Replay Q&A, and Update to PPP-3-peat Webcast

Jan 15, 2021

Go to Q and A

Over 220 small business owners of Maui County logged in online on Thursday January 14, for the Maui Economic Development Board (MEDB) webcast on updates to the Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL). They were joined by a small number from neighboring islands to tune into the sixth presentation of the COVID-19 Business Assistance Series, sponsored by the County of Maui.

Frank De Rego, Jr., Director of Business Development Projects, MEDB and Wayne Wong, Director of the Hawaii Small Business Development Center (SBDC) covered the application rules for new and existing borrowers with first draw and second draw PPP loans being available.  They also provided updates to the Economic Injury Disaster Loan (EIDL) program.

“MEDB appreciates all those who attended the webcast on PPP.” said De Rego, Jr. “MEDB provides timely and accurate information on programs that render crucial financial support to Maui Countyʻs small businesses, especially during this pandemic. We thank Wayne Wong of SBDC for his collaboration in this effort.”

The Economic Aid Act approved December 27, 2020 allows for another $284B in PPP forgivable loans — specifically designed to provide job retention (payroll costs) and some limited other expenses.  Key updates to the PPP include:

  • Covered period can be any length between 8 and 24 weeks to best meet business needs
  • Allows additional expenses: operations expenditures, property damage costs, supplier costs, and worker protection expenditures ​
  • Eligibility expanded to include: 501(c)(6)s, housing cooperatives, direct marketing organizations, among other types of organizations
  • Greater flexibility for seasonal employees
  • Certain existing PPP borrowers now eligible to apply for a Second Draw PPP Loan
  • Clarifies that forgiven PPP, for tax purposes is not taxable gross income. Also, any otherwise deductible expenses paid with the proceeds of a forgiven PPP funds remain deductible

De Rego, Jr. and Wong discussed and answered questions on eligibility requirements, what the funds can be used for, forms and documents required, and how the loan forgiveness works. Applications for first and second draw PPP loans open 1/19/21 to 3/31/21 with participating lenders.

A further $20B was added to the EIDL Advance (Grant) program and applications can be accepted through December 2021. This is available for business owners who have not already received $10,000 in EIDL advance AND are located in a low-income community, have suffered an economic loss of greater than 30 percent, and employ less than 301 employees. The EIDL Advance application process is still being worked on by SBA and is at least another week or two away. 

“I always appreciate MEDB’s webinars, they are timely, have good understanding of the subject and very helpful on staying on top of the current laws/regulations.” said Missy Dunham, a Maui-based bookkeeper who has tuned in to all of the COVID-19 Business Assistance Series.

A replay of the webcast is available to get all the details, including participating lenders, important links. Answers to the many questions asked during the call have also been posted below.

Access the slide deck.

The impact of COVID-19 has changed how most small businesses do business. To address the challenges and to provide relevant information and practical guidance to as many businesses as possible, the COVID-19 Business Assistance Series webcasts can be viewed live or via the recording on any device.  There is no charge to view.  The series will help Maui County small business navigate the resources available to them, with clear step-by-step instructions. More topics will be explored to adapt to the changing landscape as we pull together to meet the challenges facing all of us.

Watch the Replay


Q & A

Mahalo to Wayne Wong, SBDC

Eligibility and How to Apply

Q: Does the 20% ownership rule include Private Corp Shareholders or just for partnerships or member LLCs?

A: With regards to PPP Application, the previous the rule allowed a “representative” to make the application however, the new requirement is for all parties of 20% or more ownership to sign and certify in the application (and to sign the promissory note if approved)
to ensure transparency to all significant owners of the debt application. So yes, the rule applies to all forms of organizations.

Q: What about property management companies for vacation rental NAICS is normally 531310.

A: There is no special mention of any difference in treatment of NAICS code 531310. In the
past, there was confusion between homeowner associations made up of owners which were
not profit making small businesses but passive income (investment) management. Real estate
management companies for profit are eligible for PPP if they also meet all the other eligibility

What is the established business date requirement in order to apply? Do first time appliers get first dibs this time?

