FEDERAL CARES ACT & Enhanced Recovery Stimulus

UPDATE 4/26/2020

Congress appropriated additional assistance for small businesses, address some concerns and direct additional resources to small institutions to help connect with small and rural businesses, and provide some assistance for SBA and hospitals and health providers. 

  • This second round of PPP loans may end up distributed even faster than the first as existing applications will be submitted first.
  • $60 billion dollars of the new PPP funds will be specifically set aside for small, medium, and community lenders to distribute.
  • The pool for Emergency Economic Injury Disaster (EIDL) grants increases by $10 billion and an additional $50 billion for EIDL loans. 

SBA PPP Interim Rules were updated on April 24, 2020, to touch on the following: 

  • Hedge Funds and Private Equity Firms are not eligible for PPP Loans
  • Some portfolio companies of private equity funds may be eligible for a PPP loan, using affiliation rules set forth by SBA and should carefully consider whether they can certify that “current economic uncertainty makes the loan request necessary to support the ongoing operations of the Applicant.”
  • A hospital that is otherwise eligible to receive a PPP loan as a business concern or 501(c)(3) will still be eligible, regardless of ownership by state or local government, if the hospital receives less than 50% of its funding from state or local government sources, not including Medicaid.
  • A business’s participation in an employee stock ownership plan (ESOP) does not result in an affiliation between the business and the ESOP.
  • An applicant is not eligible for a PPP loan if it is involved in a bankruptcy proceeding during the time it submits the application or at any time before the loan is disbursed
  • Applicants should keep in mind that the Borrower Application Form requires a certification that “current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” This is consistent with SBA’s publication of FAQ #31, which provides that, “although the CARES Act suspends the ordinary requirement that borrowers must be unable to obtain credit elsewhere, borrowers still must certify that their PPP loan request is necessary.”  It is anticipated that publicly traded companies will find it more difficult, if not impossible, to obtain a PPP loan during this second round of funding.

EXCERPTS FROM UPDATE 4/16/2020

SBA had issued a Lapse in Appropriations Notice:  SBA is unable to accept new applications at this time for the Paycheck Protection Program or the Economic Injury Disaster Loan COVID-19 related assistance program (including EIDL Advances) based on available appropriations funding.

SBA processed more than 14 years’ worth of loans in less than 14 days.  The Paycheck Protection Program is helping America’s small businesses through this challenging time; The EIDL program is also providing much-needed relief to people and businesses.  By law, the SBA may not issue new loan approvals once the programs experience a lapse in appropriations. 

In the interim, LEDBizloan.com remains an option, per Secretary Don Pierson of Louisiana Economic Development.  If a lending institution is not participating in the program currently, there remains capacity in the program. Lenders are encouraged to contact LED’s Kelly Raney for additional information (Kelly.raney@la.gov)

The Paycheck Protection Program (“PPP”) and Health Care Enhancement Act of 2020 (“PPP Act”) was signed into law on April 24, 2020, providing additional stimulus of $484 billion.

The House passed the $2.2 trillion CARES stimulus package and President Trump signed it into law, Friday, March 27, 2020.

Coronavirus Aid, Relief, and Economic Security Act

  • The CARES ACT legislation authorized one-time direct payments of $1,200 to most taxpayers and enhance unemployment benefits, extending such benefits for non-traditional recipients, like independent contractors.

  • The original CARES ACT created a $500 billion lending program for businesses, cities and states.
  • The original CARES ACT established a $367 billion fund for small businesses.

  • The original CARES ACT established an Employee retention tax credit. The tax credit is not available to those receiving the loans/forgiveness. 
The size of the stimulus package, along with Federal Reserve actions, is projected as an injection of about $6 trillion into the economy – or about 30% of annual gross domestic product.

Preliminary Interpretation

This information is offered as a summary introduction; we will be updating the site as additional regulations are issued and to improve clarity. This page will be under ongoing construction in order to best assist our businesses and communities of central Louisiana to improve mitigation, recovery, and strengthening. A Federal or State agency administering the enacted program(s) will always be the most accurate, best and final source.

SBA Disaster Customer Service Center can be reached at 1-800-659-2955 or (TTY: 1-800-877-8339) DisasterCustomerService@sba.gov.

