Office Hours: I'm now an expert on The CARES Act & The Paycheck Protection Program. I'm Karen Cahn, Founder of IFundWomen.Featured

allisonb's profile thumbnail
Hi Karen, thanks so much! Last year I was all 1099-MISC as a consultant for multiple startups. In 2020, I launched a consultancy (but haven't opened an LLC yet - doing that this week).How should I best apply to the PPP? As an IC or sole proprietor? And do you have any bank recommendations?Thanks!Allison
KarenCahn's profile thumbnail
Hey Allison! The banks want your 2019 info, so you are in an ideal spot to apply! Check out the application on the SBA website - you will see how inclusive they are in who can apply. https://www.sba.gov/document/sba-form--paycheck-protection-program-borrower-application-form. They will want your average monthly earnings and you can get a loan for 2.5x that amount. For your LLC, it had to be registered by Feb 15 in order to qualify, so that's out. But the good news is, you paid taxes as an independent contractor in 2019, so apply for relief funding for that through PPP. I would start with the bank you use regularly because they have your history. Do you mind me asking which bank you use? In tandem, I would go to https://go.streetshares.com/covid-business-relief-calculator and register with them b/c they will be deploying PPP loans as well. I know the Founder. Trustworthy.
allisonb's profile thumbnail
thank you!
sydney's profile thumbnail
Hey @allisonb (and @KarenCahn) -- have you had any luck finding a bank that is taking applications for independent contractors? My understanding is that those applications are supposed to open on April 10th but I haven't seen an indication from any bank on being able to take IC applicants. Everything is just focused on sorting out apps for corporations. I'm concerned that all the money may be gone by the time the IC applications are ready.
KarenCahn's profile thumbnail
Hi Sydney - I have not heard any real evidence that 1099's are getting calls back yet. But, it's first come first served, so get your application in anyway. Then start hounding your bank and be relentless. Tweet at them. Banks hate when you tweet at them.
sydney's profile thumbnail
@KarenCahn - so you'd just use the same application as corporations are using even though a lot of the questions are irrelevant? Seems like that would just get the application rejected, no?
KarenCahn's profile thumbnail
@sydney I am hearing that people are having some luck with this lender https://www.newtekone.com/ It's worth a shot applying. I have also heard that you can and should apply through as many places as possible, quickly b/c it will increase your odds of getting a call back.
allisonb's profile thumbnail
@KarenCahn @sydney I applied with Fundera and haven't heard back. I'm really scared they're all just going to ignore Independent Contractors because banks would prefer to deal with big amounts of money! I'm about to open a business checking account at a community credit union to see if I can get in that way.
KarenCahn's profile thumbnail
@allisonb I think that's smart.
sydney's profile thumbnail
Thanks @allisonb and @KarenCahn. Allison - if you are successful in opening a business account somewhere, I'd love to know where. What I've seen so far is that the deadlines to have set up a business account were several weeks ago.
allisonb's profile thumbnail
Sorry I must have missed this. I opened my small business account with a local credit union that has a lot of restrictions (https://lespeoples.org/). I've applied for PPP with Fundera, BlueVine, Cross River Bank, Paypal, and a couple more that I forget. Fundera said that once someone puts in your application with the SBA, you can't be approved twice. My credit union said that the SBA contacted them and has put aside some money for them, so I'm hopeful that will go through. But also I could see that these tech companies are able to automate the applications so that could go faster. So I hope that I didn't make things more complicated. All that to say, good luck!
sydney's profile thumbnail
Thank you - and good luck!
allisonb's profile thumbnail
My PPP application/loan went through with the Lower East Side Federal People's Credit Union!! It's a miracle! Thanks to @KarenCahn for the support.
sydney's profile thumbnail
My application was approved with First Republic Bank - hooray!
HeatherSawtelle's profile thumbnail
Hi Karen, Can my startup retroactively pay me as the CEO (employee 1) and qualify for the PPP? We haven't filed our 2019 corp. taxes yet.We have a future of work solution that is gaining traction now but need capital to move it forward. We are mostly bootstrapped with a little bit of early revenue, have 1099 contractors and overseas team and I haven't yet been paid, C-Corp 2018. Any out of the box ideas to qualify for EIDL/PPP or other?
KarenCahn's profile thumbnail
@HeatherSawtelle have you applied yet and have you started paying yourself? If you have started paying yourself, you can still apply! There is money in the PPP still. If you started paying yourself in April, I would apply and use your Q2 and Q3 P&Ls which show you as a paid employee.
HeatherSawtelle's profile thumbnail
OY! I wish I knew that then. No I'm still unpaid. I'd love to connect w/ you about funding strategies though. We need to extend out runway ASAP so we can launch a pilot and hit revenue. We are SO SO close we just have to get over the hump.