A: That’s actually two questions: 1) Eligibility for PPP requires the small business to be “in operation on February 15, 2020” (this has not changed since the original round of PPP). 2) The legislation only indicates an intended advantage for smaller, rural and disadvantaged companies providing for an earlier application start date for financial institutions that specialized in those types of clients. The SBA implementation guidance indicated that they will open the application to First Draws first, however it was only a two business days advantage and that was not fully implementable because of the tardiness of the publication of the application process. Pragmatically, application implementation is resulting in an application opening for both draws on January 19, 2021. Applications/lending has an ending date of March 31, 2021.

Q: Do you have to apply for the forgiveness for the first round of PPP before they will let you apply for the second round?

A: The SBA guidance on eligibility for Second Draw includes “has used or will use the full amount of a first draw PPP Loan, on or before the expected date of the disbursement of the Second Draw.” It is unclear whether that means that a Forgiveness determination is required.

Q: Can PUA recipients get PPP?

A: Not for the same period of time as that would be federal funds “double dipping”. Both programs are paycheck replacements so (regardless of amount), you cannot get unemployment and a paycheck from PPP for the same period. If you can arrange to space out and time the compensation to not pay during the same period, technically it is legal.

Q: Will the local banks be ready to allow their clients to apply?

A: PPP can be applied for from participating SBA approved lenders. The list of approved lenders, by state is located at: however, not all are participating in the PPP program and less are participating in this 3rd round than the previous rounds. In the workshop/presentation, a chart of Hawaii-based PPP lenders were provided that had been confirmed by the Hawaii SBA District Office.

Q: I have heard that the portal for PPP opens earlier for financial institutions with less than 1 billion in assets is that still in effect.

A: The Economic Aid Act expressed a targeting advantage for smaller, more rural and social-economic disadvantaged small businesses. To accomplish this the legislation was to provide “community banks”, CDFIʻs and institutions that specialize in veteran and other minority clientele an earlier application start as well as actual funding set asides during the SBA approval process. Implementation of that intent has been difficult. There is no legal definition of “community bank” but just a consensus that itʻs a small institution that serves a small geographic area emphasizing personal relationships. Various government agencies have added the criteria of assets less than $1billion, others less than $10 billion. The intent is still in the code and in the guidance, in practice, there has not been any extra support to help smaller lending institutions be able to participate earlier and its also unclear how the SBA is going to identify those PPP applications to enforce the priority and set asides.

Q: Should we apply with the same lender where we got our first draw?

A: General consensus is that there could be an advantage because the lender already has a lot of your data and you are already considered a customer. That said, there are no regulations or requirements for a Second Draw applicant to use the same lender and because fewer lenders are participating in this round, it may not be an option for some.

Q: Do you think those of us doing second draw and using the same lender will still need to send paperwork if we did already for previous PPP? 

A: That is the thinking, however each institution has various data management capabilities (not to mention ability to handle such a volume of accounts) so this possible advantage will vary by lender and institution.

Q: PPP funds were deposited to our business account but no paperwork was provided.  How do I acquire a loan?

A: Contact your lender, they have that information (easily to obtain for you) and in fact for PPP, they have a promissory note in your name. Actually, the most difficult part is finding the right person in the bank that is your “loan account manager”.

Q: Is there specific dates to start the 8-24 week period on the 2nd draw for the PPP?  Can I use qualified expenses starting when my first draw ended, or does it start at the time the 2nd draw is approved?

A: Covered period always starts on the day of disbursement (in this case disbursement of second draw funds)… qualified costs for forgiveness must not only fall within the correct categories, but the cost must be “incurred and paid” during the covered period. There is a minor adjustment of the start of a covered period possible to allow synchronizing pay periods.

Q: What if you show a loss in your business?  Meaning no payroll.  Can you still apply?

A: To be clear, you can have payroll and still operate at a loss (expenses larger than gross receipts) so your question is not clear… Essentially, a PPP loan amount is 2.5 times your monthly average payroll cost from 2019 (no consideration for profit or not)… If you are saying that you had no payroll then there are no jobs to retain and hence no PPP that applies.

Q: So, if the 1st quarter of 2020 was 25% below and business already received PPP from the 1st round, can they still apply?

A: If you mean gross receipts for Q12020 was 25% less than gross receipts for Q12019 then Yes for Second Draw if you also meet the other criteria for Second Draw: no more than 300 employees and your company “has used or will use the full amount of a first draw PPP Loan, on or before the expected date of the disbursement of the Second Draw.”