UPDATE 5/18/2020

The Paycheck Protection Program (“PPP”) allows approved/receiving businesses the opportunity to apply for loan forgiveness.

The U.S. Department of Treasury has published the loan forgiveness application for the PPP program on its website, along with other COVID-19 information.

https://home.treasury.gov/system/files/136/3245-0407-SBA-Form-3508-PPP-Forgiveness-Application.pdf


RESOURCE BRIEFS FOR COVID-19 ASSISTANCE TO BUSINESSES

♦CARES Act – Loan Briefing 

→U.S. SMALL BUSINESS ADMINISTRATION LOANS (click for link)

In addition to Economic Injury Disaster Loans and its other, existing loan programs, the U.S. Small Business Administration (SBA) will guarantee loans through its 7(A) Loan Program under the CARES Act initially using existing certified lenders (certain banks/credit unions). SBA is advising loan applicants to be prepared with the following:

  • Tax Information Authorization (IRS Form 4506T), completed and signed by each principal or owner
  • Recent federal income tax returns
  • Personal Financial Statement (SBA Form 413)
  • Schedule of Liabilities listing all fixed debts (SBA Form 2202)
  • You may also need to provide profit and loss statements, recent tax returns, and balance sheets.

Recommended documents that businesses may want to gather while awaiting SBA regulations and lender guidance:

  • Payroll documentation for 8-week period, not before 2/15/2020
  • Employee healthcare expense for 8-week period, not before 2/15/2020
  • Evidence of mortgage/rent/lease agreement in force prior to 2/15/2020 and amount per month paid for 8-week period
  • Evidence of utilities paid for 8-week period, not before 2/15/2020 (consider water, sewer, gas, broadband, landline phone)
  • Substantiation of credit worthiness/credit score as basis of ability to repay 
      • NOTE: Kisatchie-Delta can pull a credit report at a cost of $25 per report, inclusive of 2 (two) major bureaus. To arrange, please email quint@kdelta.org. 
  • Comparison payroll documentation for 8-week period not before 2/15/2019
  • Evidence of last 2 years’ of complete business tax returns
  • Evidence of business ownership
NOTE: SBA is allowed to approve and offer stimulus loans based solely on an applicant’s credit score or “alternative appropriate methods” for determining an applicant’s ability to re-pay. Borrower limitations for SBA loans also include non-duplication of EIDL and PPP loan uses.

CaresGuide – US Senate Small Business Guide (pdf) click for download


PAYCHECK PROTECTION PROGRAM with Loan Forgiveness

PPP loans are intended to enable companies to retain employees and pay certain, eligible operational expenses incurred during the COVID-19 pandemic. The PPP eliminates many of the requirements of a typical SBA loan and expands the types of businesses that are eligible for relief. The SBA continues to provide official SBA Guidance regarding this program. 

SBA 7A LOAN (stimulus)

Eligibility:   small business, 501(c) (3), 501 (c)(19) veteran’s organization or Tribal business concern with not more than 500 employees.   Small businesses include sole-proprietors, independent contractors, and other self-employed individuals.
  small business or specified organizations<500 employees                  
 
·       affiliation rules for hospitality and restaurant industries, franchises in SBA’s Franchise Director, and small businesses receiving financing through the Small Business Investment Company program
·       allows multi-location small business applicants (under 500 employees) in certain industries and below annual receipts threshold in certain industries
·       waives borrower and lender fees, credit-elsewhere test, and collateral and personal guarantee requirements
·       assures no prepayment penalties, maximum interest of 4%, and treatment of any portion not forgiven to have a maturity of not more than 10 years
Covered period:   2/15/2020 – 6/30/2020
Loan amount:   7A is formula-based relative to 8-weeks’ worth of payroll support (employee salaries, paid/sick medical leave, insurance premiums), mortgage/rent, and utility payments
  formula based; maximum $10 mm eligibility based on formula of allowed working capital use; limit of approximately 250% of employer’s average monthly payroll
Term:   10 years maximum, after allowable deferment period of 6-12 months
Loan forgiveness:   subject to retaining employees, allowable uses of loan proceeds
Government guarantee:   100% through 12/31/2020

 

returning to 75% for loans exceeding $150,000

and returning to 85% for loans equal to or less than $150,000

Other concerns:   allows for 6-12 month deferment of loan payments, with SBA to issue guidance within 30 days to lenders (financial institutions/SBIC).
**HOW TO APPLYSBA 7A loans are accomplished with lending partners, typically financial institutions that have been accepted and approved as lenders. SBA will need to “stand up” these new programs, so consider using the link above, calling your banker, or checking back to this page for further updates.

