Replay, Q & A and updates to Guide to SBA Paycheck Protection Program

Apr 6, 2020

Updated April 13

Thank you to all those who joined us for the April 6 Webcast on Guide to SBA Paycheck Protection Program. We will be posting answers to questions here and any updates to links, forms and processes.

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View or download the Slide Deck

SBA Paycheck Protection Program

In this one (1) hour webcast Gerry Smith, Director of Business Development, MEDB and Wayne Wong, Director of the Hawaii Small Business Development Center (SBDC), was joined by Kyle Sakamoto, Senior VP of Central Pacific Bank and MEDB Board Member, to guide you through the Paycheck Protection Program.


  • Whether you are eligible 
  • What the funds can be used for
  • What forms are required
  • How the loan forgiveness work
  • What to do once you have applied — what to expect, supporting documentation and how to prepare for compliance.

This webcast is the second of an ongoing series – the COVID-19 Business Assistance Series, sponsored by the County of Maui, aimed at helping our small businesses navigate the resources available to them, with clear step-by-step instructions.

The SBA Paycheck Protection Program provides small businesses with zero-fee loans of up to $10 million to cover payroll and other operating expenses.  Up to 8 weeks of payroll, mortgage interest, rent, and utility costs can be forgiven.  Payments on principal and interest are deferred for one year. 


Q & A

Q: As a one person LLC, I don’t do payroll, and am hoping you can go over how to apply. It looks like I’m supposed to wait until April 10th to apply? True? Also since I’m the only employee and I do have some subcontractors do I and they count towards loan forgiveness if I’m able to rehire them or not let them go?

A: You do not have to wait until April 10 to apply as a one person LLC. Reach out to your SBA Approved Lender, many are accepting applications before April 10. The bank cannot submit the applications for self-employed businesses to the SBA until April 10.

You cannot file for subcontractors. Subcontractors will file for themselves, as they are essentially their own separate business. The only differences in your application from what we’ve talked about in the webinar are:

  • you are filing as a sole proprietor (you are a sole member LLC and a real LLC but you do taxes on IRS 1040 -Schedule C) your Legal name/DBA is … LLC but you’re filing as a sole proprietor
  • instead of providing IRS Form 941 to substantiate compensation, you’d either submit your 2019 -1040 Schedule C for net earnings (which is your compensation as a self-employed payroll)

Q; I am a sole proprietor/owner and do not have payroll, but all regular business expenses. What types of assistance, loan or grants can I apply for?

A: You are eligible for both the EIDL and the PPP from the SBA, which is the scope of this webinar series. We suggest doing your own research to uncover other opportunities for your particular business. What you may not be aware of is that for the purposes of these relief loans, self-employed owners can count themselves as 1 employee and their owner’s draws (or all of their net earnings) is your annual payroll for the “payroll cost” computation.  PPP applications for self-employed starts April 10 but banks are taking applications now to be able to submit to SBA at 12:01AM Friday.

Q: Aloha! Curious if you can collect unemployment while waiting for the Paycheck Protection Program loan to come through or if we should continue to wait it out? Thank you!

A: It is unclear from this question whether you are asking from the perspective of an employee or an employer. The purpose of the Paycheck Protection Program is to allow employers to bring back employees off of unemployment, and keep them working for 8 weeks. Think of it as extending unemployment benefits for an additional 8 weeks. Yes, you and your employees can collect Unemployment but if you get approval for the PPP, you must suspend your Unemployment (and for your employees that you ‘rehire’ for eight weeks) and when PPP money is spent or the eight weeks is over, resume Unemployment.  Hence the concept that PPP can extend your unemployment benefit weeks by eight weeks.  What you cannot do is simultaneously take unemployment and also pay yourself for the eight weeks (no double-dipping).

Q: I’m a single member LLC with employees, but I pay myself as self-employed when funds permit. When I turn in the payroll amount, how do I include and calculate my portion of that?

