Supporting Businesses and Individuals Through Uncertain Times
In response to the ongoing coronavirus public health crisis, the federal government has taken unprecedented steps to provide economic relief to individuals and businesses. Several programs have been created to ensure small businesses have the working capital they need to survive during this difficult time.
Loan programs available to help your business include:
- Paycheck Protection Program Loans: A $659 billion business loan program established by the CARES Act and implemented by the Small Business Administration to help small businesses, self-employed workers, sole proprietors and certain nonprofit organizations continue paying their workers. Available at a one percent interest rate for amounts generally up to the lesser of $10 million or 2 ½ times average monthly payroll for 2019, PPP loans can be used for payroll, benefits, mortgage interest, rent, utilities and other debt, and may be partially or fully forgiven if a business maintains its employee count and wage levels. The “Covered Period” for spending PPP loan funds was originally 8 weeks following loan disbursement, but on June 5, 2020 was extended to 24 weeks. The deadline to apply for a PPP loan was initially June 30, 2020, but on July 4, 2020 the deadline was extended to August 8, 2020. When the application period closed on August 8, 2020 $134 billion in funds remained unspent. To avoid making payments borrowers are required to apply for loan forgiveness within 10 months after the end of the borrower’s Covered Period.The Consolidated Appropriations Act, 2021 (the “CAA”), signed into law on December 27, 2020, included the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (“Economic Aid Act”) which re-opened the PPP with a new application deadline of March 31, 2021 and authorized additional funding of $284 billion. The CAA added certain new forgivable payroll and non-payroll expenses, and gives borrowers the flexibility to select any Covered Period of between 8 and 24 weeks. The CAA allows small businesses to apply for their first PPP loans largely under the program’s original rules, and also permits borrowers who received a PPP loan during the first round to apply for a second loan (“second draw loan”). Second draw loans have more restrictive eligibility requirements, as small businesses must substantiate a 25% reduction in revenue for any quarter in 2020 compared to the same quarter in 2019, and are capped at $2 million. Otherwise second draw loans are generally subject to the same rules that apply to first-time borrowers.
- Economic Injury Disaster Loans: An established Small Business Administration loan program that helps small businesses, independent contractors, nonprofit organizations and agricultural organizations overcome the loss of revenue during a declared disaster, including the COVID-19 pandemic. Loans carry an interest rate of 3.75% (2.75% for nonprofits) and can be used for payroll, benefits, working capital and other expenses. Loan amounts were originally up to $2 million and included an advance (“EIDL Advance”) of up to $10,000 that was automatically forgiven, but are now capped at $150,000, and funds for the EIDL Advance were fully allocated.The CAA also sets aside $20 billion in order to reopen the $10,000 EIDL grant program to allow more small businesses to receive assistance. If you previously applied for a grant but did not receive the maximum amount of $10,000, you will be able to reapply to receive the difference. Priority for the targeted EIDL grant will be given to small businesses that are located in a census tract area that is eligible for a New Markets Tax Credit; experienced at least a 30% reduction in revenue during an 8-week period between March 3, 2020 and December 31, 2020 compared to the similar 8-week period in 2019; and have no more than 300 employees. We will update this page when the SBA issues guidance and begins accepting applications.
Resources & News
Bennett Thrasher is dedicated to keeping you up to date on the many COVID-19 legislative measures and related resources available. Our articles below capture the latest news and insights.
- Paycheck Protection Program Frequently Asked Questions: The Small Business Administration (SBA), in consultation with the Department of the Treasury, intends to provide timely additional guidance to address borrower and lender questions concerning the implementation of the Paycheck Protection Program (PPP), established by section 1102 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), and amended by the Economic Aid Act. This document will be updated on a regular basis.
- Paycheck Protection Program – Interim Final Rule: The Paycheck Protection Program and loan forgiveness are intended to provide economic relief to small businesses nationwide adversely impacted under the Coronavirus Disease 2019 (COVID-19) Emergency Declaration (COVID-19 Emergency Declaration) issued by President Trump on March 13, 2020. This interim final rule, issued on January 6, 2021, outlines the key provisions of SBA’s implementation of section 1102 of the CARES Act in formal guidance and incorporates the Economic Aid Act amendments.
- Interim Final Rule on Second Draw Loans: This interim final rule, issued on January 6, 2021, implements the key provisions of section 311 of the Economic Aid Act, which allows PPP borrowers to take a second PPP loan or second draw loan.
- Interim Final Rule on Loan Forgiveness: This interim final rule, issued on January 19, 2021, consolidates prior rules related to forgiveness and reviews of PPP loans and incorporates changes made by the Economic Aid Act, including with respect to forgiveness of second draw loans.
- Form 3508 PPP Loan Forgiveness Application Form and Instructions: The “long-form” loan forgiveness application, revised January 19, 2021, is required to be used by borrowers who are not eligible to use either Form 3508S or Form 3508EZ.
- Form 3508S PPP Loan Forgiveness Application Form and Instructions: This simplified loan forgiveness application, revised January 19, 2021, requires only a one-page certification and may be used by eligible borrowers who received a PPP loan of $150,000 or less.
- Form 3508EZ PPP Loan Forgiveness Application Form and Instructions: This simplified loan forgiveness application, revised January 19, 2021, may be used by eligible borrowers who received a PPP loan exceeding $150,000 and certify that they either did not reduce the number of employees or the average paid hours of employees between January 1, 2020 and the end of the Covered Period (other than certain permitted exceptions) or were unable to operate between February 15, 2020 and the end of the Covered Period at the same level of business activity as before February 15, 2020 due to compliance with requirements established or guidance issued by HHS, CDC or OSHA.
- COVID Relief Package: Summary of Key Provisions Related to the Paycheck Protection Program: The long-awaited $900 billion COVID Relief Package was passed by the House of Representatives and approved by the Senate late on December 21, 2020. The legislation, headed to President Trump’s desk for his signature, includes important updates to the Paycheck Protection Program (PPP).
- SBA Intends to Request Loan Necessity Questionnaires from Large PPP Borrowers: On October 26, 2020, the Small Business Administration (SBA) published a notice seeking approval from the Office of Management and Budget (OMB) to release two new forms to supplement the loan forgiveness applications of larger PPP borrowers.
- SBA Clarifies Deferral Period for PPP Loans: The Paycheck Protection Program Flexibility Act (PPP Flexibility Act), enacted on June 5, 2020, made certain changes to the terms of PPP loans, including extending the deferral period for borrower payments of interest to the date the SBA remits the borrower’s loan forgiveness amount to the lender, or ten months after the end of borrower’s loan forgiveness covered period if the borrower does not apply for loan forgiveness.
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BT is Here to Help
Bennett Thrasher is here to offer the guidance and insights you need during the current pandemic. Contact one of our professionals to learn more about our services.
Services we can provide include:
- Loan Forgiveness Calculations & Documentation Assistance
- Bankruptcy & Restructuring
- Estimated Tax Payments
- Disaster Relief Credits
- Insurance Coverage & Claims Reviews
- Stimulus Package Benefits & Resources
- Small Business Loans
- Considerations for Cash Flow Management
- Payroll Considerations
- Cash Flow Modeling
- Contract Compliance Reviews
- Valuations for Tax
- Secure Remote Access Systems/Endpoint Protection Solutions
- SaaS/Cloud System Integrations and Migrations
- Family Office/Advisory
We are continuing to monitor developments and updates that affect you and will provide you with alerts on a regular basis to ensure you are informed on how to respond to tax and regulation changes as they occur.
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