Q: If you never reopened during 2020, and got PPP funds, can those be returned and then apply for this round of PPP if you plan to reopen business in 2021?

A: Possible but it’ll be difficult. Once you’ve gotten the first round of PPP funds the safe harbor date (May2020) is long past so there is no “returning of the funds”. You apply for forgiveness determination which is only looking during the covered period, and you would have some or all forgiven and a loan balance to pay off that includes interest which accrued from the day you were disbursed funds. For Second Draw, you would have to show you spent round 1 in approved ways, ou would have to restart your business (closed businesses are not allowed to apply) and also show that there was a quarter in 2020 that had a 25% reduction in gross receipts from the comparable quarter in 2019. Also each lender interprets the rules slightly different so the sure answer is to talk to your PPP lender.

Q: I have no employees in HI but do in TN. I do have HI rentals and pay for HI damaged building repair costs and vacancy due to HI renters who were laid off due to Covid-19. Is there anything I am likely eligible for?

A: PPP does not indicate any geographic limitations beyond employees having US residency, as long as your transactions and records are under one EIN and ownership, none of the eligibility rules indicate a limitation due to locale but read the franchise and affiliation rules to be sure that your company is eligible.

Calculating Monthly Payroll

Q: Can we increase the monthly average payroll than it was, being that we need to hire a new employee?
A: The PPP application is not based on what you’re going to do so the numbers in the Application would be one of the 3 choices… (option 3 might work for you if you hire now and you’ll then have the numbers (and eventually the 941 to support you new employee):
(3 calc methods):
•2019 payroll costs divided by 12, or
•2020 payroll costs divided by 12, or
•month’s payroll costs precisely 1-year before the date on which the loan is made

Q: We would be considered a First Draw. My dad, owner and only employee with a very minimal monthly payment of less than $1K/month just to keep the business running, since we have been closed to visitors, wants to move into online and will need to hire another employee to do so. Can we add this to our average monthly payroll? Or do we need to use what it was prior, which was only his?
A: See above

Q: What is FTE? 
A: The initials stand for “Full Time Equivalent” indicating a unit that  is an employee’s scheduled hours divided by the employer’s hours for a full-time work week. 

For PPP Forgiveness (and not part of application), the FTE calculation converts a company’s total employee count (including both full- and part-time employees) into the “equivalent” number of full-time employees working 40 hours a week. The original loan forgiveness application clarified the base hours of 40 hours per week to calculate an FTE.
Two options of calculating the number of FTEs are provided: (1) calculating based on actual hours worked or (2) simplified approach of using an FTE of 1.0 for employees working 40 hours or more and 0.5 for employees working less than 40 hours in a week. You can elect the option that is more favorable to you and that option must be used to calculate all FTEs for all reference periods. Tip: It is beneficial to calculate both options as the results can differ significantly and one will be more favorable to your circumstances.
On page 1 of the APPLICATION, it asks for “Employees at Time of Loan Application” and “Employees at Time of Forgiveness Application”. Please remember this is not based on FTEs; rather, this is based on the definition used by the Small Business Administration (SBA) and counts each employee as one.

Q: What is the fte look back period?

A: I’m not aware of an FTE look back period. There is an employee’s earnings look back period whereupon repayment of part of the loan (less than full forgiveness) may be required to the extent that any employee’s earnings are reduced by more than 25% during the applicable Covered Period, compared to the wage comparison Lookback Period of January 1 to March 31, 2020.
Perhaps what you are think of is that there are multiple time periods to calculate FTEs when preparing your PPP loan forgiveness application:

  • The “forgiveness period”. Calculate both and choose the one for the application that is more favorable to your results:
    • Covered Period (“CP”) ranging from eight to 24 weeks beginning on the date of your loan disbursement.
    • Alternative Payroll Covered Period (“APCP”) ranging from eight to 24 weeks beginning on the first day of the payroll period beginning after the date of your loan disbursement. The Alternative Covered period can be helpful when you increased your FTEs over the forgiveness period as the APCP can allow for a later payroll to be included than would be included in the Covered Period.
  • Baseline reference period to determine whether FTE penalties apply. Calculate both and choose the one for the application that is favorable to your results:
    • Option 1 – 2/15/19 to 6/30/19
    • Option 2 – 1/1/20 to 2/29/20
  • FTE Safe Harbor calculations:
    • FTEs as of February 15, 2020 (based on the pay period including this date)
    • Average FTEs during the period 2/15/20 to 4/26/20
    • Number of FTEs as of the earlier of the submission date of loan forgiveness application or December 31, 2020

