I hope everyone is doing well, staying safe and healthy. We’ve been totally remote for a couple of weeks now and know how uncertainty there is around the entire public health situation. We’ve been actively following the economic disaster relief conversations and spent a lot of time trying to dissect the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

Here is what guidance we are receiving at the moment. For any businesses, your own or potential customers, that are in dire need of relief assistance there are two separate processes on the loan options and solely for the purpose of sustaining business (does not apply to the self-employed 1099 employees). The first is available already and the second should be active in the coming week or so.

Businesses can apply for the Economic Injury Disaster Loan (EIDL) program – they have released a streamlined application as of this morning (link below). According to the guidelines, the EIDL is eligible for an advance of up to $10,000 within 3 days of applying whether you get the loan or not and does not have to be repaid even if the loan is denied.

The Paycheck Protection Program (PPP) Loans – everything we understand at the moment – will have to be administered by an approved SBA lender, such as a local bank. I have been in touch with local bankers and they are still waiting on their guidance and guidelines; it’s an evolving process still. When there’s better information available I’ll be happy to share that with you. If you have a local bank you’re able to work with, that’s probably the best place to start.

That said, the link to apply for the EIDL is below. It is not a simple process, but it’s more straightforward than previously. If you have questions, please feel free to ask our team for assistance.

https://covid19relief.sba.gov/#/

Thanks and let us know how else we can help you and your business continue to move forward through this turbulent situation.

I sincerely hope everyone is managing themselves, their families and their businesses well during this stressful time. We’ve been working through an unprecedented situation on a global scale and there’s no doubt it has been anxiety inducing for almost everyone. Particularly for a number of small business owners I’ve spoken to, the frustrations and uncertainty around how their business is going to survive, or if it will come out of this still functioning has been at the forefront of their thoughts.

I know this is a tough time. I’m also relieved to say there looks to be some help coming fast.

On Wednesday, March 25, the Senate passed the $2 trillion Coronavirus Aid, Relief, and Economic Security Act, CARES Act, H.R. 748. A section-by-section summary can be found here. The CARES Act is a bipartisan package providing essential economic support to businesses of all sizes across the country, and their workers (among other relief measures). The House of Representatives will take up the bill at 9am EST this morning, and it is expected to pass and be signed into law. While not perfect, this deal gives the small businesses around the country a fighting chance against the economic catastrophe being caused by COVID-19 and will help us all to prepare for recovery.

Prior to the CARES Act, two other measures had already been implemented earlier in March. On March 6th, the $8 billion Coronavirus Preparedness and Response Supplemental Appropriations Act which was signed into law and on March 18th, the Families First Coronavirus Response Act, H.R. 6201, was signed into law. Combined, the two new provisions expanded unemployment insurance, sick leave, and family medical leave to workers employed by businesses with under 500 employees for Coronavirus-related causes through the end of the year. Congressional leadership has indicated it may need to pass additional bills in the coming months to relieve the total impact of the crisis.

The $2 trillion economic stimulus bill, provides direct relief to taxpayers, small businesses, corporations, hospitals and states and localities. In short, the bill provides:

  • $500 billion for loans and assistance to companies including $58 billion for loans and grants to state and local governments;
  • $350 billion in loans and aid to small businesses,
  • $150 billion to hospitals and health care providers and direct payments, enhanced unemployment insurance and other services to individuals.

Below is a summary of the provisions which should be of highest interest to small businesses countrywide. FaaSfunds will continue to provide information in the coming days and, as always, our team is here to offer guidance and assistance as new regulations are released.

Business Tax provisions:

  • Employee retention credit for employers subject to closure due to COVID-19. Provides a refundable tax credit for 50% of wages paid by employers during the COVID-19 crisis. The credit is available to employers whose (1) operations were fully or partially suspended due to a COVID-19 shut-down order, or (2) gross receipts declined by more than 50% when compared to the same quarter in the prior year but does not include employers that receive an SBA interruption loan described below.

The credit is based on qualified wages paid to the employee. For employers with greater than 100 full-time employees, qualified wages are wages paid to employees when they are not providing services due to COVID-19-related circumstances. For eligible employers with 100 or fewer full-time employees, all employee wages qualify for the credit, whether the employer is open for business or subject to a shut-down order. The credit is provided for the first $10,000 of compensation, including health benefits, paid to an eligible employee. The credit is provided for wages paid or incurred from March 13, 2020 through December 31, 2020.

  • Delay of employer payroll taxes. Employers and self-employed individuals can defer payment of the employer share (6.2% Social Security tax) of the payroll tax. The tax will require the deferred tax to be paid over the following two years, with half due December 31, 2021 and half due December 31, 2022. Does not include employers that receive an SBA interruption loan described below.
  • Net operating loss deduction. The provision allows businesses to fully carry back net operating losses occurring in 2018, 2019, and 2020 to the previous five years, allowing them to amend previous tax returns to get a refund and help cover liquidity demands.
    Section 2304. Modification of limitation on losses for taxpayers other than corporations. Modifies the loss limitation application to pass-through businesses and sole proprietors.
  • Modification of credit for prior year minimum tax liability of corporations. The provisions accelerate the ability of companies to recover those AMT credits, permitting companies to claim a refund now.
  • Modification of limitation on business interest. Temporarily increases the cap on business interest expense deductions for 2019 and 2020.
  • Changes regarding qualified improvement to property. Enables businesses to accelerate depreciation of some improvements.

Small Business Interruption loans (Section 1102), Paycheck Protection Program. The bill provides nearly $350 billion for eligible coronavirus-impacted small businesses. We anticipate these loans will be in high demand, if interested in this program contact an SBA approved lender.