A: Include the owner draw amounts that you paid yourself, along with all other allowable payroll expenditures. We suggest downloading the slide deck at this same site, slide number 10 details allowable and unallowable expenditures to be included in the average monthly payroll calculation. What’s also acceptable is provide documentation of your annual net earnings, divide by 12 to get the compensation portion of the “payroll costs”.

Q: If we had 10 employees on our payroll (on avg) in 2019, and I laid 8 off last month, the way I understand it is that by June 30 I need to bring all employees back to have the loan completely forgiven. So, I get the PPP loan, take everyone off unemployment and start paying everyone on payroll again, what happens on Jul 1 if my business cannot keep going at full capacity? Can my employees go back on unemployment again?

A: Yes, they will be again eligible for unemployment, if, at the end of 8 weeks, you cannot retain them. They would “resume” their unemployment until they use up the balance of the state (26 week) and CARES Act relief (13 more weeks) that they have not previously use.  And to be clear, you need to bring them back for the PPP eight-week period so actually no later than May 5th to employ them eight weeks, ending no later than June 30.

Q: Question on the forgivable portion of the loan (employees to be brought back by 6/30): If I had 10 employees and I could only bring 6 of them back due to the nature of their position, but I overall paid the same AMOUNT of payroll – is it still forgivable? **30k paid to 6 ppl instead of 30k paid to 10 ppl. I can have office and marketing staff work, but not servers and bartenders due to the obvious.**

A: If you do not use at least 75% of the money on payroll, there may be forgiveness issues. There are also forgiveness issues if you cut pay. The scenario you describe above is likely NOT going to be forgivable, as it in effect gives raises to 6 people. Essentially, you are required to keep the same staff at the same rates as pre-Covid. And, in your loan application besides payroll costs, you indicate number of employees, so maintaining employee count (in terms of Full Time Equivalents) is also a forgiveness criteria.

Q: I am a single owner operator LLC in my second year of business. My first year I purchased all my equipment with any earnings. I paid myself zero and in fact am owed approximately $20k from my business in personal start-up loans currently. I had intended to start drawing a salary this year however in January & February I again decided to take all business earnings to order equipment. So zero payroll and negative yearly income means … I do not now qualify or can I in someway value my equipment?

A: It will be difficult to substantiate your personal payroll/draw as you describe above for the purposes of acquiring a PPP loan.  The EIDL may be more appropriate for your needs. Talk to your local bank about what they will accept as documentation on the PPP.

Q: As a Single member LLC would we start by selecting LLC or Sole Proprietor? I’ve seen this done both ways on different applications.

A: Depends how you file your taxes which as a single member LLC is probably as a disregarded entity, on personal returns, 1040 Schedule C.  If so, then you select Sole Proprietor and under the field for DBA you would put your LLC name.  If you’ve elected with the IRS to file as an S Corp and you fill out corporate federal taxes returns then you would indicate LLC.

Q: Once all forms are complete How should they be submitted? Do we upload the application and support documents to the bank’s or SBA website? Print and drive to the bank? Mail them in?

A: Check with your local SBA approved lending institution. Different banks use different forms/processes for application.  For instance, Central Pacific Bank does everything online and accepts e-signing, you only have to go in when they have the money for you… Bank of Hawaii and First Hawaiian Bank has you upload the application and forms and then have to go in, to sign before your application is complete.  This should all be explained on each banks’ respective websites. It is also a changing process as each bank gets caught up on their backlog.

Q: Thank you for hosting this webcast! I am hoping there will be information on execution, once a loan has been granted. I.E. does the loan apply to all of the EE’s wages, whether they were actually working or if there was “no work” and we paid them to keep on payroll? And how much do we pay them (especially those who had varied hours during a work week? Need definitive guidelines to how to carry out the logistical side.

A: It is irrelevant for the purposes of the PPP whether the employees actually worked or were just kept on payroll. You are expected to maintain the same number of employees at the same hourly rate as pre-COVID. You would essentially rehire your entire staff at the exact same rate for 8 weeks. Recall the goal of PPP is to keep people employed by paying them for eight weeks -there is not going to be any guidance in terms of what are they going to do for the company during those eight weeks that totally up to the company… PPP simply gives you money to pay payroll and benefits for eight weeks.

