COVID-19 Loan Programs
We have been fielding a lot of calls about loan program details, and which might be right for certain businesses. Accordingly, we wanted to push out the attached memo which gives an overview of the two federal programs for small businesses as provided in the CARES Act (the PPP and EIDL programs). The memo also discussed the PIDA program for PA small businesses. While the EIDL and PIDA programs are up and running, the PPP is still being prepared. As it will be administered through SBA approved lenders, the lenders are in the process of developing their internal programs prior to accepting applications. They are also, as of writing this, waiting for SBA guidelines on administration of the PPP program. This is all to say don’t despair… there have been no deadlines missed, and the great majority of lending relief has yet to even begin.
While reviewing loans, we would like to stress CAUTION in the application process. As with all unfortunate situations, there are certain people looking to take advantage. In this case, that includes scammers looking to hijack application data. For those of you who may be applying for an SBA EIDL, it has been discovered that scammers actually hacked into the original EIDL website and somehow were able to redirect applicants to a different site to make application. This site is asking for personal banking information and when you don’t input it someone personally calls you. Please be on the lookout for grant fraud, loan fraud, and phishing!
Here are several links to official SBA websites you can utilize:
- A link to the SBA page regarding Scams and Fraud Alerts: Learn More
- A link to the official SBA.gov website for the EIDL: https://covid19relief.sba.gov/#/.
- A link to sba.gov. There is a yellow banner that floats across the top of the screen. You can click on it and it takes you directly to the EIDL page.
- Linked is updated information on the SBA Economic Injury Disaster Loan and application process from the SBA. They have changed the process as of March 30th for a more streamlined approach. Hopefully, this can help
- show exactly what the process is (for those of you applying, and show that it has become much easier), and also
- put those of you that will or have already applied at ease if my prior email gave you any concerns about fraud.
- And for those of you worrying about time, please know that individuals that applied over a week ago are just finding out that, while their applications have been approved, no loan amount has been determined or money actually been paid.
As always, information will be able to view all current and prior updates on our Resource Center. For tax information related to the COVID-19, and more importantly the CARES Act, feel free to review information here from Eisenhart & Co., one of our trusted CPA partners. Thank you, and stay safe.
SBA Loans, PA A Major Disaster Area & More
Just like Bill Murray in Groundhog Day, it can certainly feel like we are living the same day over and over again. However, things will get back to normal. Until then, keep moving forward!
Here are the latest updates which we believe are most relevant (short and sweet):
- Which SBA Loan is right for you? Lots of presentations are floating around related to the different SBA programs. Linked is a memo we have drafted to help give you a little clarity. Also, M&T Bank (courtesy of Shane Patterson) has also drafted a good slide deck overview (linked here).
- Fraud, no, say it ain’t so: We have been hearing about phishing scams and fraud related to the SBA programs. Please be aware of who you are dealing with and what information you are providing. Below are some links that may be helpful:
- SBA link to Scams and Fraud Alerts: https://www.sba.gov/document/report–sba-programs-scams-fraud-alerts
- Official SBA.gov website for the EIDL application: https://covid19relief.sba.gov/#/.
- Official SBA Website: www.sba.gov
- PA approved as a major disaster area: PA was declared a major disaster area by the Federal government today. Essentially, this means that Federal funds and resources are more readily available to state, county and municipal governments, along with eligible private non-profits. See the linked article for more details.
- For whom the bell tolls: Check out the latest update from Joel Berg at BizPA. He highlights the latest legal challenge filed in the Eastern District of PA related to Governor Wolf’s actions related to the Covid-19 crisis. Schulmerich Bells, a Bucks County-based maker of handchimes and handbells, and two of its employees have challenged the waiver process for deciding who can stay open. I see a lot of constitutional challenges coming out of this crisis.
- You can apply through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. Other regulated lenders will be available to make these loans once they are approved and enrolled in the program.
- Lenders may begin processing loan applications as soon as April 3, 2020.
- This is a fluid process, so please consult with your local SBA approved lender for more details.
- A sample application is linked here.More details about the SBA’s Paycheck Protection Program have been released.
If you would like a list of contacts, please let myself, Andy Miller (email@example.com) or Christian Miller (firstname.lastname@example.org) know.