Q: If this is a 2nd round draw, if we choose to use the same Mthly Payroll used in the 1st round, would you need to provide the 941 forms again?
A: The Second Draw documentation requirement remains the same so yes, you will need to provide the 941 forms (again).  This has been suggested why there may be an advantage to using the same lender as your first draw application because they should have the records and MAY be able to ‘copy’ the documentation.  Remember, the individual lender (banks) are holding all the ‘paper’ for these loans -the SBA provides a guarantee based on the acceptance of the lender so the SBA will not have copies of any submitted documentation substantiating the application. So definitely provide 941’s if you are using a different lender and ‘maybe’ need to provide again if using the same lender.

Q: Is it true that to qualify for this next PPP, you must have a 25% decrease in revenue for 1 quarter in 2020 and it doesn’t matter which one? I heard from someone that we need to look 1st, 2nd, 3rd and 4th quarters of 2019 and compare them to the same quarters in 2020.  If any of those quarters in 2020 is 25% below the same quarter in 2019 we qualify for the next PPP.
A: For Second Draw PPP loans one of the eligibility rules is borrower must have experienced a revenue reduction of 24% or greater in 2020 relative to 2019. Calculate this by comparing quarterly gross receipts and if any one quarter comparison shows at least a 25% reduction 2020 from the comparable 2019 quarter then this eligibility is met. An annual sales comparison is also allowed.

Q: I’d like to understand how the FTE/pay rate works for the 2nd draw. We have less employees than we did in 2019. What is the look back/ comparison period for the 2nd draw?
A: There is no change in Forgiveness calculation for Second Draw (Forgiveness/FTE rules are exactly the same as they were for the previous PPP). What is different is that in the PPP Application you are able to use monthly payroll amount and headcount from either 2019 or 2020.

Q: What if you just hired 2 new full time employees that will increase your payroll from the look back payrolls and 941 tax form? Can you use your new expected numbers for payroll?
A: Listen to the PPP Application portion again, you have the option to use either 2019 numbers or 2020 numbers so it sounds as if your 2020 numbers would give you a greater Loan calculation than staying with the 2019 numbers; and yes you will need to provide the 2020 form 941s to substantiate.

Q: Can you pick any three months to compare or does it have to be actual quarters. So could you do August, September & October 2020 and compare those same months with 2019?
A: The guidance indicate “quarters” not three months nor any 3 month period.

Q: Just 1 quarter is required?
A: If you mean to demonstrate the 25% loss in 2020 then YES, either full annual comparison but an allowed method is comparison of any single 2020 quarter loss to the comparable 2019 quarter.

Q: What is included in Revenue? Do we include the PPP Loan #1. Do we include grants? Or do we show Quarterly Total Revenue compared to last year?
A: Loans generally are never counted as revenue (since they have to be paid back). Grants however do count as revenue with the exception of Forgiven portions of PPP loans (which technically has become a grant but legislation makes a special case that forgiven PPP funds are not revenue.

Q: We reopened since 10/15 and we are experiencing a huge decline in business since last year. I have 50% staff from last year. Do I have to apply for our current payroll count or do I have to base it from last year?
A: You are allowed to have your PPP amount calculated on 2019 or 2020 numbers, you choose.

Q: If you just started paying salary in 2021 and weren’t paying salaries in 2020, are you eligible for a PPP loan?
A: I don’t think so because the three methods for calculated average payroll costs on which your loan amount will be calculated on, all involve numbers from prior years. However if you as the owner had income (as determined by a Schedule C) for either 2019 or 2020, you have a “payroll cost” that can be calculated.