Q: My wife and I are established as an LLC-partnership. We applied for the SBA loan on March 30th. Do we need to reapply as the process seems to be changing constantly? Also, what about unemployment compensation. Of course, I realize that normally this wouldn’t be an option for us, but given the unprecedented nature of our developing crisis I am seeing where other states are offering 1099/sole proprietor types some kind of unemployment assistance. Thanks!

A: You must be referring to the EIDL here, not the PPP, as the PPP was not available until April 3. Did you go through the streamlined all web process with no form uploads and receive a confirmation of any sort on your EIDL application? If so, follow up with a call to SBA utilizing the confirmation number. Contact 1-800-659-2955 or (TTY) (800) 877-8339 and have your federal EIN available. If you have not been contacted or do not have a confirmation number, consider reapplying for the EIDL and advance at:  

We are looking into unemployment compensation and will provide updates when guidance is clearer. As self-employed you most likely are eligible for Unemployment. There is a federal mandate that increases the benefit amount and increases the number of benefit weeks -most significant for you is that self-employed individuals now qualify for Unemployment. The ‘wrinkle’ is that it is a federal mandate but individual states must do the implementation and payments. Hawaii’s Dept of Labor and Industry Relations (DLIR) is struggling with just intaking the 200,000 new applications from traditional clients, they have yet come up with a way to intake/process the self-employed. So right now, there is no process yet to intake self-employed.

Q: If we’ve applied for EIDL and receive the advance, will that amount be deducted from PPP amount. Will the full amount still be forgivable if spent appropriately?

A: The guidance says, yes, EIDL advances will be deducted from PPP, however many are questioning that because 1) the implementation is such that so far, PPPs will be processed BEFORE the advances start wo how can you deduct something that has not been granted yet…  2) EIDL spending is very broad but PPP spending is restricted to payroll so it doesn’t make sense to lose payroll money because you received general working capital assistance.

Full amount still forgivable? Yes if spent appropriately with the caveat that Forgiveness is a separate process from loan application and the guidance details of forgiveness have not been published yet

Q: Will the 1% interest be forgivable, too?

A: Interest accrues only on unforgiven amounts.

Q: Are LLC and S Corp included in the self-employed category?

A: LLC and S-Corp are legal entities. It is possible for self-employed individuals to have LLC or S-Corp status. It is possible you are looking at an older version of the application, please check the SBA website for the most current PPP application.

Q: OK so if business is not in business, and employee is not working but collecting unemployment, this loan is to pay them from US rather than from the unemployment? Do employees then get taken care of by us and they don’t work, and we get the loan to help them. Who helps us?

A: The PPP is forgivable, meaning you don’t have to pay it back, as long as you are in compliance. Think of this as extending unemployment to your employees by 8 weeks.

You have a valid question…  PPP as the name implies is designed to keep people working and only by inference does your business benefit because if your workers don’t leave you don’t have to try to recruit them back and if/when the economy comes back you’ll recover faster because you have experienced workers… that’s a lot of assumptions.  PPP is not a direct relief for small businesses as the EIDL is, the goal is to keep employees working by Protecting their Paycheck (for eight weeks).

Q: To complete the employers IRS 941 form for my PPP application, can I use average owners draw from 2019 income tax returns – adjusted gross income divided by 12? also How do we figure out what portion of my estimated taxes went to SS, Medicare, etc. for this form?

A: Have you filed taxes from 2019? It appears so. Average owners draw from your 2019 tax return is acceptable in calculating self-employed pay, as would be net profit or a combination of the two.

For the application form, it is not necessary to break down taxes by category. We suggest downloading the slide deck, slide 10 details costs that can be included in the eligible monthly payroll expenses.

Note – IRS Form 941 is not a form that you fill out for a PPP application it is a verifying document that a company with a traditional payroll uses to verify purported past compensation because traditional federal payroll taxes are reported quarterly to the IRS on this Form/Return. Form 941 is a form you would already be submitting quarterly to the IRS reporting your payroll. Since you are reporting Owners Draw as your “payroll” you’d submit something that verifies the draw amount you’re calculating -probably submitting your IRS 1040 Schedule C to show net earnings as what you ultimately got “paid” last year.

