Summer2020_SSCWN_web

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QandA Got Questions? We have Answers! Carwash and accounting expert Pat Shannon answers questions on everything from PPP loans to tax forms to revenue numbers. In the hazy maze of this financial quagmire thanks to Covid-19, many car wash owners are left with questions. The Small Business Administration (sba) is offering help, but unless you’re an expert in the field of economics and car washes, there are opportunities for confusion and frustration. Thankfully, Pat Shannon fits the bill for the aforementioned qualifications. Shannon is a car wash owner, the President of the Heartland Carwash Association and an expert in small business accounting, payroll, personal and business tax preparation. The following are answers to questions posted to carwashforum.com. Q Why doesn’t an S-corp qualify for the PPP loan? Pat Shannon: Being an S-Corp does not disqualify you from receiving a PPP Loan and if you do not receive a PPP loan you should explore the employee retention credit. If your business is taxed as an S corporation, your owner draws are known as shareholder distributions. It’s important to realize that these distributions are non-taxable, which means there are some pretty strict requirements in place to prevent owners from taking advantage. As an owner of an S-Corp, you are required to pay yourself a reasonable salary through payroll, meaning that you are remitting payroll taxes on that amount. You are allowed to take distributions in addition to this salary, but it’s best practice to have a combination of the two rather than distributions alone. Q We purchased our wash about two years ago from the owner on a land contract and we have about a year left to pay it off. We updated our equipment and rehabbed the building using a home equity loan. Our LLC is a partnership between my dad and me. I have noticed that sole proprietors and LLCs are specifically mentioned in the stimulus package. From what I have gathered so far it seems like we may be able ry institution, federally insured credit union, and Farm Credit System institution that is participating. Other regulated lenders will be available to make these loans once they are approved and enrolled in the program. The loan will be fully forgiven if the funds are used for payroll costs, interest on mortgages, rent, and utilities (due to likely high subscription, at least 60% of the forgiven amount must have been used for payroll). • PPP loans have an interest rate of 1%. • Loans issued prior to June 5 have a maturity of 2 years. Loans issued after June 5 have a maturity of 5 years. • Loan payments will be deferred for six months. • No collateral or personal guarantees are required. • Neither the government nor lenders will charge small businesses any fees. Loan Forgiveness Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels. Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease. The loan forgiveness form and instructions include several measures to reduce compliance burdens and simplify the process for borrowers, including: • Options for borrowers to calculate payroll costs using an “alternative payroll covered period” that aligns with borrowers’ regular payroll cycles. • Flexibility to include eligible payroll and nonpayroll expenses paid or incurred during the 24-week period after receiving their PPP loan. • Step-by-step instructions on how to perform the calculations required by the CARES Act to confirm eligibility for loan forgiveness. • Borrower-friendly implementation of statutory exemptions from loan forgiveness reduction based on rehiring by June 30. • Addition of a new exemption from the loan forgiveness reduction for borrowers who have made a good-faith, written offer to rehire workers that was declined The following entities affected by Coronavirus (COVID-19) may be eligible: • Any small business concern that meets SBA’s size standards (either the industry based sized standard or the alternative size standard) • Sole proprietors, independent contractors, and self-employed persons • Any business with a NAICS Code that begins with 72 (Accommodations and Food Services) that has more than one physical location and employs less than 500 per location • Any business, 501(c)(3) non-profit organization, 501(c)(19) veterans organization, or Tribal business concern (sec. 31(b)(2)(C) of the Small Business Act) with the greater of: • 500 employees, or • That meets the SBA industry size standard if more than 500 EBL = SBA Express Bridge Loans: Enables small businesses who currently have a business relationship with an SBA Express Lender to access up to $25,000 quickly. These loans can provide vital economic support to small businesses to help overcome the temporary loss of revenue they are experiencing and can be a term loans or used to bridge the gap while applying for a direct SBA Economic Injury Disaster loan. If a small business has an urgent need for cash while waiting for decision and disbursement on an Economic Injury Disaster Loan, they may qualify for an SBA Express Disaster Bridge Loan. Terms • Up to $25,000 • Fast turnaround • Will be repaid