Q: I’m the owner and never paid myself according to my contract of $5000 a month and only paid myself $1500 a month. I can show my contract.
A: Is your question, can you count $5000/month in the Application payroll costs and then subsequently count it for Forgiveness? Unfortunately, No in both cases. The guidance makes it clear that costs have to be both incurred and paid in the target periods. Having a contract may be incurring the cost but not actually paying the cost is a problem.

Q: If you have 2 employees and 2 Owners on Draws, can you count the Cost of each of these 4 people… mixing Payroll and draws?
A: Yes. Employee compensation averaged to come up with an average monthly payroll is straight forward; Draws for each owner is line 31 of each Schedule C divided 12 to come up with monthly payroll cost. Also remember that each employee (and owner) has an annualized maximum of $100,000.

Q: I understand that employee retention is part of determining forgiveness. However, how can a businesses be expected to retain employees if the business is not “allowed” to operate and/or generate income (i.e. live entertainment)?
A: This is a valid concern but this is exactly what PPP is designed to do, to provide some relief to the business by providing payroll costs for eight weeks because of revenue drop due to COVID-19. PPP is specifically designed to provide job retention through providing payroll costs. And if you pay the majority of the funds to payroll and retain your headcount, the relief funds are granted to you rather than increasing your debt. Does it solve all your problems? Sadly, no.

Q: Is a person who receives the left over profit of a business of rentals owned by said person, and whose prior occupation was real estate and so shows all income and expenses on Schedule E, and does not pay himself as an employee and does not have a payroll tax therefore, still an employee for purposes of qualifying (limited perhaps to $100K/yr)?
A: Unfortunately for PPP purposes, you are not treated as an employee because of a lack of earned income. PPP guidance has ruled that IRS 1040 Schedule E is for “supplemental income and loss,” and not earned income. Earned income is income generated from business activities. Supplemental income is considered passive income which is not eligible for PPP purposes.

Q: What if your NAICS is 31 – bakery?
A: PPP does not specifically call out businesses with NAICS code 31 for any special treatment so your business is eligible if you meet the stated eligibility requirements for all small businesses.

Q: Does a Deli fall into the NAICS 72?
A: “Delicatessen” is a commonly used term which could be classified into a couple of NAICS codes so it depends on your operations. Operating primarily as a meat market or a grocery and specialty food market would be NAICS code 44-Retail Trade . If your operations are primarily/predominantly operated as a restaurant then the business is classified as 722513-Limited-Service Restaurants.

Q: If we are a Food Distribution company that supplies restaurants can we get the 3.5X amount that restaurants qualify for?
A: I do not think so. NAICS Code 72 (which qualifies for the 3.5 multiplier instead of the normal 2.5 factor) are accommodations and consumer serving restaurants. I am guessing that your company does not prepare and serve food direct to consumers, and more likely can be classified as a wholesaler/distributor/supplier hence would more likely be classified as NAICS 44… more specifically NAICS Code: 424490.

Q: Did they say Tour companies also get 3.5 X ?
A: I apologize for any confusion, I misspoke. 3.5 factor requires NAICS code 72-Accomodations & Ready to eat Food Service as in Restaurants. A tour operator is NAICS Code 56 and scenic/Sightseeing transportation is NAICS code 48.

Use of Funds

Q: Is salary of Independent contractors covered?
A: I am unclear about what is being asked in this question. My response depends from which perspective you are using “Independent Contractors”. An independent contractor is allowed to be an applicant/borrower because they are self-employed so their own income/salary (usually line 31 of IRS 1040 Schedule C) is what they would use in the application payroll cost. However I suspect this is from a borrower’s perspective asking if the salary of an independent contract worker of theirs can be part of the allowed “payroll costs”; the answer is No. Your contractor is viewed as a vendor who must apply for their own PPP and not an employee of yours that you can include in your payroll costs.

Q: As an owner I did 1099 by employees does this count?
A: No. Lets start by correcting the terminology, your workers that have their compensation reported on Form 1099 are not “Employees” and cannot be counted in your PPP payroll costs. 1099 workers are essentially Vendors to you with their own businesses, pay their own taxes. Workers that are actual “Employees” (and so can be counted in PPP under the borrowing business) have their compensation reported on on W-2, have tax withheld and employer contributions reported and paid quarterly by the employer to the IRS on a Form 941 and the management of this set of workers must be compliant with the Fair Labor Standards Act.