Q: Because we are considered an essential business and are still in operation, but had a quick decrease in our business, we would like to be prepared to continue our operation and are wondering if our business currently does not have any layoff, has no payroll deductions, we’ve continued to pay our expenses including rent and utilities, but as of Apr 3 has seen a 30%+ decline in gross revenues — will my business still qualify for the PPP loan?

A: PPP eligibility has no reference to “essential” or not.  Its goal is purely to protect Paychecks so if you had some sort of payroll last year, you could apply for eight weeks of the monthly average of that payroll to continue to pay employees and/or yourself for eight weeks.  If you have no payroll to protect then PPP is not for you if you are counting on forgiveness.  Some businesses are submitting for what they can, plan on just paying bills and not worrying about forgiveness or ‘authorized expenditures’ -it’s a great loan at 1% with first payment not due until October and 2 years to pay back. 

Q: I own an LLC with no payroll employees, my partner and I pay ourselves when funds are available. Can we include our rent/utilites for consideration of loan amount.

A: No. When applying, you will not include rent/utilities in your monthly payroll calculation. Only payroll.  PPP really has two stages.  Stage 1 is application for loan amount calculation and is purely last year’s avg monthly payroll costs and number of employees.  Once you get your money it’s a 1% loan for 2 years.  After eight weeks, you enter stage 2, applying for forgiveness so it’s not a loan (but like a grant). Only if you want to try to get forgiveness will you document that you spent the money appropriately on payroll and there’s a bit more that might go to rent and/or utilities and still be forgiven.

Q: If we can’t open our business by the end of the 8 week period, do we need to keep paying employees through June 30 in order for the loan to be forgiven?

A: No. You would pay employees for 8 weeks. Paycheck Protection means just that, money to pay payroll for a defined eight week period… goal: keep workers getting payroll money….nothing related to being open, utilizing workers, or even getting anything done. 

Q: Can the adjusted gross income on individual tax returns be used to determine the average monthly income the owner earned?

A: Yes. Talk to your lending institution to see what exact documentation they will accept.

Q: Can a sole proprietorship with no employees apply for this loan.

A: Yes. But to be clear, it’s not the form of organization, it’s that self-employed can count themselves as 1 “employee” of a business and whatever you pay yourself is “payroll” for the PPP -quite a great expansion of the traditional meaning of those terms.

Q: What if I applied for the EIDL, but have not heard back yet. What would I put in under the average monthly payroll?

A: Do not include any EIDL amounts in the average monthly payroll calculation. We suggest downloading the PowerPoint presentation on this same website. Costs that are allowable and unallowable in the average monthly payroll calculation are detailed on slide 10.  EIDL and its advance come into play as you multiply the calculated avg monthly “payroll costs” by 2.5 times.  Pragmatically, no one has gotten the EIDL or the advance yet so it’s a moot point -no one has gotten an EIDL yet (lots of applications but you don’t count that because you haven’t been approved for anything yet).

Q: If you haven’t received the EIDL advance how can you accurately fill out that section?

A: If you have not received an EIDL advance then do not include it on the PPP application. If you receive an EIDL and a PPP, they will become connected in the future, guidance to follow.  As stated above, pragmatically, no one has gotten the EIDL or the advance yet so it’s a moot point to not worry about -no one has gotten an EIDL yet (lots of applications but you don’t count that because you haven’t been approved for anything yet).

Q: If we pay employees through a PEO (Employee Leasing) do I include them in number of employees? Because legally they are employees of the PEO.

A: Yes. Check with your PEO for documentation. There’s a lot of confusion about whose employee are they.  All the PEO’s have figured this out with the SBA so contact your PEO and they’ll supply you with the correct documentation for the payroll costs and employee count that you can then just add to your non-PEO employees, if any. Do not try to get numbers from the PEO invoices as there’s charges in there that don’t qualify.  All the PEO’s are on this.