in full or in part by proceeds from the EIDL loan EBL loans can only be made up to six months after the date of an applicable Presidential Disaster Declaration. For the COVID-19 Emergency Declaration, EBL loans can be approved through March 13, 2021. Use of Proceeds: • EBL loan proceeds must be used exclusively to support the survival and/or reopening of the small business within the eligible Primary or Contiguous Counties. For the COVID-19 Emergency Declaration, EBL loan proceeds must be used exclusively to support the survival and/or reopening of the small business. • Lenders must certify in the credit memorandum that the EBL loan proceeds will be used by the borrower to support the survival and/or reopening of the small business within the eligible Primary or Contiguous Counties. For the COVID-19 Emergency Declaration, Lenders must certify in the credit memorandum that the EBL loan proceeds will be used by the borrower to support the survival and/or reopening of the small business. This certification must be included with any guaranty purchase request to SBA. • EBL loan proceeds may be disbursed as working capital, or for specific disaster-related purposes, such as the purchase of generators, repair or replacement of disaster-damaged equipment or inventory, making repairs to the business premises, etc. For the COVID-19 Emergency Declaration, EBL loan proceeds must be disbursed as working capital. Around the Wash Where’s The Money 40 • SUMMER 2020
Around the Wash Where’s The Money SBA Debt Relief: The SBA is providing a financial reprieve to small businesses during the COVID-19 pandemic. As part of the coronavirus debt relief efforts, the SBA will pay 6 months of principal, interest, and any associated fees that borrowers owe for all current 7(a), 504, and Microloans in regular servicing status as well as new 7(a), 504, and Microloans disbursed prior to September 27, 2020. This relief is not available for Paycheck Protection Program loans or Economic Injury Disaster loans. Borrowers do not need to apply for this assistance. It will be automatically provided as follows: • For loans not on deferment, SBA will begin making payments with the next payment due on the loan and will make six monthly payments. • For loans currently on deferment, SBA will begin making payments with the next payment due after the deferment period has ended and will make six monthly payments. • For loans made after March 27, 2020 and fully disbursed prior to September 27, 2020, SBA will begin making payments with the first payment due on the loan and will make six monthly payments. SBA has notified 7(a), 504 and Microloan Lenders that it will pay these borrower loan payments. Lenders have been instructed to refrain from collecting loan payments from borrowers. If a borrower’s payment was collected after March 27, 2020, lenders were instructed to inform the borrower that they have the option of having the loan payment returned by the lender or applying the loan payment to further reduce the loan balance after SBA’s payment. Borrowers should contact their lender if they have any questions regarding this payment relief. Additional Debt Relief For current SBA Serviced Disaster (Home and Business) Loans: If your disaster loan was in “regular servicing” status on March 1, 2020, the SBA is providing automatic deferments through December 31, 2020. What does an “automatic deferral” mean to borrowers? • Interest will continue to accrue on the loan. • 1201 monthly payment notices will continue to be mailed out which will reflect the loan is deferred and no payment is due. • The deferment will NOT cancel any established Preauthorized Debit (PAD) or recurring payments on your loan. Borrowers that have established a PAD through Pay.Gov or an OnLine Bill Pay Service are responsible for canceling these recurring payments. Borrowers that had SBA establish a PAD through Pay.gov will have to contact their SBA servicing office to cancel the PAD. • Borrowers preferring to continue making regular payments during the deferment period may continue remitting payments during the deferment period. SBA will apply those payments normally as if there was no deferment. • After this automatic deferment period, borrowers will be required to resume making regular principal and interest payments. Borrowers that cancelled recurring payments will need to reestablish the recurring payment. If you have questions about your current loan and whether or not your loan is automatically deferred, please contact your Loan Servicing Office directly using the following information: Birmingham Disaster Loan Servicing Center: 800-736-6048 or at BirminghamDLSC@sba.gov El Paso Disaster Loan Servicing Center: 800-487-6019 or at ElPasoDLSC@sba.gov MORE CUSTOMERS. MORE REVENUE. LESS EFFORT. ANY WASH No matter your equipment, we work with just about any equipment on the market. ANY PAYMENT Payments are made easily through credit or loyalty cards, and mobile. ANY LOCATION With one location or hundreds, tie all your data together to make managing your wash a breeze. 651-439-5740 | washcard.com SUMMER 2020 • 41
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