In the second of a series of webinars titled “COVID-Proofing Your Pest Control Business,” Dan Gordon presented details about the federal government’s Paycheck Protection Program and how it applies to pest control and lawn care operators. PCO Bookkeepers is presenting the webinar series in partnership with Coalmarch.
Watch the entire webinar replay here.
Sign up for future sessions here.
The Paycheck Protection Program is free money. It’s a non-recourse loan, which means that you’re not on the hook for it unless you commit fraud or do something that’s against the rules. A large portion of it is forgivable for those firms who keep people employed.
How much can you get?
The amount is two and a half times your average monthly payroll. So take your annual payroll, the health benefits that you paid and the 401(k) employer portion. Add all that up, divide it by 12, and that’s your average monthly rate. Then multiply that times two and a half and that’s the total amount for the loan. The payments can be deferred up to one year and the interest rates are no higher than 4 percent.
So how do you get it forgiven? The amounts borrowed under the PPP are eligible for forgiveness equal to the payments made during the eight-week period, starting from the date of the loan origination for payroll costs, mortgage interest costs, rent and utilities. So written into the law, and you might not see it on the application, is the non-payroll costs (mortgage interest, rent, utility) can’t exceed 25 percent of the entire amount.
By the way, you’re not getting the entire amount forgiven, as I understand it, and I’ve talked to several folks about it. You’re getting, remember, two and a half months would be approximately 10 weeks. Well, you’re going to get eight weeks of it forgiven. So two weeks of it you’re going to borrow and you’re going to have to pay back.
How do you get your free money?
The funds will be guaranteed and governed by the SBA and lent by local banks who are SBA lenders. These banks will be processing applications. Make sure you have access to such a bank.
The application is two pages. It asks a bunch of questions, but really the crux of the matter is this calculation and it’s your average monthly payroll. If you applied for any other loans because of the coronavirus, all of the monies that you get are going to be put together in a bucket. So if you get the grant from the other loan, that $10,000 then you’re going to get $10,000 less here.
What do you need to do? You need to get your salaries and what goes into payroll. So, it’s payment of salaries and wages. If you’re in the restaurant business, it’s cash tip equivalent. It includes vacation, family leave, any separation agreements that you’ve signed, health care benefits, retirement benefits, payment of state and local tax assessed on compensation of employees and payments of any compensation to a sole proprietor or independent contractor. Those people are eligible for the PPP as well. You might not be putting your 1099s in there.
The last thing that you have to do is you have to exclude anybody who’s making over a $100,000. You can only take the $100,000. If they’re making $120,000, you’ve got to knock out $20,000.
When’s the big day?
The big day to begin applying was April 3 for corporations, LLCs and partnerships. Sole proprietorships and independent contractors start April 10, and the funds are limited to $350 billion, which is a lot of money, but not for this program. Most people expect that the funds will be gone by April 10.
If you can get through to your bank today and put your application in, that’s great. If not, keep trying because I saw Secretary Mnuchin said that he will be going back to Congress if they run out of money and look for more appropriations because they’re not going to let people just hang on this.
What are some of the requirements to qualify?
You have to be in operation since Feb. 15th, 2020. You have to have paid salaries, payroll taxes, 1099s, non-employee compensation and you have to be less than 500 employees. There are programs for folks who are over 500 but this is for 500 or less.
If you’re looking for this forgiveness, then you need to keep people on the payroll, right? So the amount of loan forgiveness may be reduced by any employment reduction.
So if the level of employment during the covered period is not at least equal to the preexisting employment level, the amount of loan forgiveness will be reduced by a proportionate amount.
At least 75 percent of the loan proceeds has to go to payroll costs, which can include your health care benefits and salaries. Not more than 25 percent can go to mortgage payments, rents, utilities or interest on debts incurred before February 15, 2020.
Once you get your money, then you have to apply for this loan forgiveness. And once you get approved, they’re saying the money’s going to show up in 24 hours. And again, if the proceeds are misused, meaning that you’re not paying payroll, mortgage interest and utilities, then you will be personally guaranteeing that loan and it will no longer be a non-recourse loan. It’ll be a recourse loan, and they’ll go after you to get the money.