Q:  I have a weekly independent contractor do I count his weekly payment as part of my expenses?

A: Independent contractors will file on their own, do not include them.

Q: So for sole proprietor, can I take owner draws and/or distributions (K-1) when I calculate eligible payroll.?

A: Yes

Q: I pay a consultant once a week as an independent contractor for several years. We had to stop operating March 16 due to the virus. Do I need to keep paying him? We have plans to start up again when it is safe.

A: No directive says you need to keep paying someone. You cannot include an IC in your payroll calculation because the IC would file PPP on his/her own company.

Q: How do I put together a Payroll Summary Report?

A: If you use a payroll service, they can probably provide one for you. Your accountant may be able to provide one for you. Speak to your lending institution to determine their requirements.   The banks all have their own ideas of what “proof” they need for your calculation or last year’s average monthly payroll costs. That’s the number you provide, and the banks ask you to provide documents to prove that (banks vary).

Q: I filled a pp loan today it did not ask about rent or utilities .  Is that not on this loan .. is it another loan

A: The PPP does not ask about rent or utilities on the application. The EIDL application takes both rent and utilities into account as liabilities in the application process.

A portion (not >25%) of the PPP may be used to cover expenses like rent and utilities but that only comes into play when you decide how to spend the PPP money in the eight weeks and when you ask for forgiveness.  Rent/utilities has no bearing on the application nor the loan amount.

Q: If the amount of forgiveness we can receive is roughly equivalent to the EIDL $10K grant, should we still apply for the PPP or just go with the grant and EIDL Loan?

A: That is up to you based on your unique situation. Check with your accountant and lending institution to find the right package for your individual business needs. You may qualify for both EIDL and PPP. Keep in mind that the two programs serve distinctly different purposes, the PPP is primarily to cover payroll for eight weeks, the EIDL is for any working capital need including recurring liabilities like rent, utilities, etc.

Also note that there is NOT an EIDL $10,000 grant… If you apply for an EIDL loan, you can ask for an advance on the loan that is calculated at $1000/#of employees on payroll on Jan 31, 2020 up to a maximum of 10 employees.  If you end up not getting approved for the EIDL loan, you get to keep the advance, but it is an advance on the full EIDL.

Q: What is the timeline from application to funding? is it based on credit score?

A: This is a moving target that is a combination of application volume and individual bank processing.  For PPP the process is this:

  • banks take applications (some electronically others manually -which affects speed),
  • bank electronically submits application to SBA E-Trans system (at launch it was returning accept or deny in hours, that now has become days),
  • if accepted by SBA and Loan number assigned, bank start processing a promissory note package for client signature and figure best way to get signatures and disburse funds (some banks are automated, allows e-signature and puts funds in a new checking account which I’ve seen done as quickly as 1 day, other manual bank processes I’ve heard banks say that after SBA approval takes 3-5 business days.)

Q: I’ve already applied, should I expect an email response from CPB? How to guarantee all docs were received?

A: Each lending institution will have their own procedure and timeline. Keep in mind that the heavy workload from thousands of applications may cause some processing delays. 

Q: We are a small organization, and we hire out much of our work to independent contractors. They don’t count for payroll, but I would like the loan to help us continue to hire them for landscaping, bookkeeping, cleaning, building maintainance, etc. Is that possible?

A: Independent contractors are eligible for the PPP themselves. You cannot count independent contractors in payroll costs calculation nor your FTE employee count number. 

Q: I’m an independent contractor paid via commission only. How do I figure out my payroll?

A: Were you given 1099’s last year? Use them. Have you filed taxes for 2019 yet? Divide net earnings by 12. If not, use net income from the taxes you filed in 2018, divide by 12. Include owner draws.

Q: Is the expense of the outside payroll service be eligible to include in the loan amount?

A: Essentially NO, “Payroll costs” for PPP are compensation, benefits and state and local taxes (no federal). The cost of your payroll service is the company’s burden and not related to compensating the employee. We suggest downloading the PowerPoint presentation on this same website. Costs that are allowable and unallowable are detailed on slide 10.