Small Business Funding – Urgent

COVID-19 Small Business Funding – Urgent

Small Business Administration

The Small Business Administration is receiving an enormous amount of funding and significant program adjustments to help small businesses weather and survive the crisis. A sample of the numbers includes:

• $349 billion for loan guarantees.
• $675 million for Small Business Administration salaries and expenses.
• $240 million for small business development centers and women’s business centers for technical assistance for businesses.
• $10 billion for emergency EIDL grants.
• $17 billion for loan subsidies.
• $100 billion for secondary market guarantee sales.

Paycheck Protection Program (PPP)

• • Creation of the Paycheck Protection Program (PPP).
  • Helps small businesses, 501(c)(3)’s, 501(c)(19)’s, and 31(b)(2)(c).
  • Limited to under 500 employees.
  • Includes independent contractors, sole proprietors and the self-employed.
  • Entities must have been operational by 2/15/20; had payroll, paid taxes.
  • Covered loan period is 2/25/20 through 6/30/20.
  • Maximum loan amount via 7(a) set to $10 million through 12/31/20.
  • 100% loan guarantee through 12/31/20.
  • Eligible expenses include payroll, insurance, rent, mortgage and utilities.
  • Borrower cannot apply/carry both PPP and Economic Injury Disaster Loan (EIDL) for COVID-19, but can carry previous, non-COVID-19 EIDL and participate in PPP.
  • Borrow must good-faith certify that funds are needed for COVID-19 related purposes, the funds will be used to retain workers, and that their request is not duplicative with other SBA funds for the same purpose.
  • Waives borrower and lender fees.
  • Waives credit elsewhere requirements.
  • Waives collateral and personal guarantees.
  • Sets maximum interest rate of 4%.
  • No prepayment fees.
  • Defers payments on PPP loan for 6-12 months.
  • Delegates authority to all existing 7(a) lenders to expedite approvals/distributions.
  • Authorizes bank and non-bank lenders to participate in PPP program.
  • New lenders in program can only participate in PPP and not other 7(a) loans.
  • Amount spent by borrower in the first 8 weeks from loan origination may be forgiven; amount reduced proportionate to reductions in workforce as compared to previous year; if rehires made during 8 week period, no penalty in reflection of possible layoffs early in the 8 week period.

• Allows inclusion of additional money paid to tipped workers.
• Anything not forgiven or repaid by 12/31/20 will convert to a max 10 year loan at a max 4% interest rate; loan will remain 100% guaranteed.

Emergency Injury Disaster Loan (EIDL)

• Eligibility expanded to include tribal businesses, cooperatives, ESOP’s, individual contractors, sole proprietors, and private non-profits with less than 500 employees.
• Waives credit elsewhere requirement for advances and loans below $200,000.
• Waives personal guarantee for advances and loans below $200,000.
• Waives 1-year-in-business requirement for advances and loans below $200,000.
• SBA has greater flexibility in determining borrower eligibility.
• Entities eligible to apply for EIDL may request an advance in the form of an emergency grant of up to $10,000.
• SBA must distribute EIDL emergency grant within 3 days.
• Applicants are not required to repay emergency grant, even if they are ultimately denied EIDL.

For Businesses

A series of tax credits to ease the burden of keeping staff on payroll.

• Employee retention benefit: 50% refundable payroll tax credit during COVID-19 crisis for businesses that either fully or partially shut down OR have a 50% decrease in receipts versus the same quarter in the previous year and continue to pay employees.
• Based on qualified wages paid to employees during crisis, tied to number of employees (100+ full time employees = wages paid when they are not providing services due to COVID-19 and less than 100 full time employees = wages paid regardless of business closure status).
• Covers up to $10,000 paid per employee, including benefits, for the period 3/13/2012/31/20.
• Payroll tax deferred, payments to be spread over 2 years.
• Net operating losses (NOLs) modification: NOLs arising in FY’s ‘18, ‘19, and ‘20 can be carried back 5 years.
• AMT credits available as refundable credits through 2021 can be claimed as a refund now.
• Allowable deductible interest expenses are increased from 30% to 50% for 2019 and 2020.

Rebates

Cash payments to U.S. residents.

• All U.S. residents with an adjusted gross income of up to $75,000 for individuals and $150,000 for couples will receive a cash rebate of $1,200 (ind) or $2,400 (couples)
• Includes all taxpayers with work-eligible SSN, including those with low or no income
• Rebate amount decreases by $5 with for every $100 over the threshold, with individuals AGI over $99,000 completely phased out, $146,000 for head of household with at least 1 child phased out, and $198,000 for couples phased out.
• An additional $500 will be given for each child per household.

We at Prudent Accountants can assist you with the process at reasonable costs. Please feel free to reach out to us.