long, you’ll get the PPP loan inside your operating account. How long after you’ve received the PPP loan do you need to start the forgiveness process? ‘Cause that’s a separate application. And the forgiveness process is to get, basically, the loan to turn it into, for lack of a better money, free money, where you don’t have to pay it back. Yeah.

Jason – Yeah, so, they haven’t released any paperwork yet. I assume there will be some kind of standard form or maybe you write a letter. You’ll apply to the bank, and I don’t know if they’ll forward it to the SBA or if they will be the ones who vet it, but there will be an application process where you have to prove, over the eight week period after you receive the loan, what your payroll costs were, what your rent costs were, what your utilities were, and interest on any mortgage obligations. And then you want the total of each category and the overall total to exceed the amount of the loan, and if it does, they should forgive it. You have to prove the numbers, so I think they will vet it. Kinda like we were saying before, you can start on it now by making sure you keep good track of it, what you’re doing with your bookkeeper, I think that’s great. I think if everyone did that, it would be easy. I don’t think everyone will though. If you cut back on your bookkeeping to save money, I probably would not do that after you get the PPP. I’d hire your bookkeeper back or go to weekly, or whatever frequency you need to. Just keeping good records. Look, it’s not a big deal. The loan is deferred for six months to a year, so it’s not like you’re gonna have to pay anything in the meantime. Even if you don’t get forgiveness until month four, you’re still not out anything. They’ve indicated they will forgive any accrued interest too, so it’s not a big deal. Like I said, worst case, if you are stuck with something due to not being able to bring back all of your employees or other issues, you’re left with an amazing loan.

Sara – Yeah, you can’t get that at all from your private bank.

Jason – Yeah, it’s kinda wild, right. Someone could go out of business, and the government or the bank are not going to be able to collect from them personally. We end up filing a lot of bankruptcies due to personal guarantees. Business fails, and the owner personally guaranteed everything, and they have to file bankruptcy to move forward with their life and get a fresh start. Obviously, I hope no one goes out of business. The kind of stuff we do, I don’t wish tax problems on anyone, I don’t wish financial problems on anyone. It’s just a reality, it happens. It’s just insane to me that that’s the loan. I think prepare, keep good records, but at the same time, I wouldn’t lose sleep over it either.

Sara – Before we move to some of the tax benefits or help that they’ve given out with the taxes, I just want to summarize your advice here. Whether you think your business is hit hard or it’s not gonna be hit hard, still get on EIDL application, ’cause it’s just too easy to fill it out. It’s good help, right. And then also, this Friday, if you can, if not, early this next week, go ahead and go through your banker for the PPP loan. Correct?

Jason – Or another third party if–

Sara – Or another third party, all the ones you mentioned, or go to that site.

Jason – And look, I have no idea, they could be a problem too, I don’t know. I’m trying to find out for my clients and for myself. I think, hopefully, between the two of them, one will come through for you.

Sara – Okay. And we don’t yet know, or do we know whether they’re gonna take the PPP, I’m sorry, your EIDL loan and bundle it into your PPP or not? Do we know any information on that yet?

