The Utah Economic Response Task Force hosted a “Facts & FAQs” virtual conference call on Tuesday, March 25, 2020 at 4:00 p.m. MST to provide an update on the status of economic efforts to mitigate the coronavirus. This zoom video conference provided an overview of the federal stimulus plan and innovative business solutions
Agenda
- Welcome – Utah Economic Response Task Force Chair Derek Miller
- Federal Delegation Report – Representative John Curtis
- Implementation of the Economic Response Plan – Dean Taylor Randall, David Eccles School of Business at the University of Utah
- Business Story – Don Willie, St. George Area Chamber of Commerce and David Moody, Silver Reef Brewing Co.
- Federal Stimulus Package Overview
- Miles Hansen, World Trade Center Utah
- Tourism Industry Update – Vicki Varela, Utah Office of Tourism
- Available Financial Resources – Howard Headlee, Utah Bankers Association
Answered Q&A Questions
*Questions have been slightly edited to provide anonymity.
Paycheck Protection Program (PPP) Loan Q&A PDF
Q: I spoke to my bank today and they said they will not be working with businesses in regards to stimulus package and everything must be done through SBA. Yet everyone in news and on TV says to contact your bank directly. Thoughts? Please advise
A: The SBA does the disaster loans directly. The new stimulus package contains a new program called the paycheck protection program. This is a new SBA loan that will run through your bank. So it just depends on which loan you are applying for. The disaster loan is available today directly through the SBA. The new program, once it passes the House will be available through your bank. Even if that bank hasn’t done SBA loans in the past.
Q: Will SBA Loans to keep staff on payroll truly be forgiven? To what extent? What types of employees are included? Part time? Salary?
A: After the 8 week period we can look at payroll costs, rent, mortgage interest and utilities and forgive that much of the debt. So if you borrow 1 million and during the 8-week period you have 900,000 in payroll, rent & utilities then 900,000 will be forgiven and 100,000 would roll into a 10 year loan at 3.75% with the first payment 12 months later.
Q: To clarify on loan applications – do you recommend we apply thru SBA or thru our local bank?
A: If it is a disaster loan, that is directly with SBA. Others you would get through your bank.
Q: I own a small business in Orem. I am struggling to keep my employees. Are you saying that I can walk into my current bank, once this passes and get the “grant”? My question is directed toward this – do I have to pay my employees first and then get reimbursed? Or, do I get the grant and am able to pay out of that?
A: As soon as your loan is processed you will get the proceeds (hopefully same day), which you can use, for payroll.
Q: 1. How do you know if your small business gets a loan or a grant? 2. If you get a loan are they all interest free? 3. If they are not interest free what is the rate going to be?
A: You get a loan equal to 2.5 times your average monthly payroll. Then to the extent that you use it for payroll, rent or utilities that loan will be forgiven. If you borrow more than you spend on Payroll, rent or utilities over the 8 weeks after you get the loan, that portion of the loan is amortized over 10 years at 3.75. If you choose to amortize it over a period less than 7 years it would be 3.25% your first payment on that loan wouldn’t be due for 12 months.
Q: Can you apply for both the Stimulus loans and the pay check protection program?
A: This is a question we are still trying to get answered. Nonetheless, you can apply for the disaster loan directly through the SBA right now and can convert that to the Paycheck protection program later when it goes live.
Q: Are banks even open other than through their drive up window?
A: Each bank is taking different approaches. Some have moved to drive thru with branch visits by appointment. With regard to the paycheck protection program we are hopeful that once we see the guidelines this will be something that we can process without anyone having to come into the bank in person. But those are some of the details that have to be hammered out.
Q: Can you confirm that all federal financial institutions (including credit unions) can participate in the small business loans/grants included in the stimulus package?
A: YES
Q: I spoke with my banker and they didn’t know any details other than what was in the news. I think they’re learning about it as we learn about it.
A: That is correct. We are all waiting on the guidelines from the SBA, and then we can proceed – quickly.
Q: What can be covered from the banks? Is it just payroll?
A: The PPP loan program proceeds can be used for anything, but the portion of the loan that is used for payroll, rent, mortgage interest or utilities will be forgiven.
Q: So keep them on the payroll based on what? The past two months average? All employees? Even ones that work 6 hours a week?
A: The maximum loan amount will be based on the average monthly payroll in the past. To the extent that you use that loan to cover payroll (all employees) or utilities or rent over the 8 weeks after you get the loan then it is forgiven.
Q: Is there a criteria on how far revenue must be reduced to get the loans forgiven?
A: Forgiveness is based on the use of the loan proceeds not reductions in revenue.
Q: If our staff has moved on and we need to hire new staff, will this qualify for new staff members as well?
