California Relief Grant Program | For Business Owners PPP Loan

California Relief Grant Program | For Business Owners PPP Loan

January 2, 2021 by Andrew Rogerson in Loans and financing, Management and Planning

California Relief Grant Program was made because 2020 was a difficult year.

Especially if you were a business owner.

Especially if you were a business owner in California, as you were dealing with COVID-19, wildfires, a difficult Presidential election, tariffs, and much more.

If you have made it to 2021, congratulations. Perhaps you know some business owners that would welcome some help so they can recover and make their business bigger and stronger.

California Relief Grant program

The State of California is offering grants to small businesses that qualify.

The program is called the California Relief Grant program.

1. One of the lenders that the State of California has asked to handle the application process is called Lendistry.
2. Here is a link to a very detailed landing page about the program.
   1. California Relief Grant program
3. Here is a link to create an account and start the application process.
   1. California Relief Grant application
4. The California Relief Grant program is not a first-come, first-serve program and will not close early.
   1. There have been technical issues for some applicants because there are so many applicants, but an application can still be submitted for first-round consideration any time before January 13, 2021, at 11:59 PM.

You may know a California business owner that could benefit from this information and so you are welcome to forward this to them.

See also: Taking A Loan To Keep Your Business Going

GO-Biz Offering $80M to California Businesses

The Governor’s Office of Business and Economic Development (GO-Biz) is now accepting applications for the California Competes Tax Credit (CCTC). GO-Biz will be awarding over $80M during the second round of the fiscal year 2020-2021. The CCTC rewards businesses that relocate to California or expand operations in the state.

Do you or your business clients anticipate:

1. Paying California income tax?
2. Hiring full-time employees?
3. Investing in real property
4. Purchasing or leasing equipment?

If you answered “Yes” to any of the above, Fox Consulting Group will help you claim the CCTC to offset both current and future tax liability. The application deadline is Monday, January 25, 2021, at 11:59 PM (PST).

You can contact Fox Consulting Group on 1 800 908-3220 or visit their website.

PPP loan – Round One

If you are like me, you are getting your financial statements in shape to file your business and personal tax return. If your business was able to qualify and you were successful with your application, the CARES Act was signed into law on March 27, 2020, offering different forms of help to business owners.

If your business took a PPP loan, here are some simple suggestions to get your Income Statement of P&L in shape to present to your CPA or tax preparer. This help will also assist you if you plan to value or sell your business in 2021.

A key point regarding a PPP loan is that it is a loan.

The loan proceeds should therefore be shown on the Balance Sheet as a Note Payable as it is a liability.

Please do not show the loan proceeds on the Income Statement as income.

To be a little clearer, if the PPP loan is forgiven, for income reporting purposes show it as follows:

1. On the Income Statement or P&L only, put a fancy label on it so your tax preparer understands and asks you questions. For example, “Gain on Extinguishment of Debt.” (This will then be removed when the income statement activity is placed in your Income Tax Return.)
2. Income Tax Return. If the loan is forgiven, the loan amount will result in “Loan Forgiveness Income”, but this income WILL NOT be subject to income recognition which means it will not be subject to tax. As a result, the forgiven loan amount will not be included as income in the income tax return.
3. Concerning expenses, the Income Statement will reflect the expenses paid with the PPP loan proceeds. Thankfully, with the passing of the second stimulus bill in late December 2020 and the subsequent signature of the President, expenses paid with the PPP loan will now be tax-deductible.
4. Be aware, that for a business owner in California, we must wait and see if the State of California clarifies the tax treatment of the PPP loan and related benefits.

PPP loan – Round Two and the Second Stimulus effective late December 2020

With the Second Stimulus now passed into law at the end of December 2020, there are different benefits for different business owners.

This includes a PPP loan – Round Two for businesses that qualify.

This also includes assistance for business owners with an SBA loan plus those looking to buy a business in 2021 using an SBA loan.