Jason – Yeah. The act says you can, it’s your payroll costs for two and a half months, up to 10 million, by the way, I didn’t say that earlier, ’cause I assumed most of our listeners wouldn’t get 10 million. But if your payroll costs multiplied by 2.5 exceed 10 million, you’re gonna be limited to 10 million. But you can include any EIDL loans you’ve received too. So, if somehow you’ve already received an EIDL loan, which I think you would’ve had to have applied the first day it was available, you can roll it into the PPP loan. I think most people are gonna do the opposite. They’re gonna do PPP first, and then EIDL after. I think that makes the most sense, because you’re not able to use the funds for the same purpose. The PPP loan allows you to use it for payroll, rent, utilities, and interest on mortgage. Where an EIDL loan is much broader. You can use it for accounts payable to pay vendors, you can use it for necessary business expenses that you’re unable to pay due to the crisis. So, it’s much more broad. You just have to justify it. Potentially, you get more money that way. And then, I think, just realistically, that’s how things will play out. I don’t think people are gonna get PPP funds for probably another 30 days. If that’s bad news or causes stress or heartburn to someone who’s listening, do the advance loan, do the EIDL advance loan online, get the 10 grand. It reduces the PPP by 10 grand, so you should just look at it as there’s a forgiveness by 10 grand. You should just look at it as I’m advancing my PPP loan, I need cash now. So, that’s what I would do. Personally, I did not do that, ’cause I didn’t need cash now. But for a lot of my clients, the gyms, salons, everything you said earlier, they need it now, so I would advise them to do it. And then there is another program, two more actually. I’m gonna put some round numbers on these. The PPP is 349 billion, the EIDL $10,000 loan was 10 billion plus just EIDL loans in general. And then, SBA payment relief is 17 billion. So, you can see, based on the numbers, what the government’s really focusing on. They want everyone to do PPP. If you have a preexisting SBA loan, you will be able to contact your bank and you can get six months of payments forgiven completely. And you can do this in addition to the other programs. So, it’s for someone who already has a preexisting SBA loan, and they should just contact whichever bank is handling that loan, that serviced it. I talked to a dentist yesterday who has multiple practices, and SBA loan in his practice, and it’s a substantial savings, ’cause it’s six months of payments, principle and interest. And then he’s gonna do the PPP and the EIDL too, ’cause all of his offices are closed. Terrible for him right now. And then, finally, they included in the stimulus bill, Congress included relief for payroll taxes. I did talk with someone else today where we are going to, it’s called the Employee Retention Credit, I believe. We are actually looking at using that instead of the PPP. So, it’s a one or the other type thing. Well, the act says, if you take the Employee Retention Credit you cannot do the PPP. I don’t know if it allows you to go the other way, that’s what we’re gonna find out. ‘Cause if you could do the payroll taxes and wait and do PPP later, sorry, if you do PPP and then do the payroll taxes later, that’s another benefit. This person doesn’t have a very high payroll cost for the last year. Their business grew a lot in Q4 and Q1, Q4 2019, Q1, and this retention credit allows you to get a $10,000 per employee credit against your payroll taxes, and it’s refundable. Which means that the government will refund the money to you when you file your payroll tax return. And they released a form where you can go ahead and apply for that. So, for most people, PPP is the way to go, but for a select few, the facts and circumstances, if the goal is to maximize your benefit and get the most money, it could be better, ’cause her payroll now is much, much larger than it was if you average the amount over a year. So, it gives her greater bang for her buck. It’s the kind of thing where so much money is at stake, I would really make sure. She was actually unaware of the retention credit, ’cause it’s not getting as much press. And rightly so, I mean, for most people–

Sara – Yeah, the PPP makes more sense. What other tax credits or benefits should we be aware of? For, first of all, business owners.

Jason – Yeah, yeah, so tax reform that was passed a few years ago now, limited your ability to deduct net operating losses. They have reinstated the old rules and made them better. So, if you have a loss in, had to take notes on this, 18, 19, or 20, you can go back and amend your return and carry the loss back five years. And so, if the tax reform rules, if you had a loss any of those years, it was limited to tax reform, you might or might not know that, but if you had a loss, you need to contact your CPA. You probably should go ahead and amend your tax return and get money now. The government will give you an income tax refund, plus interest. ‘Cause if you carry it back five years, that’s a significant period of time. What else? Some of us are gonna get these rebate checks. Even if you’re a business owner. So, it’s based upon income, so it’s $1,200 per person. If you’re an individual, they look at your adjusted gross income. Up to $75,000 you get 1,200, after 75,000, for every $100 of income it goes down by $5, the check amount. Basically, from 75 K of adjusted gross income to 99,000 you get something. For joint filers it’s 150 to 198. And then it’s $500 per child. So, your income for every child you have, ’cause it’s $500 for every $100 of income. Uber complicated, if you’re curious whether you receive it, grab your 2018 and 2019 tax return. The act says you’re supposed to look at 2019 first. I have not filed 2019, I extend at the last possible moment, ’cause I hate taxes. I mean, I’m a tax attorney, but–

Sara – Yeah, I love it.