Q: What about condo owners who run their own business and don’t have any employees on a payroll but pay independent contractors? Is there any money available for the owners for those, who have lost income due to quarantine?
A: PPP is not an appropriate relief option remembering that PPP is primarily designed to help businesses retain their workforce. It is beyond the scope of this PPP session to identify other possible relief that may work for you. I would suggest that beyond business relief programs that personal COVID-19 programs be sought, for instance rent/mortgage relief and so on. For Maui residents check out the website for various COVID-19 relief options both business and otherwise.

Q: Can you clarify more what can be included as ‘operations expenses’?
A: Under the new guidance of how PPP funds can be appropriately used (for Forgiveness) the guidance states: “covered operations expenditures (payments for any business software or cloud computing service that facilitates business operations, product or service delivery, the processing, payment, or tracking of payroll expenses, human resources, sales and billing functions, or accounting or tracking of supplies, inventory, records and expenses)”.

Q: Are marketing services supplier costs included?
A: While I don’t think so as a “supplier cost” as the guidance speaks of suppliers in relation to goods (as in products, inventory). I do believe that Marketing Services costs do fall under the “covered operations expenditures as that does cover service delivery… that facilitates business operations”.

Q: Please go over the “covered period” options — 8 weeks? 24 weeks? something else?
A: For this 3rd round of PPP -both First Draws and Second Draws, the covered period (when PPP funds must be spent in order to be considered for Forgiveness) starts on the day of funds distribution to the borrower for a period of any length between 8 and 24 weeks to best meet business needs.

Q: Please clarify rent and utility costs if one only has a home office. re mortgages… it sounds like only mortgage interest is covered. not mortgage itself on a home office — correct?
A: Unfortunately correct. Only the interest portion of mortgage payments, not the principal portion. Furthermore, for a home office only the prorated proportion of your mortgage is a valid business expense (as in the dedicated (no share use) square footage of the office as a ratio to the total square footage of the home. So not only the interest only but only the prorated portion of the interest only.

Q: Can any unused funds from the 1st PPP loan be rolled over to the 2nd PPP loan?
A: No. In fact, Second Draw PPP eligibility includes the requirement that the full amount of a first draw PPP Loan has to be completely used or will be used on or before the expected date of the disbursement of the Second Draw.

Q: Can I use my $150,000 loan at 3.75% and get the 1% loan and pay the other 3.75% off?
A: It is unclear to me what you are asking, sorry. If you are asking if you can use PPP funds (@1%) to at least partially pay off the higher interest (@3.75%) EIDLoan? The short answer is no because allowed uses of PPP funds is very restrictive and paying off prior debt is not allowed. PPP is to primarily retain employees and regardless of Forgiveness, the restrictive uses remain.

Q: Any restrictions on how we spend the PPP Round 1 funds that were remaining after the 24 week coverage period?
A: Restrictions on how/what PPP funds are allowed to be used remains regardless of Forgiveness and regardless of covered period time frames. PPP funds use is very restrictive.

Q: Is it deductible for the PPP second round which we got last year, able to take it as a deduction on our taxes as used as payroll expenses if we used the funds to pay our employees.
A: Sorry, I am unclear what you are asking in the way you are asking… Here’s what was clarified in this Dec 27, 20 Economic Aid Act (which I think will provide the guidance you seek). This act clarified that PPP amounts, for income tax purposes will NOT be counted as gross income -even if the loan is forgiven and essentially converted to a grant. Furthermore, normally tax deductible expenses paid by PPP funds will remain tax deductible thereby debunking previous charges of “double dipping”.

Q: Should capital campaign donations for capital project be excluded from gross revenues when calculating whether we meet the 25% reduction requirement?
A: For an eligible nonprofit organization, a veteran’s organization, an eligible nonprofit news organization, an eligible 501(c)(6) organization, or an eligible destination marketing organization, gross receipts are defined according to section 6033 of the Internal Revenue Code of 1986.

Q: Does it make a difference if the 25% reduction is based on accrual or cash basis? 501(c)3
A: Per the IFR on Second Draws, gross receipts include all revenue received or accrued (in accordance with the entity’s accounting method regardless of form or source). For an eligible nonprofit organization, a veteran’s organization, an eligible nonprofit news organization, an eligible 501(c)(6) organization, or an eligible destination marketing organization, gross receipts are defined according to section 6033 of the Internal Revenue Code of 1986.