All of the PPP docs can be accessed through the following link: https://home.treasury.gov/policy-issues/top-priorities/cares-act/assistance-for-small-businesses.

SBA Paycheck_Protection_Program_Application click here to download.

SBA Express Loan (CARES Act stimulus)

Maximum Loan: Maximum increased from $350,000 to $1 million through 12/31/2020

Special thanks to Donnie Wooley, Ark-La-Tex Financial Consultants and Board of Directors’ member of the National Rural Lenders Association, and Luke Letlow, former Chief of Staff for Congressman Ralph Abraham for contributing. 

Please check back; this page is under ongoing construction/edits.

US SBA ECONOMIC INJURY DISASTER

(ADVANCE) LOAN

→U.S. SMALL BUSINESS ADMINISTRATION – ECONOMIC INJURY DISASTER (ADVANCE) LOAN (EIDL)

In response to the Coronavirus (COVID-19) pandemic/national emergency declaration, small business owners are eligible to apply now for an Economic Injury Disaster Loan with advance of up to $10,000. 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 based on CARES ACT language — even if the loan is not approved.

The advance does not need to be repaid under any circumstance, and may be used to keep employees on payroll, to pay for sick leave, meet increased production costs due to supply chain disruptions, or pay business obligations, including debt, rent and mortgage payments. The $10,000 cash advance on the loan can be forgiven if spent on eligible use, including paying workers (including the business owner), all payroll costs (such as health insurance, retirement, state/local taxes), rent, utilities, other specific costs.

The Economic Injury Disaster Loan program allows small businesses to borrow up to $2 million to assist with certain working capital needs during this time for a loan term up to 30 years at 3.75% interest rate and payments deferred for 1-year. 

Borrowers may modify an EIDL loan request even after approval with a request for modification for eligible working capital use.  There is NO COST to apply for this loan.  Apply online at (https://www.sba.gov/disaster/apply-for-disaster-loan/index.html) or you can now fill out the downloadable application and upload it on the SBA website.

The completion of an application is anticipated to take more than 2 hours to complete and requires self-certification by the borrower on the veracity of the information submitted. 

Apply for the Loan Advance via SBA’s website.

Please check back; this page is under ongoing construction/edits.


US Small Business Administration Borrowers…

→U.S. SMALL BUSINESS ADMINISTRATION – SMALL BUSINESS DEBT RELIEF PROGRAM click for link

In response to the Coronavirus (COVID-19) pandemic, for existing SBA-loan borrowers, your SBA lender can defer your loan payments for 6 months and SBA may be able to make 6 months of payments on 504, 7A, and microloans to include principal, interest, and fees. Discuss this with your lender and visit SBA’s website for updated information as regulatory information becomes available.

Please check back; this page is under ongoing construction/edits.


 

♦CARES Act – Tax Information 

The U.S. Internal Revenue Service (IRS) publishes information online for individual and business programs, deadlines, and other information for general and Coronavirus-specific-programs online at: https://www.irs.gov/coronavirus.

The Treasury Department and the Internal Revenue Service today launched the Employee Retention Credit, designed to encourage businesses to keep employees on their payroll.  IF A BUSINESS HAS A US SMALL BUSINESS ADMINISTRATION LOAN RELATED TO THE CORONAVIRUS STIMULUS, IT CAN NOT TAKE the tax credit. Please review the fact sheet and press release online at: https://home.treasury.gov/news/press-releases/sms96.

IRS FAQ – Employee Retention Credit

The IRS has updated information available to advise businesses of the COVID-19-related Employee Retention Credit, with overviews, Frequently Asked Questions, and other related guidance.

https://www.irs.gov/newsroom/covid-19-related-employee-retention-credits-overview