Payroll Protection Program (PPP) Loan Forgiveness

Commercial Real Estate Investing
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Payroll Protection Program (PPP) Loan Forgiveness

Dan Wallace
Golden, CO · Member since 2016 · 145 posts · 61 votes

As a part of the $2 Trillion CARES Act, the SBA is authorized to lend $349B to small businesses impacted by the COVID-19 economic impact.

The primary program for small businesses through the CARES Act will be the Payroll Protection Program (PPP). The PPP encourages small business owners to maintain historical employment levels by providing funding for payroll and other specific operational expenses. The application process is getting finalized but it will be streamlined to get funds into small business owner's hands and maintain employment.

One of the primary features will be that if employers maintain or re-establish employment levels to historical levels, that portion of the loan proceeds will be forgiven. That's right, there will be no repayment on those proceeds. Additional proceeds may also be forgiven that went towards utilities, mortgage interest/rent, and few other types of operating expenses.

These proceeds are expected to move very quickly and there are lenders getting systems in place to streamline the application and submission process. As with any government program there are some nuances and timing issues. 

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Dan Tutolo
Investor · Cleveland, OH · Member since 2017 · 18 posts · 18 votes
6y

Does anyone know that if you are a single-member LLC that holds residential real estate (SFH, 4plex, 6plex) is rental income from a schedule E considered "payroll" according to the definition on page 3 of the application that says payroll can be "net earnings from self-employment or similar compensation"?

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  • Ben Steelman
    Investor · Kansas City · Member since 2017 · 28 posts · 20 votes
    6y

    Hey Dan- Do you know if HOA fees would fall under a "few other types of operating expenses"

    1Reply
  • Dan Tutolo
    Investor · Cleveland, OH · Member since 2017 · 18 posts · 18 votes
    6y

    Does anyone know that if you are a single-member LLC that holds residential real estate (SFH, 4plex, 6plex) is rental income from a schedule E considered "payroll" according to the definition on page 3 of the application that says payroll can be "net earnings from self-employment or similar compensation"?

    9Reply
  • Account Closed
    Rental Property Investor · Houston, TX · Member since 2018 · 106 posts · 56 votes
    6y

    @Dan Tutolo

    This is going to be interesting and I have been reading a lot about PPP. 

    As for eligibility, we, landlords with LLCs are qualified. The issue is how much we can borrow? We do not have the payroll cost to calculate the loan amounts but we do have expenses for forgiveness such as interest on mortgage and so on. 

    Can anyone chim in?

    1Reply
  • Saeed Joshua Zarshenas
    Investor · Atlanta GA · Member since 2019 · 3 posts · 0 votes
    6y

    Would also be interested to hear more on Thawda's comment. My brother and I currently own a few vacation rentals through an LLC (got started 6 months ago) and don't know how to calculate payroll given the lack of financial history. Additionally, can rental income count as payroll for my brother and I?

    0Reply
  • Don KonipolBusiness Member
    Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes
    6y

    @Dan Tutolo

    According to our SBA loan officer, any qualifying payroll income has to be income on which fica is paid. So sch e income won’t count.

    Private Mortgage Financing Partners, LLC
    WebsiteView Page
    2Reply
  • Brian Dickerson
    Rental Property Investor · Delray Beach, FL · Member since 2017 · 102 posts · 44 votes
    6y

    For those who don't have payroll costs for PPP, the "grant" portion of the EIDL could be an option?  

    0Reply
  • Craig Griffiths
    Investor · Clinton, OH · Member since 2014 · 8 posts · 2 votes
    6y

    such a shame they excluded payments to independent contractors (1099) in calculating loan amount.  They say the contractor can get the loan.  Well my rents are down and I'm still paying my 1099's.  What the hell kind of incentive is it to give a forgiveable loan to contractors when you need them to work!  *** backward sba

    1Reply
  • J Sheth
    Investor · Sanford, FL · Member since 2012 · 3 posts · 0 votes
    6y

    @ Dan Tutolo. Same question here. My CPA is cliueless w.r.t. PPP guidelines as relates to single-member LLC who do not draw regular W-2 salary. Does P&L of all properties count as gross income?

    PPP not an option if payroll is only based on FICA. Anybody receive any funds from EIDL?