Q: Are the new allowable expenses applicable to earlier awards of PPP or only to the latest round of PPP?
A: Good news, Yes, as long as the SBA final determination for Forgiveness for the earlier loan(s) has not been made yet. Once SBA Forgiveness determination by the SBA is issued, no changes can be made. There is a small footnote in the Interim Final Rule SBA Docket number SBA-2021-001: “These ‘extra allowable expense’ provisions are effective as if included in the original CARES Act and apply to any loan made before, on, or after December 27, 2020, including forgiveness of such loan, unless SBA has remitted a loan forgiveness payment to the lender on the PPP loan.”

Q: Do independent contractors need to register as a small business? What would that entail?
A: Lets start unrelated to PPP, in the State of Hawaii you are required to obtain a business license in order to conduct commerce (charge for services or sell products) within the boundaries of the state). That license is the Hawaii General Excise Tax license. In the PPP context, as an independent contractor your work/jobs are clients so entities that hire you cannot include you in their employee count nor payroll costs. You must apply for your own PPP for your respective business. PPP application requires proof that you are a legally run business in operation by February 15, 2020. Your GET license showing establishment date and a status of Open (not closed) is part of the application process.

Q: What if I’m an owner able to take draws, but wasn’t able to pay myself due loss, therefore no income on Line 31. How can I get help?
A: You have correctly concluded that PPP does not have any relief for you. Other relief programs and or pivoting your business model is what you need to explore. Those are beyond the scope of this PPP webinar.

Q: You mentioned not including grants in our revenue. Does this mean that nonprofits should only use earned income and no contributed income for our 2019-2020 quarterly comparison?
A: For an eligible nonprofit organization, a veteran’s organization, an eligible nonprofit news organization, an eligible 501(c)(6) organization, or an eligible destination marketing organization, gross receipts are defined according to section 6033 of the Internal Revenue Code of 1986.
The IFR further clarified that the amount of any forgiven First Draw PPP Loan shall not be included toward any borrower’s gross receipts. The IFR further clarified that the amount of any forgiven First Draw PPP Loan shall not be included toward any borrower’s gross receipts.

Q: If a business pays their staff to an outsourced employee hiring company is the business entitled to apply for PPP?
A: You need to coordinate with your outsourced hiring company. Your agreement/contract and possibly some negotiation will be required to determine which of you will be able to claim the workers as “their” employee for PPP purposes. 

Q: Do Owners Guaranteed payments considered part of the payroll costs?
A: PPP Application payroll costs calculation does not look at what obligations are incurred but rather what actual compensation payments are made/booked per your accounting method within the designated period in question.

Q: When figuring the gross receipts what do you include? Can you exclude Monies received for building project donations? Unrealized gains/losses on investments? Please clarify definition of gross receipts. Thanks
A: Gross receipts come into play for Second Draw PPP pertaining to the eligibility requirement for 25% loss in gross receipts between 2019 and 2020. Per the IFR on Second Draws, gross receipts include all revenue received or accrued (in accordance with the entity’s accounting method regardless of form or source). This includes revenue from the sales of products or services, interest, dividends, rents, royalties, fees, or commissions, reduced by returns and allowances.
Generally, receipts are considered “total income” (or in the case of a sole proprietorship, independent contractor, or self-employed individual “gross income”) plus “cost of goods sold,” and exclude net capital gains or losses as these terms are defined and reported on IRS tax return forms.
Gross receipts do not include the following: taxes collected for and remitted to a taxing authority if included in gross or total income (such as sales or other taxes collected from customers and excluding taxes levied on the concern or its employees); proceeds from transactions between a concern and its domestic or foreign affiliates; and amounts collected for another by a travel agent, real estate agent, advertising agent, conference management service provider, freight forwarder or customs broker.
All other items, such as subcontractor costs, reimbursements for purchases a contractor makes at a customer’s request, investment income, and employee-based costs such as payroll taxes, may not be excluded from gross receipts.
The IFR further clarified that the amount of any forgiven First Draw PPP Loan shall not be included toward any borrower’s gross receipts. The IFR further clarified that the amount of any forgiven First Draw PPP Loan shall not be included toward any borrower’s gross receipts.

