We recently published an overview of small business COVID-19 assistance programs under the federal CARES Act. Since that time, there have been significant developments and changes impacting the application processes. Here’s what you need to know.
Paycheck Protection Program (“PPP”)
How do I apply?
Fill out the Borrower Application Form and send it to a participating lender. All existing certified SBA lenders are authorized to issue these loans starting April 3 – but, due to the quick legislative turnaround and administrative logistics, not all lenders are ready to take applications.
Contractors and self-employed individuals must wait an additional week to apply. They can submit applications starting April 10, according to recent Treasury Department guidance.
Finally, keep in close contact with your banker because the loan application processes are evolving. In some cases, businesses have had to re-apply due to lenders’ efforts to keep up with shifting SBA guidance.
How much can I get?
Your business may be able to obtain a loan up to 2.5x your average monthly payroll and other costs. Consult these PPP Loan Calculators published by the American Institute of CPAs.
What documents will my lender require?
The following is an example of documents your Paycheck Protection Program lender may require:
Copies of payroll tax reports filed with the IRS (including Forms 941, 944, state income and unemployment tax filing reports) for the entire year of 2019 and first quarter of 2020 (if available)
Copies of payroll reports for each pay period for the preceding 12 months. Such reports should include gross wages including PTO (which might include vacation, sick, and other PTO).This includes payroll reports through the pay period preceding the origination of the SBA loan
Documentation reflecting the health insurance premiums paid by the company under a group health plan including owners of the company for the immediately preceding 12 months prior to the date of the SBA loan origination
Documentation of all retirement plan funding by the employer for the immediately preceding 12 months
A detailed profit and loss statement for the year ended 2019 and YTD 2020
Economic Injury Disaster Loans & Emergency Grants (“EIDL”)
How do I apply?
Businesses can apply for EIDLs and emergency grants here.
As with the Paycheck Protect Program loans, keep in close contact with your banker because the loan application processes are evolving. In some cases, businesses have had to re-apply due to lenders’ efforts to keep up with shifting SBA guidance.
How much can I get?
Eligible businesses can get low-interest loans up to $2 million and emergency grants up to $10,000 given upon loan application.
Can I take out both a Paycheck Protection loan and an EIDL?
Yes. The CARES Act requires that Paycheck Protection borrowers make a good-faith certification that the funds:
Will be used to retain workers and maintain payroll or make mortgage payments, lease payments, and utility payments; and
During the period beginning on February 15, 2020 and ending on December 31, 2020, that [borrower] has not received amounts under this subsection for the same purpose and duplicative of amounts applied for or received under a covered loan.
So, as long as borrowers do not use Paycheck Protection and EIDL funds for the same purpose, the borrower can take out both loans. We recommend carefully segregating and tracking these funds to ensure compliance.
Express Bridge Loans
Eligible borrowers may be able to get an advance on EIDL funds up to $25,000. For more details, see the program page.
Small Business Debt Relief Program
This debt relief is automatic, but make sure to check with your lender to make sure.
The SBA has cautioned that additional guidance is still forthcoming on such essential issues as affiliation analysis, loan forgiveness, advance purchase for loans sold in the secondary market, and religious liberty protections under the PPP. It also remains uncertain whether small businesses with equity investors are eligible for the loans. Follow the SBA’s updates here. Be sure to stay current with the U.S. Department of the Treasury as well.
We at Messerli Kramer are dedicated to supporting you through the COVID-19 crisis. Check back frequently for updates.