Coronavirus (COVID-19) Pandemic
Employer Resource Guide
Please contact your CPA & Bank/Lending Institution for additional information
CARES Act - Created to help businesses through this time
- $2.2 trillion relief package
- Paycheck Protection Program
- $350 billion business loan package
- Protection Loans
- The loans are 100% generally guaranteed. No collateral, personal guarantees or SBA fees are required
- $10 million loan cap - loan amounts of up to $10M per eligible entry
Full loan forgiveness for employers that maintain or restore pre-crisis payroll
Deferment Relief - Loan payments will be deferred for six months with the ability to extend to one year under the law.
No Resource - SBA has no recourse against individuals, shareholders, members, or partners or loan recipients for non-payment, unless loan dollars are used for impermissible purposes.
Benefits of Paycheck Protection Loans
- Entities including sole proprietors, independent contractors and self-employed individuals that were operating and paying workers on February 15, 2020 are eligible provided they are either:
- Small Business
- Business under 500 employees defined by SBA laws and rules
- Other eligible recipients
- For Profits "business concerns" 501(c)(3) nonprofits, 501(c)(3) veterans organizations and tribal businesses with not more than the greater of:
- 500 employees
- The SBA "small" size standard in number of employees for the entity's industry (or special fuels for faith-based applicants)
Determining Employer Size
General rules - In general, all entities count full-time, part-time and "other basis" employees of all U.S. and foreign affiliates.
The Application Process
Must file a standard, streamlined Paycheck Protection Loan Application (SBA Form 2483).
Basic business identification information
- A list of all owners of the applicant with greater than 20% ownership stake:
- A list of any businesses under common ownership or management with the applicant;
- Details on any EIDLs (Economic Injury Disaster Loans) received by the business between January 1, 2020 and April 3 2020;
- Information about individual applicants' and 20%-plus owner's criminal history and citizenship status; and
- Good-faith certifications by a business representative
- Applicants must also submit payroll documentation. It appears that lenders will use payroll documentation from calendar year 2019 to make loan amount calculations, even though the rules reference the last 12 months as the look-back period.
- The SBA Application U.S. Small Business Administration see link below for latest forms (these forms seem to be changing every other day)
The application Process
- Applicant was in operation on February 25, 2020 and paid workers at the time, and is otherwise eligible for PPL
- The loan is needed to "support ongoing operation" during the COVID-19 emergency
- Funds will be used to retain workers and maintain payroll or make mortgage, lease and utility payments.
- The borrower will provide the lender documentation that verifies the number of full-time-equivalent employees on payroll and the dollar amounts of foregiveness-eligibile payments during the eight weeks after getting the loan.
- Loan forgiveness will be for the sun of documented payroll costs, covered rent and mortgage payments, and covered utilities, but "not more than 25% of the forgiven amount may be for non-payroll costs".
- The applicant has not and will not receive another PPL from now until December 31, 2020.
- All the information provided by the borrower is true and accurate.
- The lender will calculate the eligible loan amount using the tax documents submitted.
- Please note that if you use a bank you are currently doing business with the loans will be processed much faster.
- Do not wait to process your loan. The banks are fearful that just like in 2008, they did not receive the refund from the government. Please be patient as they want to make sure they are turning in the exact documentation so your company and the bank process the loan correctly.
- Maximum Loan Amount
- $10 Million or 250% of average monthly "payroll costs" during the last year (or alternative look-back periods for new and seasonable businesses).
Uses for Loans
This includes employee or sole proprietor/independent contractor compensation up to annualized compensation of $100,000, paid leave, severance payments, payment for group health benefits, including insurance premiums, retirement benefits and state and local payroll taxes.
It excludes, excess compensation above the $100,000 threshold, certain federal taxes, compensation to non US employees, and sick and family leave wages for which the credit is allowed under the Family's First Coronavirus Relief Act. At least 75% of the PPL proceeds must be used for payroll costs.
Group Health Care Benefits and Insurance Premiums
Group health care benefits (including dental, vision & life) during periods of paid sick, medical, or family leave - and any insurance premiums.
Payment of interest on mortgage obligations
Rent and Utilities
Rent (including rent under a lease agreement) and utilities.
Interest on other obligations
Interest on any other debt obligations incurred before February 15, 2020
Existing SBA Uses
Any uses already permitted for SBA business loans (e.g. inventory, supplies, building or land purchases, construction, site improvements, etc.)
Maximum Loan Forgiveness Amount
The maximum loan forgiveness amount (up to the full principal amount of the loan) is the sum of the following incurred and paid within 8 weeks or your loan origination (i.e. the forgiveness period).
- Interest on mortgage obligations incurred before February 15, 2020
- Rent obligations in place since February 15, 2020 and
- Utility payments for services that began before February 15, 2020
- No more than 25% of the forgiven amount may be forgiven for non-payroll costs
- Any dollars spent more than 8 weeks after your loan is originated, even for these forgiveness – eligible expenses, will not be included in your forgiveness amount.
Applying for Loan Forgiveness
To receive loan forgiveness, borrowers must apply to their lender with documentation:
- Verifying full-time equivalent employees on payroll and their pay rates (via IRS tax filings and state income tax, payroll and unemployment filings)
- On covered costs/payments (e.g. cancelled checks, receipts or other documents verifying mortgage, rent, and utility payments.
- Certifying (by an authorized business representative) that the documentation is true and correct and that forgiveness amounts requested were used to retain employees and make other forgiveness – eligible payments.
For loan balances remaining after forgiveness, the same loan terms remain in place.