Q: I thought the PPP gross receipt test includes Operating Revenues as well as other revenues such as interest, dividends, miscellaneous revenues, GET collected?
A: The definition of gross receipts for PPP eligibility was just answered above but of the items you list, all fall under the definition EXCEPT Hawaii GET which while collected from customers and included in your books as income, is remitted to the taxing authority. The IFR mentions that Gross receipts do not include taxes collected for and remitted to a taxing authority even if included in gross or total income (such as sales or other taxes collected from customers…).


Q: If you have an EIDL loan but did NOT receive the 10K advance, are you eligible for 10k grant?
A: The original EIDL Advance program ran out of money and was closed. The new funding re-opens the EIDL Advance but only for a targeted audience -the eligibility is now:

  • business must be located in a “low income community”. For purposes of the EIDL program, a low-income community is one that meets the eligibility requirements of the New Market Tax Credit – a program designed to attract private capital into low-income communities through federal income tax credits. There are online tools and maps available that you can use to see if your business falls within these census tracts.
  • have suffered an economic loss of greater than 30 percent, and
  • employ less than 301 employees

Q: If I got a EIDL loan and advance 2020 and my advance was $5000 can i go back to sba for the remaining $5000
A: Depends. Review the revised EIDL Advance eligibility requirements The re-offer of EIDL Advances are only to businesses located in a “low income community”, suffered 25% gross receipt loss and less than 301 employees… If you qualify and on then, yes, you can apply for the ‘balance’ of what you previously received and the full $10,000.

Q: How do we apply for the EIDL advance/grant?
A: SBA will be opening a new online Portal on They expect the new applications for the targeted EIDL ADVANCE to open the last week of January as the application form and online programming is currently underway. One sticky part is that the first eligibility filter is that your business must be located in a low income community and they are putting together a “geo-widget” so that when you apply, it will verify that you are eligible.

Q: Can we apply for a second EIDL?
A: NO, only one application


Q: If your calculated loan amount is more than $150,000, can you just get the loan for $150,000 to make the forgiveness process easier?
A: You do not need to accept the full amount of PPP that you qualify for however that needs to be made clear to the lender prior to their submission to SBA so that they would only submit for the desired amount and not the full amount and then have to do the promissory loan note and repayment calculations after they have been accepted by the SBA. ALSO, note that the simplified Forgiveness application for loans $150K or less is a paperwork reduction and not what some are calling a “blanket forgiveness”. You will be certifying under penalty of fraud that you have spent the PPP appropriately per the terms of the agreement and that borrower will retain all related loan and forgiveness documents for 6 years after the date of full forgiveness or the date the loan is fully paid off if only partial forgiveness was achieved and that your retained records will be made available to the SBA for audit.

Q: Are they both (PPP & EIDL) considered forgiven if criteria is followed?
A: Do not confuse the three separate relief programs which are NOT tied together with respective eligibility and terms:
1) Paycheck Protection Program (PPP): Forgivable LOAN if you meet spending restrictions
2) EID LOAN: Non-forgivable long term loan (not related to EIDL Advance except in name)
3) EIDL ADVANCE/Grant: Granted as grant that does not have to be paid back (new reopening is targeted only to low income communities).
Forgiveness is ONLY a component of PPP.

Q: Is the total amount of loan forgivable or maxed to a certain percentage?
A: PPP Forgiveness is possible for the full amount of the loan, including forgiveness of any accrued interest. Partial Forgiveness is possible, depending on adherence to the spending rules (acceptable costs categories, amounts and timing).

Q: Will you be able to combine both 1st & 2nd Draws for forgiveness all at once?
A: No, each loan stands on it’s own -made even more difficult in that one of the qualifications for the Second Draw is proof that the borrower “has used or will use the full amount of a first draw PPP Loan, on or before the expected date of the disbursement of the Second Draw.”

Q: Is the new EIDL Advance forgivable?
A: Technically NO because the Advance is not a loan but a non-payback-able GRANT from the very beginning.

Mahalo to Wayne Wong of SBDC Maui Center for providing answers to everyone’s questions from the webcast.