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Coronavirus (COVID-19): Small Business Guidance & Loan Resources
Health and government officials are working together to maintain the safety, security, and health of the American people. Small businesses are encouraged to do their part to keep their employees, customers, and themselves healthy.
PPP Bank Alternatives
PPP Loan Forgiveness Applications
The SBA released a standardized PPP loan forgiveness application with instructions (attached). The SBA still intends to publish additional rules and guidance on the program’s forgiveness provisions, but highlights from last night’s release – and answers to a few outstanding questions – include:
· Retains the “75% on payroll costs” requirement (caps nonpayroll costs at 25% of total forgiveness amount)
· Eligibility for loan forgiveness will be assessed based on rules/guidance in place on the date of your forgiveness application (so important to stay on top of and in compliance with rolling guidance!)
· Required representations and certifications are not especially notable, but you must agree that SBA may request additional information to evaluate a borrower’s initial eligibility for the loan and for loan forgiveness and failure to comply may result in a determination that the borrower was ineligible for the loan or forgiveness.
· Some flexibility in the 8-week (56 day) forgiveness “Covered Period” for payroll cost, full-time equivalent employee, and employee salary reduction determinations only – specifically, borrowers with a biweekly (or more frequent) payroll schedule may elect to calculate forgivable payroll costs using the 8 weeks beginning on the first day of the first pay period following the loan disbursement date (the “Alternative Payroll Covered Period”)
· There is a specific box on the application indicating that a borrower, together with its affiliates, received a loan with an original principal amount over $2 million (but clarifies that you do NOT include affiliates for purposes of this determination if you have an affiliation rule waiver under SBA rules or the CARES Act). This likely is to flag loans that will receive additional scrutiny from SBA.
· Some additional detail on eligible forgiveness expenses and forgiveness amount calculation:
o Eligible payroll costs:
§ Eligible payroll costs must be incurred AND paid (paycheck distributed or ACH credit transaction originated) during the Covered or Alternative Payroll Period, except you may pay those incurred during the last pay period of the Covered/Alternative Period on or before the next regular payroll date and still get forgiveness.
§ Include employer contributions to employee health insurance, including self-insured plans; exclude any pre-tax or after tax contributions by employees (same for retirement plans)
§ Include amounts paid by the borrower for state and local taxes on employee compensation (e.g., state unemployment insurance tax); exclude any taxes withheld from employee earnings
§ For amounts paid to owner-employees, self-employed individuals, or general partners = lower of $15,385 or “eight-week equivalent of their applicable compensation in 2019” (this appears to refer back to 8 weeks’ worth of 2019 net profit from Form 1040 Schedule C, but that is not spelled out clearly).
o For other forgivable expenses (mortgage interest, rent, and utilities), they may be forgiven if they are incurred during the Covered Period (no alternative period) and are paid during the Covered Period OR on or before the next regular billing date
o Total amount calculation -- your forgiveness amount with be the smallest of:
§ Your original PPP loan amount (no reference to interest -- consistent with the CARES Act, which caps forgiveness at the principal amount);
§ Total forgivable expenses, minus straight dollar reduction for any 25%+ wage reduction penalties, times percentage of full-time equivalent employees during Covered/Alternative Period compared to pre-crisis look back period (maximum of 1); or
§ Total eligible payroll costs (reported on line 1 of the application) divided by 0.75.
· 2 permissible methods for calculating full-time equivalent employees (FTEs) (then compare averages between Covered or Alternative Payroll Period and chosen look-back option specified in the rules) =
o For each employee, average number of hours paid per week, divide by 40 (round to nearest tenth); maximum for each employee = 1; or
o Simplified method: assign a “1” for any employee who works 40 hours or more per week and “0.5” for employees who work fewer than 40 hours
· Contains the “exception” from the FTE reduction penalty for employers who made good-faith written offers to rehire employees during the Covered or Alternative Payroll Period, which were rejected by employees; also excludes from the FTE reduction penalty employees who, during the Covered or Alternative Period were fired for cause, voluntarily resigned, or voluntarily requested a reduction in hours (IF those positions were not filled by new employees) – for each of these situations, you enter the FTE number for that position as if the person were still there so your forgiveness amount is not reduced for these positions
· Documents that must be SUBMITTED with the application are consistent with what is listed in the CARES Act (generally - payroll, employment records showing FTEs, documentation of forgivable expenses); also adds new requirements for documents that must be maintained by borrowers, but don’t have to be submitted
Attached is a summary of the CARES Act and how the SBA Loan Program is affected. For a brief overview of the different types of SBA loans and the application process, click here. This is a new streamlined approach they are taking to not only manage website traffic, but pre-qualifying businesses as well.The Disaster Loan can be applied using this link here: https://covid19relief.sba.gov/#/
Main Street Lending Program
The Federal Reserve announced it is expanding the scope and eligibility of the Main Street Lending Program.