A: Any payroll expense in the 8 weeks after you get the loan will be applied to loan forgiveness.
Q: The SBA website is saying loan processing will take 8-12 weeks. What do we do if a business can’t survive that long?
A: Go to your bank and apply for the PPP program, that will hopefully fund same day as soon as the SBA sets the guidelines.
Q: Do you give loan for startups ?
A: In order to get the PPP loans you had to be in business on Feb 15 and it is based on your average monthly payroll calculated before that date.
Q: Which one of the loans is for payroll, rent and utilities?
A: Paycheck Protection Program
Q: Why are we calling these loans if they are really grants?
A: Funded like a loan, forgiven if you use them for payroll, rent and utilities, but this structure gives you flexibility and if you have other needs, that ends up still functioning like a loan.
Q: So as a business that owns rental properties, once this passes, we could walk into our local bank, apply for an SBA to help us pay for our mortgage loans, and then have it be forgiven? Do we need to pay our mortgage in the interim of receiving those funds?
A: Interest on those mortgages for the 8 weeks after you get the loan will be applied to the balance as forgiveness
Q: How will this work for self-employed small businesses where the only ‘employees are the owners and what about businesses that have just launched and have very little revenue to date?
A: This is a very good question. No question Congress wants to assist here, we just have to figure out how we are going to document “payroll” costs in these circumstances. We are waiting for guidance.
Q: I own a travel agency and have independent contractors that work for me. Will I still be able to get a SBA to pay my rent and have some cash flow? I’ve taken a huge hit.
A: Independent contractors qualify for the PPP loans, but I believe they will have to apply directly. We will have to wait and see if the guidelines allow us to count payments to independent contractors as payroll for purposes of the forgiveness. But that would require us to include those payments as average monthly payroll for purposes of calculating the loan amount so I am doubtful it will play out that way. More likely you will focus on your direct payroll costs and each independent contract would apply and do the same.
Q: Does the SBA loan take into consideration current cash in the bank? In other words, is a small business owner who has been smart in managing their money and has a decent amount of cash in the bank going to be able to take advantage of this option or will it not be available to them b/c of what they already have in the bank? Will the loan still be forgiven if the business doesn’t necessarily “need” the money but wants to use it to stay strong, keep all their employees, and not have to move to lay offs to save money?
A: No. I have not heard anything like this being considered in this program. The loan will be forgiven based upon your payroll, rent and utility costs in the 8 weeks after you receive the loan.
Q: The family first act allows for 2 week paid sick leave and extended paid leave for parents to care for children at home. From what I’ve read the employer is supposed to pay that leave and the business will be reimbursed with tax credits. What if the small business is out of funds due to the last three weeks of slow business? Does anyone know how that is supposed to work?
A: These costs would be included in payroll costs in the PPP calculations. So you would use the loan proceeds to pay those and then that portion of the loan would be forgiven
Q: Can I include contractors I pay regularly in the payroll amount I request?
A: Can’t say for sure, but I would doubt it. They would want to apply directly for their own loans.
Q: Our staff are working as needed, lets say 50% of the time, we have encouraged our staff to sign up for unemployment to make up their shortfall of income. Are you recommending we pay them for their short hours with this SBA loan instead?
A: There is no question that Congress is hoping to keep people in their current jobs and out of the unemployment system.
Q: How will the Affiliation Rule apply to the SBA Loans if a potential affiliate (Investor, or VC) has more than 500 employees?
A: They promise guidelines on this that should err on the side of being inclusive, but we have not seen them yet.
Q: What do we have in place in Utah to get funds to cover payroll until we can receive the SBA funds?
A: The goal is same day origination so as soon as we have the guidelines you should be able to apply with a local bank and get those loan proceeds that day. Of course there will be lots of demand and we will go as fast as we can, but this should be the fastest option for funds.
Q: Are nonprofits eligible for this loan program?
A: This question has been answered live.
Q: We are working we diligently to complete the SBA loan application process but the website has been down. We were almost complete and we’re getting no direction when we call in on whether or not we need to submit in other ways. Does anyone have information on what is going on or when we’ll be able to complete this and move forward?
A: This question has been answered live
Q: Checking the SBA site just now, no UT counties are listed in the Covid19 disaster declaration?
A: Disaster loans are available in all Utah counties
Q: Where can I go to find what is offered in the Healthcare pillar for Healthcare Providers
A: https://gop-waysandmeans.house.gov/the-senate-cares-bill-health/ This is a helpful top-level overview. It’s GOP, so sales-pitchy, but a good overview and some links for more info.
Q: Does the payroll loan portion include rent, lease payments, utilities, etc?
A: Yes it does