    0Reply
  • Dan Wallace
    OP
    Golden, CO · Member since 2016 · 145 posts · 61 votes
    6y

    A lot of misinformation floating around out there. Such as you can only apply with your bank that you have a deposit relationship with, not true. I am to understand the 1099'd and sole proprietors are eligible and the requirements for these businesses are still being determined. If you are a contractor/1099'd you will need to file your own claim.

    @Ben Steelman I'm not sure whether HOA fees will be eligibe

    1Reply
  • Cyndi Allen
    Investor · Saint Petersburg, FL · Member since 2017 · 4 posts · 1 vote
    6y

    Has anyone had any luck with the PPP?  Any further information on requirements ?  I usually report vacation rental income on Schedule E.  Has anyone been able to use their schedule E to apply or had any luck filing a different way for vacation rental income?

    Seems crazy that Uber drivers and sub-contractors can get relief from this and we can't?!?  Is this correct.....?

    1Reply
  • Jonathan W.
    Kansas City, KS · Member since 2018 · 67 posts · 70 votes
    6y

    @Cyndi Allen do you have a payroll or employees? If no, PPP is not for you.

    0Reply
  • Cyndi Allen
    Investor · Saint Petersburg, FL · Member since 2017 · 4 posts · 1 vote
    6y

    Has anyone had any luck with the PPP?  Any further information on requirements ?  I usually report vacation rental income on Schedule E.  Has anyone been able to use their schedule E to apply or had any luck filing a different way for vacation rental income?

    Seems crazy that Uber drivers and sub-contractors can get relief from this and we can't?!?  Is this correct.....?

    0Reply
  • Cyndi Allen
    Investor · Saint Petersburg, FL · Member since 2017 · 4 posts · 1 vote
    6y

    Thanks for your response Johnathan. No - no payroll - just income for myself ( my entity) as self-employed in a single member LLC for vacation rentals. Is EIDL a possibility under these circumstances?

    0Reply
  • Nik Moushon
    Architect · Wenatchee, WA · Member since 2018 · 843 posts · 907 votes
    6y

    A little FYI for those that have employees and want to apply for this loan:

    If you first get turned down for the loan or only get a very small amount of what you thought you should be able to get, go try talking to a different bank. My wife is on the board of our daycare and they first got turned down because Wells Fargo apparently didn't get approved for this program...or something like that (I'm paraphrasing what my wife told me since I wasnt at the board meeting). So they went to a different bank and applied through them. They got approved no problem and have nearly full access to the max potential of the loan. Similarly thing is happening to my office...and it turns out the office banks at Wells Fargo. I'm not sure exactly how this works or why two business are having trouble with WF. All I know is both of these business are going to be switching banks after this. 

    So make sure you try different banks if you dont get what you need out of this PPP loan the first time.

    0Reply
  • Kevin Lefeuvre
    Los Angeles, CA · Member since 2016 · 565 posts · 391 votes
    6y
    Originally posted by @Cyndi Allen:

    Thanks for your response Johnathan. No - no payroll - just income for myself ( my entity) as self-employed in a single member LLC for vacation rentals. Is EIDL a possibility under these circumstances?

    According to the passed bill, self employed in a LLC does qualify for this. It has been loudly and clearly posted on all banks who were taking applications. However I don't know if they are actually approving them. I know a couple people who are still waiting. Their bankers told them if they are not denied it's a good sign, but two weeks later they are not approved either. And now they received emails saying funds have dried up and they need to wait for the next round of funding. It's a total mess.

    0Reply
  • Cyndi Allen
    Investor · Saint Petersburg, FL · Member since 2017 · 4 posts · 1 vote
    6y

    I finally got clarification from my bank - they said no because of the Schedule E.  They said they are only accepting Schedule C for self employed because the Schedule E does not meet the SBA traditional guidline for an approved business.  It sounds like the RE industry got shut out on a technicality that could probably be removed or clarified if we caused a big enough uproar with our senators and representatives.  But that would only be worth it - if they approve further rounds of funding.  This one is done.....

