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The Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, provides $349 billion for small business Paycheck Protection Program Loan and an additional $10 billion for the existing Economic Injury Disaster Loan and Emergency Economic Injury Grants program – but which one is right for you?

WHICH PROGRAM IS RIGHT FOR YOU?

Do you need capital to cover the cost of retaining employees?  Apply for the Paycheck Protection Program.

Do you need a quick infusion of a smaller amount of cash to cover you right now?  Apply for the Emergency Economic Injury Grant.

Do you need to ease your fears about keeping with payments on your current or potential SBA loan?  Contact your lender and request the Small Business Debt Relief Program.

 

What Are The Benefits Of The Paycheck Protection Program (PPP) Loan

  • 100% Federally Guaranteed Loan: Cash-flow assistance through 100% federally guaranteed loans to employers who maintain their payroll during this emergency.
  • Loan Forgiveness: The portion of this loan that is utilized for payroll costs, interest on mortgage payments, rent, and utilities can be forgiven.
  • Fee Free: SBA fees are waived for these loans.

Is My Business Eligible?

If you operate a business within one of the following criteria, you’re eligible:

  • Businesses and entities must have been in operation on or before February 15, 2020;
  • Small businesses that have fewer than 500 employees;
  • Sole proprietors, independent contractors, and eligible self-employed individuals;
  • Small businesses that have fewer than 500 employees per physical location that is assigned an NAICS code beginning with 72, for which the affiliation rules are waived;
  • 501(c)(3) nonprofit organizations;
  • 501(c)(9) veterans organizations;
  • Tribal businesses as described in section 31(b)(2)(C) that have fewer than 500 employees
  • Businesses within the applicable size standard in number of employees for the North American Industry Classification System (NAICS) industry as provided by the SBA;
  • Affiliation rules are also waived for any business operating as a franchise that is assigned a franchise identifier code by the SBA

How Is the Loan Amount Determined?

  • If You Were in Business Between February 15, 2019 – June 30, 2019: Your maximum loan is equal to 250% of your average monthly payroll costs during the 1-year period before the date on which the loan is made.  If your business employs seasonal workers, you can opt for the 12-week period beginning February 15, 2019, or at the election of the eligible recipient, March 1, 2019, and ending June 30, 2019.
  • If You Were Not in Business Between February 15, 2019 – June 30, 2019: Your maximum loan is equal to 250% 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 – June 30, 2020: If you want to refinance that loan into a PPP loan, you would add the outstanding loan amount to the payroll sum.
  • The maximum loan amount is, for all applicants, $10 Million.

What Do They Mean by Average Monthly Payroll Cost?

The Average Monthly Payroll Costs Includes:

  • 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
  • The Average Monthly Payroll Costs Do NOT Include:
    • Employee/owner compensation over $100,000
    • Federal Insurance Contributions Act (FICA) tax
    • Railroad Retirement Tax Act (RRTA) tax
    • Income Tax at Source on Wages
    • 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 section 7001 and 7002 of the Families First Coronavirus Response Act

How Can the Loan Proceeds Be Used?

  • 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 (but not over $100,000)
  • Payments of interest on any mortgage obligation (which does NOT include 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 February 15, 2020

What Are the Loan Terms, Interest Rate, and Fees?

  • For any amounts not forgiven, the maximum term is 10 years.
  • For any amounts not forgiven, the maximum interest rate is 4%.
  • There are zero loan fees.
  • There are zero prepayment fees.

Wait, This Loan Can Be Forgiven?  How?

The forgiveness amount calculated on a covered loan is equal to the sum of the following:

  • Payroll costs incurred the covered eight week period compared to the previous year or time period (excluding compensation over $100,000)
  • Interest on any covered mortgage obligation (not including prepayment or payment of principal)
  • Rent
  • Utilities

You must apply through your lender for forgiveness on your loan and you must include, for an 8 week period between February 15, 2020 and June 30, 2020:

  • 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.

What Happens If A Part of My Loan Is Not Forgiven?

  • Any loan amounts not forgiven are carried forward as an ongoing loan.
  • The maximum loan term is 10 years.
  • The maximum interest rate is 4%.
  • Principal and interest will continue to be deferred, for a total of six months to a year after disbursement of the loan.

How We Can Help

  • Calculating your Average Monthly Payroll costs;
  • Completing the Paycheck Protection Program Application Form;
  • Coordinating with your lender or bank on your behalf for any additional information needed to process the loan;
  • Assisting you with gathering and/or calculating the information needed for the loan to be forgiven (i.e. calculating number of employee comparison, payroll costs, rent, utilities, and interest on mortgage/loan obligations).

What Are The Benefits Of The Economic Injury Disaster Loan (EIDL)

  • Emergency Advance: Provides an emergency advance of up to $10,000 to small businesses and private non-profits within three days of applying for an SBA Economic Injury Disaster Loan (EIDL).  To access the advance, you first apply for an EIDL and then request the advance.
  • No Repayment: The advance does not need to be repaid under any circumstances.
  • Keep Your Business Running: The funds may be used to keep employees on payroll, to pay for sick leave, meet increased production costs due to supply chain disruptions, or to pay business obligations such as debts, rent, and mortgage payments.

Is My Business Eligible?

If you operate a business within one of the following criteria, you’re eligible:

  • Sole proprietors, without employees or either 500 or fewer employees
  • Independent contractors
  • Cooperatives and employee owned businesses with 500 or fewer employees
  • Tribal small businesses with 500 or fewer employees
  • Private non-profits (with an effective ruling letter from the IRS) that are not principally engaged in teaching, instructing, counseling, or indoctrinating religion or religious beliefs, whether in a religious or secular setting, or primarily engaged in political or lobbying activities
  • Must have been in operation since January 31, 2020

Can I Get an EIDL and/or an Emergency Economic Injury Grant AND a PPP Loan?

The short answer, yes.  The more in depth answer is:

  • If you receive a PPP loan or refinance an EIDL into a PPP loan, any advance amount received under the Emergency Economic Injury Grant Program would be SUBTRACTED from the amount forgiven in the PPP.
  • You cannot use your EIDL for the same purpose as your PPP loan (i.e. if you use your EIDL to cover payroll for certain workers in April, you cannot use PPP for payroll for those same workers in April, although you could use it for payroll I March or for different workers in April).

How We Can Help

We can obtain the information from you to complete the application on your behalf and, as your authorized representative, communicate with the SBA regarding any additional information that may be needed.

What Are The Benefits Of The Small Business Debt Relief Program

  • Immediate Relief of Non-Disaster SBA Loans: This program will provide immediate relief to small businesses with non-disaster SBA loans, in particular 7(a), 504, and microloans.
  • SBA Coverage: SBA will cover all loan payments on these SBA loans, including principal, interest, and fees, for six months.

How Does This Debt Relief Work with A PPP Loan?

Businesses may separately apply for and take out a PPP loan, but debt relief under this program will not apply to a PPP loan.

How Do I Apply for The Small Business Debt Relief Program?

Contact your lender today to discuss The Small Business Debt Relief Program.

We are experts at navigating the CARES Act, click here to schedule your complimentary discover session with one of our specialists today.

Post Author: Edith DeCourcy, CEO

I am a Chief Financial Officer who is passionate about helping small businesses strategically scale and grow their organizations by understanding their options for optimizing cash flow, improving how they financially manage their business, and how to utilize their resources effectively. Skilled in Workflow Operations, Growth Management, Risk Management, and Organizational Development, I have dedicated over a decade of my career to helping companies drive better sustainable results in their business. As a small business owner myself, I share the very tactics and strategies that I practice on a daily basis in my own companies.