Changes to the program include:
Paycheck Protection Program
The Paycheck Protection Program prioritizes millions of Americans employed by small businesses by authorizing up to $349 billion toward job retention and certain other expenses.
Small businesses and eligible nonprofit organizations, Veterans organizations, and Tribal businesses described in the Small Business Act, as well as individuals who are self-employed or are independent contractors, are eligible if they also meet program size standards.
Under this program:
Economic Injury Disaster Loans and Loan Advance
To apply for a COVID-19 Economic Injury Disaster Loan, click here.
In response to the Coronavirus (COVID-19) pandemic, small business owners in all U.S. states, Washington D.C., and territories are eligible to apply for an Economic Injury Disaster Loan advance of up to $10,000.
The SBA’s Economic Injury Disaster Loan program provides small businesses with working capital loans of up to $2 million that can provide vital economic support to small businesses to help overcome the temporary loss of revenue they are experiencing. The loan 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, and this loan advance will not have to be repaid.
SBA Debt Relief
The SBA Debt Relief program will provide a reprieve to small businesses as they overcome the challenges created by this health crisis.
Under this program:
SBA Express Bridge Loans
Express Bridge Loan Pilot Program allows small businesses who currently have a business relationship with an SBA Express Lender to access up to $25,000 with less paperwork. These loans can provide vital economic support to small businesses to help overcome the temporary loss of revenue they are experiencing and can be a term loans or used to bridge the gap while applying for a direct SBA Economic Injury Disaster loan. If a small business has an urgent need for cash while waiting for decision and disbursement on Economic Injury Disaster Loan, they may qualify for an SBA Express Disaster Bridge Loan.
Guidance for Businesses and Employers
The Centers for Disease Control and Prevention (CDC) offers the most up-to-date information on COVID-19. This interim guidance is based on what is currently known about the coronavirus disease 2019 (COVID-19). For updates from CDC, please see the following:
The following interim guidance may help prevent workplace exposures to acute respiratory illnesses, including COVID-19, in non-healthcare settings. The guidance also provides planning considerations if there are more widespread, community outbreaks of COVID-19.
To prevent stigma and discrimination in the workplace, use the guidance described below and on the CDC’s Guidance for Businesses and Employers web page.
Below are recommended strategies for employers to use now. In-depth guidance is available on the CDC’s Guidance for Businesses and Employers web page:
Common Issues Small Businesses May Encounter:
SBA Products and Resources
SBA is here to assist small businesses with accessing federal resources and navigating their own preparedness plans as described by the CDC’s Guidance for Businesses and Employers.
SBA works with a number of local partners to counsel, mentor and train small businesses. The SBA has 68 District Offices, as well as support provided by its Resource Partners, such as SCORE offices, Women’s Business Centers, Small Business Development Centers and Veterans Business Outreach Centers. When faced with a business need, use the SBA’s Local Assistance Directory to locate the office nearest you.
Access to Capital
SBA provides a number of loan resources for small businesses to utilize when operating their business. For more information on loans or how to connect with a lender, visit: https://www.sba.gov/funding-programs/loans.
SBA provides export loans to help small businesses achieve sales through exports and can help these businesses respond to opportunities and challenges associated with trade, such as COVID-19. The loans are available to U.S. small businesses that export directly overseas, or those that export indirectly by selling to a customer that then exports their products.
SBA is focused on assisting with the continuity of operations for small business contracting programs and small businesses with federal contracts. For more information on federal contracting, visit https://www.sba.gov/federal-contracting/contracting-guide
If a situation occurs that will prevent small businesses with government contracts from successfully performing their contract, they should reach out to their contracting officer and seek to obtain extensions before they receive cure notices or threats of termination. The SBA’s Procurement Center Representatives can assist affected small businesses to engage with their contracting officer. Use the Procurement Center Representative Directory to connect with the representative nearest you.
SBA works with a number of local partners to counsel, mentor, and train small businesses. The SBA has 68 District Offices, as well as support provided by its Resource Partners, such as SCORE offices, Women’s Business Centers, Small Business Development Centers and Veterans Business Outreach Centers. When faced with a business need, use the SBA’s Local Assistance Directory to locate the office nearest you.