Jason – So, I won’t have 19 ready, so 18 is the measuring stick for me. If you haven’t filed tax returns, now’s the time to file them, ’cause if you do not have an 18 or 19 tax return, all they’re gonna look at is your social security. So, the assumption was, if your only source of income is social security, you probably don’t have to file a tax return, ’cause we don’t want to punish those people.

Sara – But when you say file your taxes, you mean if you haven’t filed 2018.

Jason – Yeah.

Sara – A lot of people aren’t incentivized right now to file their 2019 ’cause they extended the deadline for that.

Jason – Yeah, I mean, you might be shocked. I represent a lot of people who don’t file their tax. That’s what I do for a living.

Sara – Yeah. Just to be in Jason’s world, when he says file your taxes, he’s talking about your 2018 taxes. 2019, you’re still okay.

Jason – Well, I mean, you might want to file 19 though if you’re income’s lower, ’cause if it doesn’t qualify you, 19 might, right.

Sara – That’s true.

Jason – And you have until the end of the year to get this. If you want the check now. The other way you can get it is, let’s say your 18 and 19 income is above the standards, but 2020 is gonna be a shit year for you, like your business is doing terrible, you’re gonna have a loss, or you’re not gonna make as much money, you will get it when you file your 2020 tax return. So, you could reduce your estimated tax payments equal to the amount. Let’s see, so for me it would be $3,400. I’m married and I have two children. If there was no income restrictions. That’s a significant sum of money. If you don’t qualify based on 18 or 19, I would just reduce your estimated tax payment, if you’re making them, by that amount, and you would effectively get it now, instead of waiting until you file next year. You have to have a valid social security number, and that’s kind of the deal with that. There was a provision where you could delay your payroll taxes for up to 50% for one year and 50% for two years. I do represent a lot of businesses who were unable to pay their payroll taxes, will probably take that election to just punt and kick the can down the curb. But you know, if you would like a free loan from the government, there is one built into the act. I would just be careful that you plan and make sure you’re able to pay those payroll taxes if you do that, because it’s not fun owning payroll taxes. Like I said, I represent a lot of people who do. If we had one of them here for a testimonial, I think they would tell you that they wish they didn’t owe it. Just make sure you plan if you take that option. And then, there’s some other changes that are super technical and boring.

Sara – Well, let me ask you about this. What about the person who doesn’t have a team? They have a business and they’re running on their own, they don’t have any employees, but they’re still hit by this. What advice would you give them?

Jason – I’m glad you brought that up. It’s really interesting. They will count a sole proprietor or someone who’s self-employed as a contractor, something like a Lyft driver, and Uber driver, a hairdresser, anyone that’s just a contractor. They can do it. The application period for them opens later. I do not know it off the top of my head. I think it’s April 10th, but I can pull that up right now. They can apply starting April 10th. I assume their date is delayed because the paperwork will be different, I’m not really sure. From what I’ve seen, the speculation is it will be their net income. So, when you’re a contractor, you file a schedule C on your personal income tax return, which is basically your P&L, your profit and loss. So, it has your revenue and your expenses, and you pay taxes on the net income, the revenue minus the expenses. So, I believe their quote unquote payroll costs will be the net income. So, let’s say 2019 divided by 12 multiplied by 2.5. So, two and a half months of net income. So, if they have year-to-date accounting, that would be helpful too. But if not, I assume they’ll let you use 2019. The substantiation and proof that the act says they would ask for here, the bank should look for is, 1099’s proof of receipt. So, I think as long as they have accounting records, they should be fine. I think it’s really interesting they get included, ’cause you get to include contractors, let’s say, I don’t have any contractors, but let’s pretend I did, let’s say I had three contract attorneys. I can include them in my law firm’s payroll cost, and then they can apparently–

Sara – Include themselves too.