KarenCahn's profile thumbnail
We can help. karen@ifundwomen.com
kristenclosson's profile thumbnail
Thanks for helping us navigate these new waters Karen! Two questions...1. I'm having trouble finding banks who are still accepting applications for PPP. 2. If we are an LLC and no investors just three people who came together...we don't pay ourselves W2 but have distributions monthly. Does that qualify for PPP?
KarenCahn's profile thumbnail
Kristen, I am hearing that people are having the most success either with their local community bank or with first republic
KarenCahn's profile thumbnail
@kristenclosson how did you make out? PayPal is still taking PPP applications.
kellyobrien's profile thumbnail
@KarenCahn I’m a faithful listener of Masters of Scale😊 It’s one of the most informative podcasts for new entrepreneurs like myself.
KarenCahn's profile thumbnail
I agree @kellyobrien ! It was a massive honor to be on the show. I'm still pinching myself - it was kind of an Oprah moment.
amycross's profile thumbnail
Great to see you here Karen--I've been a happy client of ifund women's coaching over the few months. Our CFO listened to your zoom call the other day. Thank you. Love that in your bio--that you can SELL anything. True!
KarenCahn's profile thumbnail
Ha! Hey Amy. I’m glad you’re getting a lot out of the coaching. Is your business registered in the US? If yes you should definitely be applying for the PPP
Izabel415's profile thumbnail
Hi Karen! Thank you so much for doing this- we’ve spent countless hours researching the bill and talking to a few lenders, but it’s all still a bit of a mystery to us. We officially registered as an LLC in August 2019, then converted to a c-corp in February 2020. Given our timing, the loan would be based on the average payroll in January and February 2020- is that correct? We’re not at a point yet where we’re hiring employees, so we’ve only paid independent contractors for their work (these have been months long contracts which we plan on continuing). Does this count? Lastly, I quit my full time job last year to instead work entirely on the startup, and our intention was to pay me quarterly starting this year (as an employee of course, since an owner/officer of a corp can’t be a contracted worker). Would payroll that we’re currently processing for me for Q1 2020 count in the loan amount calculation? Thank you!!
KarenCahn's profile thumbnail
Hi Izabel. You have a few good things going for you: 1) You are a C corp. That's good. You will get prioritized. 2) You have been in business since August 2019 - check. 3) If you paid yourself anything in Q1, then YES YOU SHOULD 100% apply and be eligible. I will give you an example. IFundWomen has been in business as a C-Corp for 3 years, but we raised a seed round last year and we hired people in 2020. Our payroll in Feb & March of 2020 is 3x what it was in 2019. We applied based on the average of Feb & March 2020 because we want to retain all 16 FTEs. Now, mind you, I have not recieved my loan so I have no solid evidence that this is gonna pass, but I worked with a human loan officer at Chase, who filed my paperwork for me, and she assured me this was correct. Again, caveat-city....I'm "very upset" because my paperwork was filed incorrectly. But back to you....technically you should be eliegible but I can tell you, this CARES act is a total and complete shit show, rules changing hourly, bankers not able to keep their systems up and running, the back end of the SBA loan system was written on an Apple 2C in 1987, and the banks are trying to map their databases to the SBA system. Like, it's a serious disaster. If you are interested in tonight's rant, go here. https://www.linkedin.com/feed/update/urn:li:activity:6653428815324377089/
Angelicaparente's profile thumbnail
Hi Karen,Thanks for this! I’ve also been going through a similar process over the last week. My mom is a sole proprietor and I helped her apply for the EIDL loan/grant. I’ve seen conflicting reports about whether, as a sole proprietor, you can apply for both EIDL and unemployment. Some articles say you can, whereas I got an email from an old accountant saying that you can’t. I know you can’t apply for both PPP and unemployment, as those are supposed to be used for payroll. However, its still unclear whether you can apply for both EIDL and unemployment. I’ve also read you can also use PPP to pay down business debt and well as organizational costs (like storage facilities). Is that true? It’s so confusing since the rules keep changing everyday!
KarenCahn's profile thumbnail
Hi @Angelicaparente - You are right, the rules are changing on the hour! I will caveat my answer with the fact that you are correct - things keep changing. The intention of the PPP is to stem unemployment, so using this logic, no, your mom cannot apply for both. it's possible that she can apply for EIDL loan (it's not a grant, it's a straight up loan) and unemployment. I would say that she should 1) apply for unemployment because that is debt-free capital. Then, apply for EIDL loan but only if she knows she can pay it back. With any loan, even EIDL, they ask for your personal assets as collateral on the loan. Finally, you can ONLY USE PPP to pay for payroll related expenses like salaries, health benefits, and payroll taxes. You CANNOT use it to pay rent. This is a brand new rule. I hope this is helpful. Feel free to come to the AMA we are hosting at www.ifundwomen.com/workshops later this week.
As far as I've read he $10k advance is awarded as a grant *if* you don't qualify for the EIDL loan. Whats unclear is what "qualify" means here, and what the follow up process is once you apply for EIDL. I applied for EIDL almost a week ago and still haven't heard back. And I've heard mixed things on collateral as well - some sites say both PPP and EIDL require no collateral/guarantor but some say EIDL does (caveat: I haven't read the latest updates on this in the last ~5 days, and a lot could have changed since then). Will tune in to the AMA, thanks!
