Posted on 04/01/2020 11:51:27 AM PDT by TheConservator
Has your business or non-profit been adversely impacted by the COVID-19 shut-down or slow-down? Will you be able to pay your employees? Or the rent? Will you be able to pay yourself? Congress is trying to help by giving away quite a bit of free money, and that should get your attention.
There are still details to be worked out about how these new plans will be implemented, but here’s some initial info:
The first and quickest option for relief is an Economic Injury Disaster Loan (EIDL) from the Small Business Administration. You can borrow funds necessary to meet expenses and obligations that could have been met had the Coronavirus not occurred.
You can apply online, and should receive an answer if you are approved in 2-3 weeks. You don’t have to accept the loan, so there’s no harm in applying.
But here’s the sweetener: You can request up to $10,000 as an Emergency Economic Injury Grant. That does not have to be repaid if used for payroll or rent. The grant is often approved even if you don’t meet the loan qualifications, and it can come to you in 3 days. Many small businesses will qualify and should apply for this.
Additionally, up to $2M can be obtained as a loan. There are other limitations with this loan plan, so not everyone qualifies. There is a limited pool of funds available, so this application needs to be done ASAP before the funds are all claimed.
Click here for more SBA info: https://www.sba.gov/funding-programs/disaster-assistance Here’s the on-line application: https://covid19relief.sba.gov/#/
Congress also created the Paycheck Protection Program (PPP), which has a larger pool of funds available to loan, $349B. Now don’t dismiss this because you don’t want to have a loan, keep reading.
Personal guarantees or collateral are not required, and there are no loan application fees. You can get a loan for 2.5 months of your historical average payroll and benefits costs. This includes the owner’s compensation if you are self-employed. (Maximum compensation rate allowed is $100K annually per employee.)
If the loans are indeed used for eligible payroll costs (up to 25% of the loan may also be used for other business expenses including rent, utilities, mortgage interest, and interest on certain equipment loans), then you can apply for the entire loan to be forgiven after 8 weeks. This effectively turns the loan into a grant.
The amount that can be forgiven in this program is reduced proportionately by any staff reductions you have from Feb 29 levels. So if your FTE count goes from 4 to 3, the amount of the loan that can be forgiven is reduced by 25%. If you re-hire employees before April 26, they won’t count against you. If your pay rates decrease, that too can reduce your forgiveness %. There is strong incentive to return to and maintain earlier staffing levels. The government would rather pay you to keep people on payroll than have them go on unemployment.
The Dept of the Treasury released application forms for the PPP today, and you may be able to apply as soon as April 3. Here’s a link to the SBA’s website: https://www.sba.gov/funding-programs/loans/paycheck-protection-program-ppp
Be sure to talk to your local bank or credit union right away. They’ll be the one processing these loans, and they can give you additional guidance about the loan application as it becomes available to them.
The PPP loan and forgiveness program is contingent upon, can you honestly make this declaration in the loan application? “Current economic uncertainty makes the loan necessary to support your ongoing operations.” Do you need working capital now? Are you concerned that your revenue source over the next 2-3 months is at risk, putting you in a situation where you would take out a loan? If you can affirm that need, then help is available.
On the other hand, your circumstances may not be that tight. Some businesses are holding their own so far. So Congress came up with an alternative benefit, in the form of an Employee Retention Credit. They are again trying to support employers who continue to pay their staff, rather than sending them to collect unemployment.
In some circumstances this credit may work better than the PPP loan forgiveness plan. Generally they’ll give you back 50% of the wages you pay after March 12 up until December 31, 2020, up to $5,000 max credit per employee, if the wages are paid during a quarter in which your business operations are at least partially suspended due to government orders. You’re also eligible if your revenues for a quarter are at least 50% below the comparable prior year figures, and remain so until such time as quarterly receipts exceed 80% of the prior year amounts. This program covers employee wages; self-employeds will not get the credit for their own draws. Finally, you have to choose - if you get a PPP loan, you can’t take this credit.
This is a very early analysis, and more details will emerge in the days to come.
Thank you for posting this explanation. I am a total dummy in this area.
And even then, it is still a loan until the business owner proves the proceeds were used to pay rent and salaries - proof that can be disallowed if the government is suddenly short on funds.
All of the paperwork and proof burden remains on the borrower. Given the time frame, employees still have to be furloughed first - and then brought back later once the government gets its act together.
[MSM is blind to anything that is not their Trump hating agenda....]
That’s for sure.
“All you have to do is pass an OSHA exam first...”
Can we imagine the fine print hooks in those loans? OSHA inspections, eh? How about hiring practices? Union formation? “Anti-discrimination” requirements? Personal leaves? SJW HR on steroids, I’ll bet.