    0Reply
  • Miles McClure
    Flipper/Rehabber · Colorado Springs, CO · Member since 2015 · 36 posts · 25 votes
    6y

    @cyndiallen This is correct. Basically if you pay payroll taxes you can qualify. If you pay 1099's nope. The 1099 can apply themselves. Take 2019 payroll divide by 12 multiply by 2.5 is max. Payroll for company includes wages, salary, comission, vacation, health care paid by employer and half of fica, futa, state tax, etc. Document 8 weeks of payroll expense from the day funds are disbursed to caculate forgivness. 75% of forgivness must be used on payroll expense. 25% can be used on loan interest prior to 2-15-20, rent, utilities. Self employed can only use wages no health care, vacation etc included. Same caculation as above but for foregivness it's 8/52 of 2019 pay. This is what we have right now from SBA. It may change more still yet. (SBA has changed requirements on our bank 5 times so far) Provide payroll documentation for coropation to verify loan number. Schedule C line 31 for self employed must be provided now. Document and provide at week 7 after disbursement payroll and other forgiven expenses to the bank for foregiveness. We will send it to SBA and they have 15 days to review and forgive. Funds ran out last week but most likely will be available again this week. Hearing $300 billion more from some contacts so get app ready. Work with your community banker if you have a relationship as we are ready to help and are more willing to work with the "smaller" guy than the big banks. We are a bank in Colorado Springs and may have a little extra room to talk with new clients if you are interested. 

    2Reply
  • Steven Gesis
    Investor · Miami, FL · Member since 2015 · 1k+ posts · 390 votes
    6y
    Originally posted by @Brian Dickerson:

    For those who don't have payroll costs for PPP, the "grant" portion of the EIDL could be an option?  

     Brian, per the legislation EIDL should be a solution and would be a grant - Likely if you do not have  payroll you would not qualify for PPP - Payroll can be rental income if that is sole income and not "e" income. 

    0Reply
  • Joel Atzenhoffer
    Property Manager · Columbus, OH · Member since 2020 · 28 posts · 12 votes
    6y

    Great information, thank you all for sharing!

    0Reply
  • Caroline Keenan
    Realtor · Nashville, TN · Member since 2020 · 9 posts · 3 votes
    6y

    1099 / Sole Proprietors, Independent Contractors, and Self-employed individuals (documentation is required) can apply for the PPP loan. The information I received from my bank (which has been able to get the loan for their users) is Payroll Costs Include: The sum of payments of any compensation with respect to employees that is • Salary, wage, commission or similar compensation
    • The sum of payments of any compensation to or income of a sole proprietor or independent
    contractor that is a wage, commission, income, net earnings from self-employment, or similar
    compensation and that is an amount that is not more than $100,000 in 1 year, as prorated for the
    covered period.

    You can also use the loan Payroll costs, including benefits;
     Interest on mortgage obligations, incurred before February 15, 2020;
     Rent, under lease agreements in force before February 15, 2020; and
     Utilities, for which service began before February 15, 2020.

    They are saying that as long as 75% of your loan is used for payroll cost, it should be forgivable. 

    2Reply
  • Adam Orentlicher
    Apex, NC · Member since 2015 · 12 posts · 3 votes
    6y
    Originally posted by @Steven Gesis:
    Originally posted by @Brian Dickerson:

    For those who don't have payroll costs for PPP, the "grant" portion of the EIDL could be an option?  

     Brian, per the legislation EIDL should be a solution and would be a grant - Likely if you do not have  payroll you would not qualify for PPP - Payroll can be rental income if that is sole income and not "e" income. 

    FYI I explicitly got an EIDL grant.  $1k per employee.  I’m exclusively a schedule E filer.  On one of the FB groups for landlords, many reports of similar this past Monday.  I have gotten zero comms from the SBA - the grant $ was simply deposited this past Monday via ACH.

    Unfortunately however the SBA stopped accepting EIDL requests except for agricultural firms  

    0Reply
  • Sarah Delaney
    Member since 2020 · 1 post · 0 votes
    6y

    Hello! Does anyone know if the PPP Loan Forgiveness is for Full time employees  only or do you have to rehire both FTE & Part time? I'm reading conflicting articles and sources online.  

    Also, can you not use the 75% and just the 25% for rent only and still have the loan forgiven?

    Thanks.

    0Reply
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