Covid- Loans

Updated 5/13/2020

The following loans are available for Covid Relief.  Note that the links, applications, and calculation methods are fluid.  (We have noted questions in red.) 

New guidelines released today 5/13/2020 provide information on the certification required for PPP loan applications.  

*Question: How will SBA review borrowers’ required good-faith certification concerning the necessity of their loan request?

Answer: When submitting a PPP application, all borrowers must certify in good faith that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.”

SBA, in consultation with the Department of the Treasury, has determined that the following safe harbor will apply to SBA’s review of PPP loans with respect to this issue:

Any borrower that, together with its affiliates, received PPP loans with an original principal amount of less than $2 million will be deemed to have made the required certification concerning the necessity of the loan request in good faith.

SBA has determined that this safe harbor is appropriate because borrowers with loans below this threshold are generally less likely to have had access to adequate sources of liquidity in the current economic environment than borrowers that obtained larger loans.

This safe harbor will also promote economic certainty as PPP borrowers with more limited resources endeavor to retain and rehire employees.

In addition, given the large volume of PPP loans, this approach will enable SBA to conserve its finite audit resources and focus its reviews on larger loans, where the compliance effort may yield higher returns.

*The newly updated PPP FAQ document can be found online at the US Treasury website here. 

1. PPP (Paycheck Protection Program) - administered by banks, who are approved SBA lenders.  Most began accepting applications on 4/6/2020. 

Here is the latest version of the links and information we have about these loans and calculations, according to the US Treasury. 

Please contact your bank to apply - using the latest version of the application that your bank is using. (Sources online have different versions.) 

Here is the application form as listed on the US Treasury website, note that this application has recently been revised to consider the EIDL loans. 

Eligibility 

  • Small businesses with less than 500 employees
  • Sole proprietorships, independent contractors and self-employed persons
  • 501(c)(3) non-profit organizations
  • Certain veterans organizations
  • Tribal businesses

Businesses with Employees

  • This is a forgivable loan, designed to keep people employed.
  • The loan amount is based on 2.5 times average monthly payroll costs. The definition of payroll costs includes gross payroll and state employer taxes, as well as benefits paid to employees.  The time frame used to calculate "average monthly payroll" varies depending on your business type (seasonal or not?)  and initial formation date of your business. 
  • Earnings over $100,000 per employee (not including benefits for this limitation) are excluded in the loan calculation and in the forgiveness calculation. (It is unclear if payroll includes guaranteed payments to owners, K-1 pass-thru earnings, or S corporation owner salaries up to $100,000.) 
  • Payments an employer makes to independent contractors (paid by 1099)  are not considered by the employer as self-employed individuals are able to file for their own PPP loans directly. 

4/7 federal employer taxes are excluded per Question 16 in the FAQ released today . It is unclear at this time whether federal employer taxes are included (some sources say they are.) 

Self- Employed Individuals 

  • Please contact your bank to apply beginning April 10, 2020 using the latest version of the application that your bank is using. (Sources online have different versions.) 
  • This is a forgivable loan, designed to keep self-employed persons afloat. 
  • The loan amount is based on self-employment earnings up to $100,000.  (It is unclear how pass-through earnings from K-1's and partner guaranteed payments will be treated.)

Forgiveness Amount

The amount of the loan that can be forgiven is based on expenditures in the 8 week period after disbursement of the loan.  

Includes payments for:

  • Payroll costs - as defined above  or self-employment earnings for self-employed individuals  
  • Rent (including leases)
  • Mortgage interest payments
  • Utilities 

Portion of Loan Not Forgiven

A portion of the loan will not be forgiven if you do not maintain your staff and payroll based on these criteria: 

  • Number of Staff: Your loan forgiveness will be reduced if you decrease your full-time employee headcount.  (Not clear if this is full time equivalents (FTE) or actual full-time only headcount.)
  • Level of Payroll: Your loan forgiveness will also be reduced if you decrease salaries and wages by more than 25% for any employee that made less than $100,000 annualized in 2019. (Not clear if is this specific to named, individual employees or applies in total.) 
  • Re-Hiring: You have until June 30, 2020 to restore your full-time employment and salary levels for any changes made between February 15, 2020 and April 26, 2020.

According to Treasury, only 25% of the loan can be used for non-payroll costs in the 8 week period. 

 

2. EIDL (Economic Injury Disaster Loans)  and 10,000 grant - these are administered by the SBA directly. 

These loans are available directly from the SBA via an online application form. 

The application process (if filed after 3/30/2020) also includes a question about applying for a maximum $10,000* grant related to economic injury.  If you applied prior to this date, you should be contacted by the SBA for clarification.  (*Revised to be $1000 per employee up to $10,000.)

Initially farms were excluded from eligibility, but according to the SBA on 4/2/2020, wineries with farms are eligible. 

Eligibility

  • Small business with less than 500 employees
  • Sole proprietorships, independent contractors and self-employed persons
  • Private non-profit organizations
  • 501(c)(19) veterans organizations 

Businesses

  • Apply on the SBA website.  This is the latest link we have.  
  • The loan amount is based on economic injury which will be based on the decrease in your gross receipts.  

Self-Employed Individuals 

  • Apply on the SBA website.  This is the latest link we have.  

The loan amount is based on economic injury which will be based on the decrease in your gross receipts.  

Non Profits

  • Apply on the SBA website.  This is the latest link we have.  
  • The loan amount is based on economic injury which will be based on the decrease in your gross receipts.  

Grants to Applicants

The EIDL application includes a checkbox to accept a $10,000 grant as part of your application. Be sure to check the box. 

 

The CARES Act text says only 501c(3) entities are eligible, these rules appear to be broadening.  Apply if you are in doubt.  

The rules have changed daily regarding a business's ability to have both loans.  Consult your banker or SBA lender for the latest rules on this.