NEW YORK – Since the outbreak of the coronavirus pandemic, several grants have been approved by the federal government to help small businesses endure losses.
But there has been very little understanding among Filipino American small-business owners, nonprofit organizations and independent contractors, that file tax returns with Schedule C itemized deductions, on how to avail of this assistance.
To help fill the information gap, internet media Eagle Eye Broadcasting hosted an talk show with Joshua Ang Price, Public Information Officer of the U.S. Small Business Administration Arkansas District Office, one of 68 SBA District Offices in the nation. The talk show explained the relief program a week before the August 8 application deadline.
The Paycheck Protection Program established by the CARES Act, provides “small businesses,” defined as having one to fewer than 500 employees, with funds by way of “loans” to pay up to 8 weeks of payroll costs during the pandemic.
These funds can also be used to pay interest on mortgages, rent, and utilities. Under the recent guidelines, loans will be forgiven if 60% is used to cover payroll. Independent contractors who pay themselves 100% are covered by the loan forgiveness.
The US federal government approved an additional $310 billion in funds for Paycheck Protection Program loans, with $60 billion of that funding being allocated for distribution by small community banks. In addition, another $60 billion of funding has been approved for Economic Injury Disaster Loans (EIDL) which is another form of low-interest bearing loan.
The program also was extended for small business owners to apply until August 8, 2020. With some $130 billion remaining unconsumed in the coffer one week before the deadline running, it is widely surmised that there could be another round of loan application deadline extension.
In this regard, the first source of information for the small businesses and nonprofit organizations is the local bank.
Bank of America and Citibank stopped accepting new applications in order to complete the processing of those who already filed online prior to August 8 deadline. But for more resources, a list of local lenders can be found on SBA’s website: www.sba.gov/lendermatch
Because there is such a great demand for aid, and loans are given on a first come, first serve basis.
Here are some tips on how to be in a good position to effectively and quickly avail of these and other future. These tips have been tested by the broadcaster’s parent company, Eagle Eye Charities Inc., a New York-based nonprofit which acquired a small “forgivable” loan just enough to run its online gallery for poor and displaced artists.
1• Have a relationship with local banker.
By developing a strong relationship with your bank prior to needing a loan, you’ll have a better chance of the bank giving your loan priority and helping you with the application process. One of the questions that will be asked during the process is, whether you have an existing account with the bank. Banks facilitate the completion of documentary requirements; in some cases, they have their own forms that mimic the regular tax forms and a bank officer is assigned to guide the loan applicant in completing the requirements. Upon approval, the bank automatically credits your account with the loan equivalent to 2.5 times the monthly salary declared by the business.
2• Organize your financial records.
Assemble proofs of payroll such as pay stubs, cancelled checks or even 1099 forms paid out to independent contractors. For salaried employees, IRS form 940 filed last year details the amount of wages paid, and the FICA and social security taxes contributed by the business or employer. For those who were not existing or did not pay wages in 2019, it is required that the business must be existing at least prior to February 15, 2020 and evidence of payroll can be submitted using a form 941 instead; it must show the amount of Social Security and Medicare taxes that have been withheld for the first quarter of 2020. If a form 1099-MISC was issued, then no withholding tax need be shown.
To prove your business was in existence on February 15, 2020, you’ll need to provide the exact start date of your operations, using business registration, previous year tax filing, bank statement or proofs of payment of rent, mortgage or utilities expense prior to Feb 15, 2020. For independent contractors, not more than $100,000 wage can be claimed, divided by 12 months, not to exceed $8333/month. The grant is 2.5 times that monthly payroll. Proof that you earned that amount will be required. File your 2019 Return. You must include schedule C from your 2019 return and form 1099 MISC with your loan application.
3• Authorized signer/applicant must pass eligibility requirements.
If you own less than 20% of your business, be prepared to have a co-owner complete and sign the application with you. Applicant (if an individual) or any individual owning 20% or more of the equity of the Applicant must not be presently incarcerated or, for any felony, presently subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction.
Within the last 5 years, for any felony involving fraud, bribery, embezzlement, or a false statement in a loan application or an application for federal financial assistance, or within the last year, for any other felony, Applicant (if an individual) or any owner of the Applicant must not have 1) been convicted; 2) pleaded guilty; 3) pleaded nolo contendere; or 4) commenced any form of parole or probation (including probation before judgment). A questionnaire will be answered before proceeding to online application.
After passing these eligibility questions, applicant can now proceed to fill up the forms online through banking websites participating in the lending match. Be ready to upload your files, proofs required, and provide your checking or savings account number to the bank where your funds will be credited Document all expenses to prepare for “Loan Forgiveness” which requires at least 60% of the funds must be used to pay payroll. The rest can be used for rent, mortgage and utility expense.
As of the Eagle Eye broadcast, a few Fil-American owned small businesses have applied and qualified for the loans. These include restaurants and staffing and nursing recruiters. What most people didn’t realize is that independent contractors like physical therapists, home health aides, gig workers, and home-based food caterers can actually qualify, provided they can show proofs of wages and business income. A live stream of the video can be viewed at: https://www.facebook.com/EagleEyeBroadcast/videos/210433070369532
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