Please see all of our updates at the following link: https://mpl-law.com/resource-center/
More SBA Program Detail & some interesting State Updates
With a whole weekend to analyze the various bills and further updates from the Federal, State and Local governments, there is a lot to discuss today. Below are some of the more relevant updates:
1. More info on EIDL, PPP and the PA Working Capital Loans (sent by Chad Bumbaugh at Stambaugh Ness)
- Economic Injury Disaster Loans (EIDL) & $10,000 EIDL Grant
- The question of the day (thus far at least) has been on applying for an EIDL loan to get the $10,000 EIDL grant made available by the CARES act.
- The $10k grants are to be provided within 3 days of request
- These grants are first come, first serve with funding at roughly $10 billion
- To be used to cover sick leave, retaining payroll, paying rent, or covering “obligations that can’t be met due to revenue loss” – should be an easy hurdle to clear. Only requires a self-certification of eligibility.
- Businesses DO NOT have to take out the EIDL loan to get the grant and even if EIDL application is DENIED businesses can get the $10k grant
- The EIDL loan does not have any provisions currently for forgiveness outside of the $10,000 grant
- Important Note: If applying for both the EIDL and PPP loans my understanding is the $10,000 grant essentially becomes an “advance” on any PPP loan forgiveness. The PPP loan forgiveness that is calculated is to be reduced by the EIDL grant.
- To apply for an EIDL loan the SBA is the place to go – specifically https://covid19relief.sba.gov/#/
- Paycheck Protection Programs (PPP) (potentially forgivable loans)
- PPP will be administered by banks (on behalf of the SBA).
- They are to received guidance on the PPP loans by April 11th but goal is for banks to begin processing requests this week.
- Suggest contacting your bank now for their input on timing & next steps.
- Loans are expected to be funded after April 11th – most likely mid to late April based on what I’m reading now but things are moving quickly.
- PA Working Capital Loans I’ll also note that the PA PIDA loan ($100k working capital loans at 0% interest) are, to my knowledge, still in play. I’ve not seen any sort of announcement that those funds have been fully allocated to date.
- Taking an EIDL or PPP loan does appear to remove the ability of businesses to 1) defer payroll taxes and 2) to take the employer retention credit which provides a 50% credit on payroll taxes for qualified wages per quarter for employers under 100. The credit is a maximum of $5k per employee with limitations related to wages & payroll taxes. The site at following link provides one of the best analysis of the interplay between the programs I’ve seen thus far today. https://northmetrosbdc.com/coronavirus/economic-assistance/ . The PA working capital loans do not appear to have any direct impact on the Federal programs.
2. EisnerAmper provides a good overview of the various tax consequences of the CARES ACT in the following link (sent by Carey Gertler in his update email): https://www.eisneramper.com/cares-coronavirus-tax-0320/
3. PA Unemployment Website issues a helpful FAQ for businesses and employees at the following link: https://www.uc.pa.gov/COVID-19/Pages/Employer-COVID19-FAQs.aspx .
- Also, linked is a help guide for various paid sick leave, unemployment and workers comp as they relate for Covid 19 (sent by Patrick Barry in his update email).
4. Business Interruption Insurance Coverage Under the Microscope: New York follows New Jersey by introducing a bill which would force the payment of certain business interruption insurance. Massachusetts is also considering similar legislation. These have not been passed, but I wanted you to be aware of there existence. If passed, these could significantly shift the business insurance landscape.
- NY Bill: https://legiscan.com/NY/text/A10226/2019
5. PA Expands Stay At Home Order, Kids are out of school indefinitely (memo linked): Also, here is a quick story on the announcement https://www.pennlive.com/news/2020/03/pa-school-closure-order-extended-for-an-indefinite-period-of-time.html
6. What should business owners have ready to apply for the various programs? Scott Stevens at 44 Capital sent the linked document as a great guide for documents to gather and other available resources.
7. Upcoming webinars and helpful resource Sites
- RKL has conducted a few webinars and has a useful slide deck for employers at the following link: RKL Webinars & Resources
- Assessing the impact on Private Equity: Read here
Please see all of our updates at the following link: https://mpl-law.com/resource-center/
As always, please don’t hesitate to email myself or anyone in our office with any questions or comments.
Also, please feel free to forward our updates to others.
Keep moving forward! We will get back to normal.