KarenCahn's profile thumbnail
PPP = no collateralEIDL = collateral
Angelicaparente's profile thumbnail
Thanks! I talked to SBA today and they said the quoted 3-day turnaround time for EIDL $10k advances is not accurate. It's 3-days from *when a loan officer starts working on it*, for which there is no current time estimate. First come, first served, so if you're going to apply, do it ASAP. Important: SBA changed the EIDL application on March 30th. If you applied before March 30th, you need to re-apply. Make sure your application submission # starts with the number 3, as this means you used the right application. If your submission # starts with a 2, you need to re-apply with the correct form. The SBA agent I spoke with also said that they *think* you can apply for both EIDL and unemployment as long as EIDL isn't being used to pay salary to sole proprietors. However, they said all information keeps changing and there are no concrete details right now. They said its worth applying for unemployment no matter what happens, as one can always cancel unemployment if they get an EIDL loan.
Reneta's profile thumbnail
Thanks! That's very helpful! Do you know what are the terms to make the $10k advancement a grant?
Angelicaparente's profile thumbnail
I have no idea, and unfortunately new details regarding EIDL were released that make it significantly less helpful. Now they will only give you $1k per employee up to 10 employees. Which is basically nothing. I do know that if you get the grant, you will likely receive a direct deposit in your bank account before getting any correspondence about the loan. Its been a week since the $1k grant was disbursed and still no correspondence from SBA.
Marjan's profile thumbnail
Thank you for your support @KarenCahn! I am wondering if you know the fastest ways for employees to get there CARES act money? Someone mentioned you need to register your bank account with the IRS versus getting a check but I wasn't able to find the proper details. We have some low income employees and I want to make sure they receive there money as quickly as possible.
KarenCahn's profile thumbnail
oh god. dude, there is no fast way to money. Are you applying for the Paycheck Protection Program? If yes, try to apply through your bank, and get your application in ASAP. It's first come first served. And read the reply above for the down and dirty. It's not great. But...back to trying to be positive. APPLY.
mariaderchi's profile thumbnail
Hi Karen! I run a nonprofit with no full time employee - just 1099 contractors. We also don't pay rent. Would we still be eligible for the $10k grant if the funds are used to pay 1099 contractors?
KarenCahn's profile thumbnail
No. Your 1099 contractors should apply for the PPP on their own. The only thing you can apply for in terms of the PPP is your salary. Non-profits are encouraged to apply. Hopefully, you've been paying yourself?
rachelbell's profile thumbnail
My boyfriend runs a small business firm. He's trying to decide between the Payroll Protection Program, or the employer tax credits which states that "Eligible employers can claim the employee retention credit, a refundable tax credit equal to 50 percent of up to $10,000 in qualified wages (including health plan expenses), paid after March 12, 2020 and before January 1, 2021. Eligible employers are those businesses with operations that have been partially or fully suspended due to governmental orders due to COVID-19, or businesses that have a significant decline in gross receipts compared to 2019.The refundable credit is capped at $5,000 per employee and applies against certain employment taxes on wages paid to all employees. Eligible employers can reduce federal employment tax deposits in anticipation of the credit. They can also request an advance of the employee retention credit for any amounts not covered by the reduction in deposits." It's hard to know how they will measure "significant decline" - do you have advice on which one makes more sense for him? The payroll program would be a smaller amount since he only paid himself last year, and brought on 2 employees in Jan 2020.
KarenCahn's profile thumbnail
@rachelbell I am so sorry I don't think I got to this question BUT I hear there is STILL MORE MONEY in traunche 2 left, so if your beau has not applied, tell him to do so asap! I know PayPal is still taking applications for PPP
elizaarnold's profile thumbnail
Hi Karen, thank you so much for doing this. I've been hoping someone with your knowledge would show up soon to help ;) Are sole proprietors allowed to apply if they don't pay themselves a salary? I just take whatever revenue is left, minus costs, but my income has dropped off significantly and I can definitely show a decline in monthly payments. Would I be better off just trying for unemployment? I do also have an independent contractor who I pay hourly, so even if I'm not able to apply for my own payment, can I apply to get hers covered?
KarenCahn's profile thumbnail
Hi Eliza,Up until about an hour ago, it was my understanding that sole proprietors can and should apply for PPP, preferably through your bank. I am now hearing from real humans who are sole props. and applied through their banks that they are getting rejected. If you didn't pay yourself a salary, that is a problem regardless. If I were you, I would apply for both. I would start with PPP and then apply for unemployment. You can't apply for your independent contractor (your 1099) employee b/c they are going to apply for themself, so it's double-dipping. IF THERE IS ANYTHING WE LEARN FROM THIS, LADIES, IT'S PAY YOURSELF FROM DAY 1.