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Covid 19 Financial Relief For Businesses

If you are a business in need of financial assistance:

    1. The SBA Loan Economic Injury Disaster Loan (EIDL) is the first starting point for loans now. EIDLs are available to most businesses, and, now also available to Tribal businesses, cooperatives, and ESOPs with fewer than 500 employees. They are also available to all non-profit organizations, including 501(c)(6)s, and to individuals operating as sole proprietors or independent contractors.
    2. EIDLs can be approved by the SBA based solely on an applicant’s credit score.
    3. EIDLs that are smaller than $200,000 can be approved without a personal guarantee.
    4. Borrowers can receive a $10,000 emergency grant cash advance that can be forgiven if spent on paid leave, maintaining payroll, increased costs due to supply chain disruption, mortgage or lease payments or repaying obligations that cannot be met due to revenue losses.

Requirements are

    1. The business must have been operating for at least one year prior to the disaster
    2. Completion of SBA Form 5
    3. 4506T Request for Transcript of Tax Return completed and signed by each applicant:
      1. Each principal owning 20 percent or more of the applicant business,
      2. Each general partner or managing member; and, for
    4. Complete copies, including all schedules, of the most recent Federal income tax returns for the applicant business
    5. Personal Financial Statement (SBA Form 413) completed, signed, by the following:
      1. Each proprietor
      2. General partner
      3. Managing member of a limited liability company (LLC)
      4. Each owner of 20% or more of the equity of the Applicant (including the assets of the owner’s spouse and any minor children)
      5. Any person providing a guaranty on the loan
    6. Schedule of Liabilities listing all fixed debts (SBA Form 2202 may be used)
    7. Application (SBA Form 5); which may require current financial statements.
    8. Additional information may be required.
  1. The proceeds may be used for:
    1. Providing long term working capital, accounts payable, inventory and other operational expenses
    2. Providing short-term working capital, seasonal financing, contract performance, construction financing and/or exports
    3. Purchasing real estate
    4. Purchasing equipment, furniture, machinery, supplies and materials
    5. Covering construction and/or renovation costs
    6. Establishing or acquiring a new business, or expanding an existing business
    7. Refinancing existing business debt.
  2. The proceeds cannot be used for:
    1. Reimbursing an owner for any previous personal investments toward the business
    2. Repaying any delinquent withholding taxes
    3. Affecting any change of business ownership that will not have a positive effect on the business
    4. Any purpose not deemed a “sound business purpose” as determined by the SBA
  3. These loans are made directly through the SBA and applied for on the SBA website, https://www.sba.gov/disaster-assistance/coronavirus-covid-19
    1. Watch to be sure that you are applying for the Economic Injury Disaster Loan. If you already have a relationship with a SBA lender, you may receive expedited funds under the Express Bridge Loan.

The CARES ACT provided the Paycheck Protection Program.

  1. There is no cost to apply
  2. The loans are to help retain workers, maintain payroll and cover rent/mortgage/utility expenses not already covered by other relief laws.
  3. The loan covers expenses dating back to February 15, to June 30, 2020. The expenses covered can be used for payroll and commission payments; Group health care benefits/insurance premiums; mortgage, rent, and lease payments; utilities, interest on any other debt obligations that were incurred before the covered period.
  4. These loans may be eligible for forgiveness (see below)
  5. Small businesses, sole proprietorships, independent contractors, and self-employed individuals can all qualify.
      1. Sole proprietorships will need to submit schedules from their tax return filed (or to be filed) showing income and expenses from the sole proprietorship.
      2. Independent contractors will need to submit Form 1099-MISC.
      3. Self-employed individuals will need to submit payroll tax filings reported to the Internal Revenue Service.
  1. The loans are made through qualified 7(a) and other lenders, i.e., your bank. More details on the specifics on this will be available early in the week.
  2. An eligible borrower is “any business concern that employs not greater than 500 employees, or, if applicable, the SBA’s size standard/employees; sole proprietors/independent contractors/self-employed personal and, food service business concerns with multiple locations, that that employ not more than 500 persons per location
  3. Eligible borrowers must make good faith certification to the lender that borrower needs the funds to operate because of current economic conditions.
  4. THIS DIFFERS FROM THE SBA DISASTER LOAN IN THESE WAYS:
    1. No personal or business collateral is required.
    2. The funding covers a more restrictive set of purposes The SBA disaster loan can cover most operating expenses.
    3. Your loan can be forgiven if you follow the terms. The SBA disaster loan requires repayment.
  5. THIS IS LIKE THE SBA DISASTER LOAN IN THESE WAYS:
    1. You need to demonstrate your business was economically affected by COVID-19.
    2. It’s free to apply.
    3. Your loan is long-term (maximum 10 years) and low-interest (maximum 4%).
    4. You have an extended deferment period (6-12 months, depending on your lender) before you begin repayment.
    5. There is no prepayment penalty.
  6. How much of a loan is available?
    1. The lender will ask you to provide documentation on your business’s payroll, mortgage, rent, and utility payments over the previous 12-month period. They will calculate the monthly average cost of those expenses. The maximum amount they can offer is 2.5 times that monthly average cost, but no more than $10 million.
    2. If you are a seasonal employer, the monthly average cost will be calculated differently. The lender will use a 12-week period beginning either February 15, 2019 or March 1, 2019, and ending June 30, 2019.
    3. If your business did not exist before June 30, 2019, the SBA will look at your costs in January and February 2020.
    4. Note that if you receive a loan under the Paycheck Protection Program, you may no longer be eligible for an EIDL SBA loan for the same purpose of covering payroll
  7. Forgiven?
    1. In the 8 weeks following your loan signing date, all expenses related to the following can be forgiven:
    2. Payroll—salary, wage, vacation, parental, family, medical, or sick leave, health benefits. Payroll
    3. Mortgage interest—if the mortgage was signed before February 15, 2020
    4. Rent—if the lease agreement was in effect before February 15, 2020
    5. Utilities—if service began before February 15, 2020
    6. Forgiveness is based upon the borrower demonstrating that the loan proceeds were used for eligible purposes, including payroll/benefits; mortgage interest; rent; and utilities during the eight-week period beginning on the date the lender originates the PPP loan for the borrower. You are committing with this load to maintain an average monthly number of full-time equivalent employee’s equal or above the average monthly number of full-time equivalent employees during the previous 1-year period. If you do not maintain that number of employees or if you reduce wages by more than 25%; your loan forgiveness will be reduced.

When submitting your application for loan forgiveness, you must provide the following documentation (no exceptions):

  1. documentation verifying the number of full-time equivalent employees on payroll and pay rates for the periods described in subsection (d), including:
    1. payroll tax filings reported to the IRS
    2. State income, payroll, and unemployment insurance filings
  2. documentation to prove your mortgage, lease, or utility payments
    1. cancelled checks
    2. payment receipts
    3. account statements
  3. a certification from a representative of the eligible recipient authorized to make such certifications that:
    1. the documentation presented is true and correct; and
    2. the amount for which forgiveness is requested was used to retain employees, make interest payments on a covered mortgage obligation, make payments on a covered rent obligation, or make covered utility payments; and
  4. any other documentation the Administrator determines necessary.

The lender must decide within 60 days of your forgiveness application submission.

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