This is about fed grabbing as much equity in and control of American businesses as it can. And what a GREAT opportunity this is!
NEVER let a crisis go to waste.
Who here trusts our government?
>>>I have rental properties and some of my renters will not be able to pay rent for a while, but I still have to pay the mortgages, would I be eligible?
I don’t know if you are eligible for PPP, but your lender will likely offer a forbearance that means you will not have to pay on your mortgage for several months. It’s worth a call, though you might be on hold for a while.
>>>won’t even be ready until Friday, and then who knows how long it will actually take to actually process the millions of applications and fund the loans? May? June?
Processing and funding should be quick. The only thing the banks have to do is confirm the business was operating on February 15 and how much employee payroll costs amount to.
Some of the big coops and dairies are telling the dairy farmers to dump their milk. The government will pay them for it.
It sounds like a rip off.
A friend of mine dumped over $100,000 of milk down the drain in the past two days. Several tractor trailer loads.
I applied through my bank, but all I was able to do is to leave basic information about my company and an email address and phone number for them to contact me because the program is not yet “set up “online. With banks closed other than Drive through windows, it appears that the whole process will be online. They are hoping to get it up and running very soon, but that is all I know.
Here is a link to the SBA Owner’s Guide to the Cares Act.
My Senator sent it to me earlier today.
I’m studying it in detail as my phone is ringing off the hook with questions. Time for this CPA to come out of retirement.
It appears that the loan forgiveness includes up to $100,000 for owner wages....
I’m especially trying to find out about related party transaction rules where affiliated companies own the real estate and collect rents....
Wait. What?
I wonder how they will determine that, especially if it is all done online.
Answer:
• Businesses and entities must have been in operation on February 15, 2020.
• Small business concerns, as well as any business concern, a 501(c)(3) nonprofit organization, a 501(c)(19) veterans organization, or Tribal business concern described in section 31(b)(2)(C) that has fewer than 500 employees, or the applicable size standard in number of employees for the North American Industry Classification System (NAICS) industry as provided by SBA, if higher.
• Individuals who operate a sole proprietorship or as an independent contractor and eligible self-employed individuals.
• Any business concern that employs not more than 500 employees per physical location of the business concern and that is assigned a NAICS code beginning with 72, for which the affiliation rules are waived.
• Affiliation rules are also waived for any business concern operating as a franchise that is assigned a franchise identifier code by the Administration, and company that receives funding through a Small Business Investment Company.
QUESTION: What are affiliation rules?
Answer: Affiliation rules become important when SBA is deciding whether a business’s affiliations preclude them from being considered “small.” Generally, affiliation exists when one business controls or has the power to control another or when a third party (or parties) controls or has the power to control both businesses. Please see this resource for more on these rules and how they can impact your business’s eligibility.
QUESTION: What types of non-profits are eligible?
Answer: In general, 501(c)(3) and 501(c)(19) non-profits with 500 employees or fewer as most nonprofit SBA size standards are based on revenue, not employee number. You can check here.
QUESTION: How is the loan size determined?
Answer: Depending on your business’s situation, the loan size will be calculated in different ways (see below). The maximum loan size is always $10 million.
• If you were in business February 15, 2019 – June 30, 2019: Your max loan is equal to 250 percent of your average monthly payroll costs during that time period. If your business employs seasonal workers, you can opt to choose March 1, 2019 as your time period start date.
• If you were not in business between February 15, 2019 – June 30, 2019: Your max loan is equal to 250 percent of your average monthly payroll costs between January 1, 2020 and February 29, 2020.
• If you took out an Economic Injury Disaster Loan (EIDL) between February 15, 2020 and June 30, 2020 and you want to refinance that loan into a PPP loan, you would add the outstanding loan amount to the payroll sum.
QUESTION: What costs are eligible for payroll?
Answer: • Compensation (salary, wage, commission, or similar compensation, payment of cash tip or equivalent)
• Payment for vacation, parental, family, medical, or sick leave
• Allowance for dismissal or separation
• Payment required for the provisions of group health care benefits, including insurance premiums
• Payment of any retirement benefit
• Payment of State or local tax assessed on the compensation of employees
QUESTION: What costs are not eligible for payroll?
Answer:
• Employee/owner compensation over $100,000
• Taxes imposed or withheld under chapters 21, 22, and 24 of the IRS code
• Compensation of employees whose principal place of residence is outside of the U.S.
• Qualified sick and family leave for which a credit is allowed under sections 7001 and 7003 of the Families First Coronavirus Response Act
QUESTION: What are allowable uses of loan proceeds?
