Do the SBA Disaster Loan programs apply to me as a Virtual Professional?  As a Freelancer?  As an independent contractor?   Yes!  

Here’s a quick lesson on the programs as of April 10, 2020 but more importantly…. financial learning and business structure you NEED to know as a business owner.   Watch this and learn some of the seemingly scary stuff about LLCs and S-Corps and Payroll and Loans and Cashflow.

SBA WEBSITE:   sba.gov/funding-programs/loans/coronavirus-relief-options

WHO IS THIS FOR?

SMALL BUSINESSES:

Are you a small business (LLC, s-corp, 501c3) with less than 500 employees?  

—->  You qualify for PPP or EIDL $10K Advance or EIDL  (but you cannot apply for ALL of them)

CONTRACTORS:

Are you a solopreneur who pays receives 1099s from clients for tax purposes?

—->  You can apply for PPP on your own.  (It’s fuzzy whether or not your clients can claim contractor $ as payroll)

What is PPP (Paycheck Protection Program)?

• A forgiveable loan (i.e. like a grant) for up to 2.5 times monthly payroll
  • Also applies to rent, utilities and some other details
• You must use the money towards those items – they will “verify” in some way after the fact
  • i.e. you need to show a financial statement that shows you paid payroll during this 8 week period
• If you don’t use it for that purpose but it rolls into a 10 year, 3-ish% loan, no payments until 6 months from now
• Must apply thru a bank!  (details below)

What is EIDL?

•  Emergency Disaster Relief Loan
• Application process is only online thru the SBA website
• There is an EIDL Loan Advance that is super simple, $10k, and forgiveable whether or not you get the EIDL loan
• The EIDL loan is for up to $2 million for businesses payable at a low interest over 10 years
  • You can receive a bigger EIDL loan potentially than a PPP which is why you want to consider doing this depending on your business situation

What do I recommend you do strategically as a Virtual Professional?

If you are a debt free business (s-corp, LLC, etc):

• Apply for PPP AND the EIDL Advance.
  • it’s not clear if you will get both but likely there is a number they will cap you at.
  • Use the funds as intended for payroll (You will be asked to report how you used it)  Then do smart things with your cash reserves such as invest ahead for new programs, expansion

If you have business debt:

• Apply for PPP and even the EIDL Advance.
  • Use the funds as intended for payroll (you will be asked to report how you used it and will pay interest if not used for payroll)
  • If there is extra, use it to pay off high interest debt. The PPP money if not used for payroll (and other approved expenses) is no payment for 6 months then rolls into a very low interest (i.e. 3%ish) 10 year loan.  Very inexpensive money that helps keep your business afloat!
• **OR** if your business is operating with multiple full time employees and in the multiple 6 figures —> talk to your business advisors about the full EIDL option (and apply for the $10k advance right away)

HOW TO APPLY:

• (watch the video)
• EIDL Advance is fast and easy only thru the SBA.gov website
• PPP requires working thru a bank.  
  • I suggest a local bank where you have a personal relationship.  (big banks are struggling to process the apps)
  • Applications started April 3 and already over $120billion of the $350bill+ has been applied for.  
  • Application details took me about 2 hours to prepare this information for my bank:
    • Completed Application (Attached)
    • Payroll Expense Verification Documents to include:
    • o   IRS Form 940 and 941
    • o   Payroll Summary Report with corresponding bank statement
    • o   If a payroll summary report is not available, employee pay stubs as of 02-15-2020(or corresponding period) with corresponding bank statement and breakdown of payroll benefits (vacation, allowance for dismissal, group healthcare benefits, retirement benefits, etc
    • o   1099s (if independent contractor)
    • Trailing twelve-month P&L

BUSINESS STRATEGY LESSONS FOR NOW AND FUTURE PLANNING:

1. PAY YOURSELF OFFICIAL INCOME!   If you have not been paying yourself an official income you do not qualify for these.  Ouch!
   • Do not fall into the trap of writing off everything as a business expense to try and avoid taxes. There are some really smart ways to do that once you are above a payroll threshold that’s appropriate for your business
   • If you do not pay yourself payroll….. you may not qualify for a car loan, mortgage re-fi etc.  This is fine if you are married but …. life changes quickly, especially when we face crisis like this.  
     • LESSON:  Pay yourself payroll and build up your credit score so you can be individually financially strong

        

2. Have a relationship with a good local personal banker(s)
   • I suggest both a large bank and a local credit union.   It seems old fashioned but personal relationships can make a difference in your loan approval rate.

      

3. Be in a position to have good credit to acquire loans.  
   • This is *very* cheap money that can help you keep your business afloat and grow it.  Good credit scores are important.
     • Think twice before skipping your mortgage payment during this crisis.  Pay everything you can on time.

        

4. Keep your books officially up to date – Your future self will thank you!
   • If your books aren’t up to date, it can be very stressful to try to pull this together quickly.  (i’ve been there in the past!)
   • A good accountant will have your Quickbooks cleaned up and all you need to do is pull the report (mine even sent it to me ready to go!)
     • Hot tip for Virtual Professional Bookkeepers!
     • If you want to learn to be a Virtual Bookkeeper or improve your game in that space checkout LoriMercerCTO.com/bookkeepers
5. Have good cashflow + business savings for 3+ months
   • Just like we are taught to have a personal savings, our business should have this as well.  
   • Just think….. if I had $##,#### money in my business account right now, how different would I feel?

NEXT STEPS:

Do you qualify?

Get on it!  This process is going to be slow and tedious as banks adapt.   As one of my co-working advisors said “It’s like the wild wild west for a money grab out there”

Do you need guidance on starting or growing your Virtual Professional income?

Go to GoVirtualProfessional.com for the most up to date resources during this rapidly changing market!