Because there is different help for different business owners from the Second Stimulus, let’s look at each benefit separately.

PPP loan – Round two:

1. A second PPP loan called a “PPP second draw” loan for smaller & harder-hit businesses with a maximum new loan amount of $2 million.
2. Eligibility: To receive a second PPP loan under this section, an eligible entity must:
   1. Employ not more than 300 employees.
   2. Have used or will use the full amount of its first PPP loan – Round One.
   3. Demonstrate at least a 25% reduction in gross receipts in the first, second, or third quarter of 2020 relative to the same 2019 quarter.
3. Selection of Covered Period for forgiveness:
   1. Borrowers can elect a covered period ending at the point of the borrower’s choosing between 8 & 24 weeks after loan origination.
4. Loan terms:
   1. Borrowers may receive a loan amount of up to 2.5X the average monthly payroll 3 costs during the year before the loan or the previous calendar up to a maximum of $2 million.
5. Full forgiveness:
   1. This will still require the same 60/40 allocation between payroll and non-payroll costs or the same rule in place for PPP loan – Round one.

Help for borrowers with an existing SBA Loan:

The second stimulus signed into law in late December 2020 includes help for business buyers with an SBA loan. There is also help for new borrowers but let us cover those borrowers with an existing SBA loan.

Extension of SBA loan Payments:

1. The second stimulus bill extends $3.5 billion in funding to extend SBA loan payments to September 30, 2021.
2. This includes the payment of principal & interest (P&I) on SBA loans guaranteed by the SBA under the 7(a)/504 established under the CARES Act that was signed into law in March 2020.
3. All borrowers with qualifying loans approved by the SBA before the CARES Act will receive an additional three months of P&I, starting in February 2021. Going forward, those payments will be capped at $9,000 per borrower per month.
4. After the three months described above, borrowers considered to be underserved will receive an additional five months of P&I payments, also capped at $9,000 per borrower per month.
   1. This includes borrowers with any 7(a) or 504 loan in the hardest-hit sectors, as measured by the severity of sector-wide job losses since the start of the pandemic: accommodation and food services (72); arts, entertainment, and recreation (71); educational services (61); mining and logging (213); apparel (315); clothing and clothing accessory stores (448); sporting goods, hobby, book, and music stores (451); air transportation (481); transit and ground passenger transportation (485); scenic and sightseeing transportation (487); publishing industries, except Internet (511); motion picture and sound recording industries (512); broadcasting, except Internet (515); rental and leasing services (532); and personal and laundry services (812).
5. The government will pay SBA payments of P&I on the first 6 months of newly approved SBA loans approved between February 1 and September 30, 2021, also capped at $9,000 per month.

Help for borrowers of a new SBA Loan:

One important piece of the bill is that for new SBA 7(a) and 504 loans, borrowers will not have to pay the 7(a)-guaranty fee for loans funded by Sept. 30, 2021. See also: 10 Reasons An SBA Loan May Be Declined.

Other changes are possible as the SBA needs to interpret the new laws. What happens if I defaulted on an SBA Loan?

See also: Sell My Business With A Pending PPP Loan | What Is My Best Option

Is the time right to value and sell your California business?

Selling any business whether it’s in manufacturing, healthcare, construction or any other industry is never easy and straightforward.

The first step, if this is something you are considering doing is to get a business valuation.  If you would like to learn more about how to value your business, simply go to this page on my website – Successfully valuing your business.  If you would like to know the value of your business, this is a service we provide.  To prepare a personal business valuation for you we would need the last 3 years’ tax returns of the business, a recent Profit and Loss Statement, and a Balance Sheet.  Here is a link to see a Sample Business Valuation.

Perhaps you are a Do It Yourselfer and would prefer to learn the steps to value your business.  We have that option for you and this link will start you on the Steps to Value Your Business.

Contact Us to value and sell your business

If you have questions about the value of your business or the steps it takes to sell a business, use the “Contact Us” page to introduce yourself and we will get back to you.