Jason – Yeah. So, I don’t know, maybe that’s why there’s a delay to make sure there’s no double-dipping, I don’t know. Everything is defined very broadly. And my take on it is I’m going to interpret the acts in my benefit and apply for as much as I can possibly get, ’cause it’s an amazing deal.

Sara – And we’re gonna interpret from the guy with the master’s in tax from NYU, which is you, so I’m following that interpretation, as well. Jason, this has been so helpful, I can’t thank you enough. Your firm, I know that you guys, you’ve been the go to firm in Atlanta for tax law and bankruptcy, and you’re now taking on, I understand, a limited number of clients to help out with this. So, how can people reach you if they’re seeking help with this?

Jason – We’re helping people with this. The problem is, with the payroll protection loans, you’re not allowed to charge for it. You get paid by the bank, basically. So, I can act as someone’s agent. And the rules that were released yesterday indicate that I get a percentage of the loan, and it’s a small percentage. I’m happy to help people and do a paid consultation to go over the different options and make sure they’re going into the right one, and make sure they’re doing the calculation correctly. And then the loan that they’re eligible for would need to be above $100,000 for me to do the paper work, because it’s a 1% fee. So, anything less than that just doesn’t make sense, I couldn’t make any money on it. I think I can get paid for a consultation. The other programs, EIDL, more than happy to help someone, ’cause I can get paid to do that. Like I said, just advising which program makes sense and making sure that they are getting the maximum amount. If someone wanted to reach out to me, my phone number is 404-233-9800. That’s 404-233-9800, or they could email me, it’s jwiggam, I think my name’s along the bottom of the screen, just first initial last name and then @proprietor, so G E E R .com, so [email protected]

Sara – And we’ll also add that in the comments, the website to the firm as well. Guys, you can either go to Wiggam Law and have their team help you with the EIDL loan, or you can, if your loan is at a certain level, they may be able to help you with the PPP loan, but at a minute, they can give you a consult or you can hire them to advise you for you to go through the process on your own, but at least advise you so that you’re following the steps correctly and maximizing it to your benefit, and taking the right steps to get the forgiveness.

Jason – Yeah, that’s exactly right. Apparently, we can, it’s unclear, I think we can charge to do the forgiveness application, so we’ll be doing those too. So, someone might be thinking, “Why are you doing this if you’re “a tax and bankruptcy attorney?” But we exclusively, I wouldn’t say exclusively, but most of our clients are small business owners, or the business itself we represent. And then everything we do is based upon their finances. So, when I negotiate with the IRS, I have to negotiate based around my client’s financial situation. And then a bankruptcy is putting together all the financial information and making sure you exempt as much as you can, and that they qualify. So, it kind of fits with what we do. You know, we’re not accountants, but we do know all the stuff and geek out on it, and are happy to help. Yeah, so, that’s kind of it. Thank you for having me, Sara.

Sara – Oh my gosh, thank you so much, Jason. This is so helpful for myself, so helpful for friends and family that I know are business owners. I think we just need to help all the Atlanta community of business owners as much as we can. I feel this for the whole country, but Atlanta, we’re just such a business friendly city, and we have so many entrepreneurs here, we have so many people that have amazing teams and have done amazing things with their teams. I’m thinking of so many restaurant owners I know, my hair salon team, my nail salon team. These have become part of our community, these are people that we just want to see thrive. We’re fortunate that we’re in the professional based services. Doesn’t mean we haven’t taken a hit, but nothing, nothing compared to what those guys are seeing. I so appreciate you spending your evening giving us all this information, especially when there is just so much noise out there and it’s exhausting, and everything you’re hearing is this Facebook group, that Facebook group, or everybody chiming in from somebody they hear something. But to have somebody that is actually doing this work and has read the law itself and has interpreted it, and is actively now helping clients, small business owners in the community to help them with this, is tremendous. So, thank you so much for your time, Jason. I really appreciate it.

Jason – You’re welcome, thanks for having me. Have a good one.

Sara – You too.