  • Eligible Businesses. Businesses, self-employed individuals or 501(c)(3) organizations with fewer than 500 full or part-time employees or businesses which meet the SBA small business threshold, whichever is greater, with some exceptions for restaurant and accommodation multi-location businesses. Employers must have been in business on 2/15/2020 and paid taxes on their employees or contractors. Employers must certify that the need for the loan is coronavirus-related and that they will use the funds to maintain payroll and retain workers.
  • Covered period February 15-June 30, 2020.
  • Loan can be used for payroll costs which include: sum of payments of compensation (includes salary, wage, commission, cash tip, family, medical or sick leave, allowance for leave, payment for provisions of group health care benefits, including insurance premiums, payment of retirement benefits, payment of state or local tax assessed on the compensation of employees and sum of payments of any compensation to a sole proprietor or independent contractor that is a wage, commission or similar compensation and in an amount that is not more than $100,000 in 1 year prorated for the covered period), payments on mortgage obligations, rent, utilities and interest on other debt that was incurred prior to 2/15/2020.
  • Loan size . 2.5 X the average total monthly payments for payroll costs incurred during the one-year period before the date the loan was made, not to exceed $10 million. Interest rates not to exceed 4%, loan length 10 years.
  • Collateral No personal/individual guarantee on loan and SBA guarantees 100% of loan, no pre-payment penalty.
  • Loan forgiveness. Recipients are eligible for tax-free loan forgiveness for the portion of the loan used to cover payroll costs, payments on interest of any mortgage obligation, rent, utilities for the 8-week period after the loan is originated. Forgiveness is proportionately reduced if workforce is reduced during the covered period. Borrowers that rehire previously laid off workers will not be penalized for having reduced payroll at the beginning of this period.

Additional SBA Enhancements

  • Increases the maximum loan amount for an SBA Express loan from $350,000 to $1 million.
  • Additional $10 billion for SBA to provide economic injury disaster loans to small businesses that employ under 500 workers. Applicants can be approved for loans based on credit score. Personal collateral requirements are waived for loans totaling less than $200,000, as are requirements for borrowers to have to been in business for at least a year, and the requirement that an applicant be unable to obtain credit elsewhere.
  • SBA is authorized to give grants (up to $10,000) to any business eligible for a loan within 3 days of receiving a disaster loan application, to cover needed expenses (including payroll, rent, and mortgage payments).
  • SBA Administrator has the authority to purchase loans made before the date of enactment of this act and provide the borrower a six-month deferment on payments.

Labor provisions.

  • Allows employers to receive an advance tax credit from Treasury instead of a refundable tax credit for coronavirus-related sick and family medical leave related costs.
  • Places limits on Coronavirus employer paid sick and family and medical leave.

Economic Stabilization Fund to Assist Severely Distressed Sectors of the Economy.

Provides $454 billion in secured funds for loans and loan guarantees for businesses and states that have not received economic relief through other loans in the bill. The liquidity assistance provided by the Federal Reserve can be in the form of direct loans to businesses or governmental entities or the direct purchase of debt obligations or securities from the business. Assistance can be in the form of the purchase of bonds, loans, and securities directly from banks or from investors in the secondary market. Collateral is required for all loans given by the Federal Reserve and Treasury, and all loans, bonds, and securities purchase by the Federal Reserve must be collateralized.

Direct lending must meet the following criteria:

  • Alternative financing is not reasonably available to the business.
  • The loan is sufficiently secured or made at interest rate that reflects the risk.
  • Duration of loan shall be as short as possible but not more than 5 years.
  • Prohibits stock buybacks, unless contractually obligated, or payment of dividends until the loan is no longer outstanding or one year after the date of the loan.
  • Borrowers must, until September 30, 2020, maintain employment levels as of March 24, 2020 to the extent practicable, and retain no less than 90% of its employees as of that date;
  • A borrower must certify that it is a U.S.-domiciled business and its employees are predominantly located in the U.S.
  • Loan cannot be forgiven.

The bill also directs the Treasury Secretary to establish a program that provides banks with liquidity to make loans to businesses with between 500-10,000 employees, capping interest rates at 2% and providing 6 months forbearance, on condition of the entity maintaining employment and meeting collective bargaining and other requirements.

To find a breakdown of relief funding for each state, please click here.

Family, Friends, and anyone affected by the public health situation (basically everyone at this point),

I wanted to reach out briefly during this strenuous time and check in. I hope you’re doing alright with all the uncertainty. I know there’s a lot of anxiety in the air and understandably so. I am confident that we’re going to be able to weather this storm and come out all the stronger once it’s past. We’re all in this together and I’m here if you need anything.

To the business at hand – one of FaaSfunds goals is to help businesses understand their current financial health and the best financial products available to help them grow into the future, currently, there are a number of COVID-19 restrictions on funding due to the growing public health concerns. Each situation is unique under these circumstances, so we’ll keep you updated with new information as it becomes available.

Please don’t hesitate to connect with us about ANY finance questions related to your business. We’re happy to help.

If you are interested in COVID-19 economic relief assistance, please review the resources below and, again, we’re here for assistance if you have any questions.

We’ve recognized these as credible sources for information regarding COVID-19 relief programs:

SBA programs:
https://www.sba.gov/page/coronavirus-covid-19-small-business-guidance-loan-resources

Other Programs:
https://www.forbes.com/sites/advisor/2020/03/20/list-of-coronavirus-covid-19-small-business-relief-programs/#28634099e89d

Keep in mind, the entire COVID-19 relief program and public health response is an extremely fluid situation. There are a lot of moving pieces and it’s important to stay aware and up-to-date on all the changes as best you can. Let me know if I can assist you in that regard.

Furthermore, please click on the link below to gain more information about other financial products that are available to you:

faasfunds.com

Thank you, hope all is well, and stay safe!