CARES Act

Summary and Resources:

  • List of Banks Participating in PPP Loan here. If your bank or lender cannot help you with PPP, NFBID recommends finding another bank or a non-bank lender who can help submit your application, such as Pursuit LendingSpring BankPayPal, IntuitSquare, Kabbage, or Lendio.
  • This article from US Senate Committee will help guide you to choosing which loans to apply for here
  • Economic Injury Disaster Loan (EIDL) FAQs
  • Economic Injury Disaster Loan/Grant Application here
  • Helpful video on how to apply to EIDL and PPP here
  • How to calculate your financials for PPP loan here

With the passage of the CARES Act, federal resources for small businesses affected by COVID-19 are becoming available. To apply for these resources, click HERE. For an extremely thorough overview of what the CARES Act has to offer, click HERE. See below for a summary:

$10,000 Economic Injury Disaster Loan Advance: All businesses eligible for the Economic Injury Disaster Loan (EIDL) are able to receive a $10,000 grant that does not need to be repaid. Disbursement is almost immediate, within three days of your application’s completion. You do not to repay this advance, even if you are denied a loan or choose not to accept the loan package you are ultimately offered. To apply you must gather accurate figures for your gross revenue and cost of goods sold for 2019 and 2020. 
The initial application for EIDL loans, which is where you apply for the Advance, has been dramatically streamlined, and takes under 10 minutes. Apply here and make sure to ‘check’ the box stating you’d like to receive the Advance.

Economic Injury Disaster Loan (EIDL): If you applied for the Advance, you have already completed the initial application for EIDL, it’s the same form. However, unlike the Advance, you will need more documentation later on in the process to secure an EIDL. Eligible businesses may receive up to $25,000 in unsecured loans and up to $2,000,000 in loans backed with collateral.

HERE is a great video that explains how to apply for the Economic Injury Disaster Loan and advance.

We are strongly encouraging businesses to prepare the following documents:

  • Most Recent Federal Tax Returns for Principals and Owners
  • CPA Certified Statement of Profit/ Loss
  • Personal Financial Statement (SBA Form 413)*
  • Schedule of Liabilities (SBA Form 2202)*
  • Sales Figures Showing Economic Injury (SBA Form 1368)*

Other documents may be required, however, an SBA agent will be assigned to you to guide you through the process. You are not required to accept the loan package offered to you, there is no cost to apply, and you may change the amount needed during or after the process. Apply here.

*These are the forms we believe you will need. Though you may be given an updated version, these are a good guide.   

Eligibility: Retail stores, sole-proprietors, commercial entities like real estate leasing agencies, nonprofits, and some other types of businesses are eligible to apply for EIDL if they are under 500 employees.

Paycheck Protection Program Loans: Click HERE to apply

Update: Guidance on the updated PPP “Final Rules”

THE SBA SPEAKS by Andrew Fine and Megan Shaw
 
Just when you thought that the PPP couldn’t get any more complicated, the SBA released a new set of “Interim Final Rules” yesterday (4/14). Fortunately, these rules actually shed some light on some of the longstanding questions surrounding the PPP. While the document itself is 19 pages, we’re here with the SparkNotes.(editor’s note: what happened to Cliff Notes?) The major takeaways for business applicants are:  
 
1. 75% Rule Applies to Total Loan. As most of you likely know, the SBA previously issued guidance requiring that 75% of the total PPP loan proceeds be used towards covered payroll costs. Other guidance, however, framed this 75% rule in terms of the amount to be forgiven, tempting the question: does the 75% rule apply to the total loan, or only to the amount I hope to have forgiven?
 
We have been advising clients to err on the side of caution and assume that the rule requires 75% of the total loan to be applied towards payroll costs, regardless of whether you hope to apply for loan forgiveness. Well, we’re glad we took that approach, because the SBA just confirmed: 75% of the total PPP loan proceeds must be used towards covered payroll costs, regardless of whether you’re hoping to apply for loan forgiveness.
 
If you are applying for loan forgiveness, banks will be requesting records to show how the entirety of the loan amount was spent. If less than 75% of the total PPP loan was spent towards payroll costs within the 8 week covered period, that will likely preclude borrowers from receiving any loan forgiveness at all.
 
We don’t like it, and we don’t agree with it. But at least the SBA has clarified its stance here.
 
2. Guaranteed Payments Count as Payroll Costs. This is a big one. Corporations and LLCs with multiple owners may include guaranteed payments as part of their payroll costs under the PPP. Previously, there was ambiguity surrounding whether ‘guaranteed payments’ to owners of the borrower entity could be covered under the PPP, which would have been bad news for business owners. Fortunately, the SBA has answered yes, guaranteed payments can count as payroll costs, even though owners of the borrower entity aren’t technically employees. This is provided that the guaranteed payments are paid in exchange for actual managerial services.
 
3. Independent Contractor Certification. The SBA clarified that it will be the responsibility of the borrower, and not the bank, to determine who qualifies as an independent contractor, and who qualifies as an employee. This distinction is important under the PPP, since independent contractors cannot be paid using PPP proceeds (rather, independent contractors would apply for their own relief under the PPP). This means that borrowers must be very careful that their independent contractor versus employee distinctions are accurate, as mischaracterizations could potentially subject borrowers to criminal penalties. Our labor team remains available to advise you on these distinctions should you require assistance.
 
4. What if I have no employees? Self-employed individuals are eligible to apply for relief under the PPP. Normally, the PPP loan amount is calculated by taking 2.5 times the average monthly payroll cost for the prior year. This, of course, wouldn’t work for applicants with no employees. The SBA finally shed light on how those loans are to be calculated. Here are the steps:
 
1. First, you would find your 2019 IRS Form 1040 Schedule C net profit amount. If this amount is over $100k, you would reduce it to $100k. If this amount is zero or less, the applicant would not be eligible to receive the PPP loan.
 
2. Second, you would calculate the average monthly net profit amount (divide step 1 by 12); and
 
3. Third, multiply the average monthly net profit from step 2 by 2.5.

If you need capital to cover the cost of retaining employees, the Paycheck Protection Program might be right for you. Here are some high-level information points:

This program will provide cash-flow assistance through 100 percent federally guaranteed loans to employers who maintain their payroll during this emergency.

If employers maintain their payroll, the loans would be forgiven, which would help workers remain employed, as well as help affected small businesses and our economy snap-back quicker after the crisis. So, essentially, the loan can be converted to a grant, if you are able to restore payroll to pre-virus levels. 

Loans are up to 250% of average payroll from last year.

Small businesses and other eligible entities will be able to apply if they
were harmed by COVID-19 between February 15, 2020 and June 30, 2020. Loans are available through June 30, 2020.

To apply for the loan, you need to find a local lender. Go to SBA’s lender match portal, will match you to local-approved bank or credit union

Our colleague Jaime-Faye Bean, Executive Director of the Sunnyside BID, does a great job of explaining the Paycheck Protection Program, and will likely answer many of your questions. Click HERE. Also, check out this YouTube video by Brooklyn wallet maker Dynomighty which has a calm simple approach to apply for Disaster Loan and PPP. Click HERE.

To understand how the CARES Act is different than traditional SBA loans, click HERE.