Small Business Aid during Covid-19

The Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, has been signed into law by the President and includes loans for small businesses, which may be entirely forgiven under certain circumstances.  The ACT is intended to provide funding for 2.5 months of eligible payroll costs, plus additional amounts to refinance any loans taken out under the Small Business Administration’s economic injury disaster program between January 31, 2020 and the date on which a covered loan is made available.  In response to the Coronavirus (COVID-19) pandemic, small business owners in all U.S. states, Washington D.C., and territories are eligible to apply for an Economic Injury Disaster Loan advance of up to $10,000 if they were substantially affected by CoVID-19, examples being:

Supply chain disruptions, including quantity and lead time, delay in shipments, shortage of supply, staffing challenges, decrease in sales or customers and shuttered business.

This advance will provide economic relief to businesses that are currently experiencing a temporary loss of revenue. Funds will be made available within three days of a successful application. This loan advance will not have to be repaid, provided the correct and complete Certificate of forgiveness is filed and approved.

Not only will the Small Business Administration be receiving and approving the loans so will authorize Small Business Administration Lenders such as Banks. 

In general, all small business concerns as defined by the Small Business Administration guidelines, including, sole proprietors, independent contractors and eligible self-employed individuals, with less than 500 employees are eligible for the loan. Municipalities do not qualify for this loan.   I know we have several restaurants within the Borough.  Based on this I also wanted to state that food services sectors with no more than 500 employees per physical location are also eligible for a loan.   There are also other loans available, but with interest, and must be repaid.  Eligible payroll costs do not include compensation of an individual employee in excess of an annual salary of $100,000 as prorated for the covered period.   

Loans issued under this Act are (i) unsecured, (ii) not subject to personal guarantees (but may be subject to recourse if the proceeds are used for an unauthorized purpose) or pre-payment penalties, and (iii) accrue interest at a rate not to exceed 4%. Payments of principal, interest and fees will be subject to deferral for a period of not less than six months and not more than one year. Amounts that are not forgiven under the loan forgiveness provisions of the CARES Act will have a term of up to 10 years from the date the borrower applies for loan forgiveness.

In determining the eligibility of a borrower for a loan under this ACT, a lender shall consider whether the applicant was in operation on February 15, 2020 and had employees for whom the applicant paid salaries and payroll taxes or paid independent contractors as reported on a Form 1099-MISC.

Allowable uses for the funds may include eligible payroll costs as well as costs related to continuation of health care benefits during periods of sick, medical or family leave, and insurance premiums; payments of interest on any mortgage obligation (but not for payments of principal); rent; utilities; and interest on any other debt obligations that were incurred before February 15, 2020.   

 

Loan Forgiveness & Procedures:

As stated earlier, any Business that cannot pay the $10,000 loan back will be required to make a good faith certification that the uncertainty of the current economic conditions makes the loan necessary to support its ongoing operations and acknowledge that the funds will be used to retain workers and maintain payroll or make mortgage payments, lease payments and utility payments.

The amount of loan forgiveness may not exceed the principal amount of the loan. In addition, the amount of loan forgiveness will be reduced if there is an employee headcount reduction or a salary reduction in excess of 25% during the 8-week covered period as compared to prior periods.  If a Borrower “reverses” any headcount or salary reductions prior to June 30, 2020, the Borrower’s eligibility for loan forgiveness may be preserved. Borrowers will be required to provide additional documentation to substantiate their eligibility for loan forgiveness.
Any Business that accepts a loan and would like forgiveness they MUST file a Certification requesting loan forgiveness.  No forgiveness will be given without filing this Certification.  No later than 15 days after the filing of the Certification you must be given an answer.

 

 

 

Summary:

The Small Business Administration provides debt relief to small businesses as they overcome the challenges created by this health crisis known as CoVID-19.

Apply for the Loan Advance here:     https://covid19relief.sba.gov/#/  This link (copy and paste in browser) will take you to the actual loan document.  This must be done online unless you file it with a Small Business Administration participating lender, perhaps a Bank.   Your bank will be able to tell you if they participate or not.  Some banks that have always done Small Business Administration Loans might not participate with this one. 

The funds can only be used for employee salaries, mortgage payments, rent, utilities and any other debt obligations that were incurred before the covered period which is March 1st, 2020 ending June 30th, 2020.

