Payroll Protection Program and Employee Retention Credit Comparisons

We are still getting an enormous number of questions regarding these two programs and which one is better for a particular situation.
The answer depends on your particular situation as well as your individual needs.
The first thing to mention is that the only two programs that you cannot do together is the Payroll Protection Program and the Employee Retention Credit. This is because these are both free Federal Programs. The PPP turns into a grant that does not need to be repaid if it is used on the correct items inside a particular time frame. The Employee Retention Credit provides a credit against payroll tax deposits on your 941.
They both provide free federal money. This is why you cannot do both in conjunction with each other. The Feds aren’t going to allow that. But you can do any other program, or even multiples of programs, with either one of these.
There are five other SBA Lending Programs, not including the Economic Injury Disaster Loan or EIDL, which can be done in conjunction with either the PPP Loan or the ERC.
The most common SBA Loan Programs are;
Standard 7(a) Loans offer the following:
– Lending limits up to $5 Million
– Interest Rates are negotiable
– Terms are typically 10 – 25 years
– The SBA Guarantees 75% – 85%
– The Lending Process normally takes 30 – 90 days
SBA Express Loans
– Loan approval can occur in 36 hours while a loan closing will still take weeks
– Loan Maximum is $350,000
– SBA Guarantees 50% (making these loans more difficult to obtain)
Export Express / Export Working Capital Loans
– Designed specifically for Exporters
– Loan Maximum is $5 Million
– Loans under the Export Express Program are up to $500,000 and are approved generally within 24 hours
Veterans Advantage Loans
– For Veteran owned Small Businesses
– Loan Maximum is $5 Million
SBA Lines of Credit (CAPLines)
My point is that while you are putting together the paperwork for a Payroll Protection Program Loan, you might as well put in for one of the other loans while you are at it. They are generally going to want the same items for both. Why not set up a Line of Credit while you are at it, just in case this craziness happens for longer than it should?
Please also realize that if you apply for the PPP Loan and receive it, that you don’t have to use it for payroll and operating expenses. That is it’s intention, but not a necessity. The following scenario is what a lot of my clients are going to do.
Example 1) Let’s say that you are a restaurant, or another non-essential business that was fully or partially shut down and that your monthly payroll is $50,000. Let’s also say that two weeks ago you laid everyone off, and all of your workers are currently receiving unemployment benefits.
You put in for the PPP Loan which is two months of payroll or $100,000 plus Payroll Tax Expenses which are another $10,000. You are allowed another 25% in operating expenses which is another $27,500. You are then approved and receive the entire $137,500.
Does that mean that you immediately hire back all of your workers so that they can sit around and play with their phones? Nothing that I have ready says that you must. You will certainly use the money for your operating expenses. But until you are allowed to reopen your business, your people stay on unemployment.
Yes, it is true that you will need to repay the portion that you did not use, but they are lending at 0.50%. That’s basically free money. If you don’t use it, you can always just pay back the loan with the amount that you didn’t use. But the point is that you will have the money necessary to stay open.
You will survive.
And while you are at it, if you set up an additional Line of Credit, using the same paperwork that we needed for the first one, it ensures your survival for the foreseeable future. Let’s remember that the Line of Credit will only charge you interest if it is used. If you don’t need it, there might be an annual renewal fee of a couple hundred dollars, but that’s all.
It’s the ultimate rainy day money fund. And it’s been raining a lot recently.
One final thought.
I’m beginning to see some promising signs in the middle of this nightmare.
I have a Brother in the Restaurant Business down in Lincoln Square who is using this time to handle the construction issues that he’s had with his building for the past ten years. This is work that he has wanted to do, but couldn’t do while he was handling two hundred covers on his weekend nights and another seventy five on the others.
I have a Sister up north in the Salon Business who is using this time to straighten out some personnel issues that have been bothering her. She is changing the scheduling and the times that she is open to save on labor costs and provide more flexibility to better service her clientele.
I have a Brother in the Construction Business here in Chicago who is using this slower time to complete one of his own six unit condominium projects which has been delayed due to a labor shortages and difficulties with his subs.
In other words, I see Entrepreneurs doing what we do best. When the world gives you lemons, make meringue.
This thing isn’t going to last forever. Take advantage of the time, and do something to make your business and your life better.
Overcome. Adapt. Improvise. Don’t sit around moping, crying, and worrying about the future. Turn this crisis into an opportunity. Be the Entrepreneur that you were born to be. In other words,
Accounting Solutions Ltd. stands ready to complete its mission and purpose of protecting you, your family, and your business. If there is anything that you need, or just need someone to talk to, please contact us. I’m here, and remain,
Sincerely yours,
Chris Amundson
Accounting Solutions Ltd.
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