Answer:
• Payroll costs (as noted above)
• Costs related to the continuation of group health care benefits during periods of paid sick, medical, or family leave, and insurance premiums
• Employee salaries, commissions, or similar compensations (see exclusions above)
• Payments of interest on any mortgage obligation (which shall not include any prepayment of or payment of principal on a mortgage obligation)
• Rent (including rent under a lease agreement)
• Utilities
• Interest on any other debt obligations that were incurred before the covered period
Answer:
For any amounts not forgiven, the maximum term is 10 years, the maximum interest rate is 4 percent, zero loan fees, zero prepayment fee (SBA will establish application fees caps for lenders that charge).
QUESTION: How is the forgiveness amount calculated?
Answer:
Forgiveness on a covered loan is equal to the sum of the following payroll costs incurred during the covered 8 week period compared to the previous year or time period, proportionate to maintaining employees and wages (excluding compensation over $100,000):
• Payroll costs plus any payment of interest on any covered mortgage obligation (not including any prepayment or payment of principal on a covered mortgage obligation) plus any payment on any covered rent obligation plus and any covered utility payment.
QUESTION: How do I get forgiveness on my PPP loan?
Answer:
You must apply through your lender for forgiveness on your loan. In this application, you must include:
• Documentation verifying the number of employees on payroll and pay rates, including IRS payroll tax filings and State income, payroll and unemployment insurance filings.
• Documentation verifying payments on covered mortgage obligations, lease obligations, and utilities.
• Certification from a representative of your business or organization that is authorized to certify that the documentation provided is true and that the amount that is being forgiven was used in accordance with the program’s guidelines for use.
QUESTION: What happens after the forgiveness period?
Answer:
Any loan amounts not forgiven are carried forward as an ongoing loan with max terms of 10 years, at a maximum interest rate of 4%. Principal and interest will continue to be deferred, for a total of 6 months to a year after disbursement of the loan. The clock does not start again.
QUESTION: Can I get more than one PPP loan?
Answer:
No, an entity is limited to one PPP loan. Each loan will be registered under a Taxpayer Identification Number at SBA to prevent multiple loans to the same entity.
QUESTION: Where should I go to get a PPP loan from?
Answer:
All current SBA 7(a) lenders (see more about 7(a) here) are eligible lenders for PPP. The Department of Treasury will also be in charge of authorizing new lenders, including nonbank lenders, to help meet the needs of small business owners.
QUESTION: How does the PPP loan coordinate with SBA’s existing loans?
Answer:
Borrowers may apply for PPP loans and other SBA financial assistance, including Economic Injury Disaster Loans (EIDLs), 7(a) loans, 504 loans, and microloans, and also receive investment capital from Small Business Investment Corporations (SBICs). However, you cannot use your PPP loan for the same purpose as your other SBA loan(s). For example, if you use your PPP to cover payroll for the 8-week covered period, you cannot use a different SBA loan product for payroll for those same costs in that period, although you could use it for payroll not during that period or for different workers.
QUESTION: How does the PPP loan work with the temporary Emergency Economic Injury Grants and the Small Business Debt Relief program?
Answer:
Emergency Economic Injury Grant and Economic Injury Disaster Loan (EIDL) recipients and those who receive loan payment relief through the Small Business Debt Relief Program may apply for and take out a PPP loan as long as there is no duplication in the uses of funds. Refer to those sections for more information.
We are in contact with our bank. A big bank. Rhymes with LACE. They have no clue how this is all going to work out.
I did this for both my businesses. Well, one is more of a hobby buying and selling antiques, but has a hefty rent payment.
For the main business I’ve been paying my employees full salaries with medical benefits even though they aren’t able to do much. The bank account will be getting pretty low in the next few weeks, but only because customers aren’t paying because they are shut down also.
Landlord is livid that he didn’t get his rent this month.
I hope this relief comes soon. Any unused amounts will be paid back immediately (I hate debt).
While I usually disagree with most government handouts, this shutdown was done by government (with or without good cause). If they actually turn the salary and rent portion into grants. I’ll take it.
This will save a lot of our small businesses, and it will be the finest thing government ever did for our economy.
“They have no clue how this is all going to work out.”
Just like Obamacare.
Already applied for EIDL and sent application form and supporting documents for PPP to my banker via email to be ready friday.
Our banker gave us info a few days ago. We’ll be ready.
Unlike Obamacare, a federally administered mess, this will be done by local FDIC insured banks.
First time I saw this. Just went and copy pasted the address, went into the site, easily maneuvered through the application, super easy format, It asked for Gross Income, Cost of Goods Sold. asked if I were interested in a $10,000.00 advance. filled out bank routing number and account number and hit submit, produced an application number and now we wait and see! 8)
What if you have not only employees to pay, but a farm with hundreds of animals to feed?
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