Once an application is submitted the lender has 15 days to respond.

Some business might be able to defer loan payments made to the small business administration, however, due to the legal issues regarding this offering the business owner should review this personally with either their attorney or the small business administration or lender directly.

Businesses may also push off paying payroll taxes, however there are exceptions to this rule so be sure to check with your accountant or payroll service.

For more information:

Contact the SBA disaster assistance customer service center at 1-800-659-2955 (TTY: 1-800-877-8339) or by e-mail at disastercustomerservice@sba.gov

 

CORONAVIRUS EMERGENCY LOANS

SMALL BUSINESS GUIDE AND CHECK LIST

Known as the Paycheck Protection Program, the CARES act provides 100% federally guaranteed loans to small businesses that maintain their payroll during this emergency. Importantly, these loans may be forgiven if borrowers maintain their payrolls during the crisis or restore their payrolls afterward.

AM I ELIGIBLE?

According to the CARES act, you are eligible if you are:

  • A small business with fewer than 500 employees
  • A small business that otherwise meets the SBA’s size standard
  • A 501(c)(3) with fewer than 500 employees
  • An individual who operates as a sole proprietor
  • An individual who operates as an independent contractor
  • An individual who is self-employed who regularly carries on any trade or
    business
  • A Tribal business concern that meets the SBA size standard
  • A 501(c)(19) Veterans Organization that meets the SBA size standard

 

 

 

WHAT WILL LENDERS BE LOOKING FOR?

In evaluating eligibility, lenders are directed to consider whether the borrower was in operation before February 15, 2020, and had employees for whom they paid salaries and payroll taxes or paid independent contractors.

Lenders will also ask you for a good faith certification that:

  1. The uncertainty of current economic conditions makes the loan request necessary to support
    ongoing operations
  2. The borrower will use the loan proceeds to retain workers and maintain payroll or make mortgage,
    lease, and utility payments
  3. The borrower does not have an application pending for a loan duplicative of the purpose and
    amounts applied for here
  4. From Feb. 15, 2020, to Dec. 31, 2020, the borrower has not received a loan duplicative of the
    purpose and amounts applied for here (Note: There is an opportunity to fold emergency loans
    made between Jan. 31, 2020 and the date this loan program becomes available into a new loan)

 

HOW MUCH CAN I BORROW?

Loans can be up to 2.5 x the borrower’s average monthly payroll costs, not to exceed $10 million.

NON SEASONAL EMPLOYERS: Maximum loan = 2.5 x Average total monthly payroll costs incurred during the year prior to the loan date. For businesses not operational in 2019: 2.5 x Average total monthly payroll costs incurred for January and February 2020

SEASONAL EMPLOYERS: Maximum loan = 2.5 x Average total monthly payments for payroll costs for the 12-week period beginning February 15, 2019, or March 1, 2019 (decided by the loan recipient) and ending June 30, 2019.

 

WILL THIS LOAN BE FORGIVEN?

A borrower is eligible for loan forgiveness equal to the amount the borrower spent on the following items during the 8-week period beginning on the date of the origination of the loan:

  • Payroll costs (using the same definition of payroll costs used to determine loan eligibility)
  • Interest on the mortgage obligation incurred in the ordinary course of business
  • Rent on a leasing agreement
  • Payments on utilities (electricity, gas, water, transportation, telephone, or internet)
  • For borrowers with tipped employees, additional wages paid to those employees

 

 
  Applying for a Paycheck Protection Program Loan
 What is the process to apply for a loan through the Paycheck Protection Program?
A small business should apply for a loan directly from an approved 7(a) lender that has opted to participate in the Paycheck Protection Program. Within 15 days of the enactment of the CARES Act, the SBA Administrator will be issuing guidance and regulations implementing the Paycheck Protection Program.

Additionally, the Treasury Department will be issuing regulations providing criteria under which new lenders may be eligible to make loans under the Paycheck Protection Program.

How do I find an already approved 7(a) lender?

Lenders authorized to issue SBA 7(a) loans and that opt into the Paycheck Protection Program will be authorized to issue loans under the program. We recommend reaching out first to existing lenders to determine whether any are already approved 7(a) participants.

A borrower can also contact its local SBA office to find a list of approved 7(a) lenders in their area. In addition, SBA maintains a list of the 100 most active SBA lenders in the country.