Small Business Interruption Loan Vs Ppp – On April 2, 2020, the Treasury Department and the Small Business Administration (SBA) published interim final rules implementing Sections 1102 and 1106 of the CARES Act prior to publication in the Federal Register. On April 3, 2020, the SBA also released an updated Paycheck Protection Program Loan Application.
The new Interim Final Rule and SBA Form 2483 reflect important developments since promulgation of the CARES Act and previous guidance. Updates based on these developments are included below in red text for easy reference.
Small Business Interruption Loan Vs Ppp
Amid a global pandemic and the highest unemployment rate in the United States since 1933, President Trump signed the $2 trillion Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) into law, which provides economic relief to companies. States, local governments and individuals affected by COVID-19. Although the CARES Act is broad in scope, this alert is limited to providing a high-level overview of the remedies available for eligible business problems (typically small businesses with some limited exceptions). If the SBA encounters regulatory compliance issues in the next 15 days, it will post additional alerts.
Sba Disaster Relief Financing
Under Title I of the CARES Act (“Establishment and Maintenance of Wage of American Workers”), eligible businesses that have suffered significant disruption as a result of COVID-19 are eligible for a “disruption loan small businesses” at no cost. Eligible small businesses include “any business, nonprofit organization, veterans organization, religious organization, or tribal business” that is:
The interim final rule states that only concerns that “had employees who paid wages and payroll taxes, or employees who paid independent contractors, as reported on Form 1099-MISC” are eligible for a PPP loan and that ” qualified borrowers are not eligible.” It says “No.” One or more PPP loans.”
SBA Form 2483 indicates that an applicant or owner is ineligible for a loan if: , or is subject to formal criminal charges or probation, or has been convicted of a felony within the past five years, or has been on parole or probation .
What are the exceptions to the “500 employees” rule? How do the SBA’s affiliation rules work?
To Offset Or Not To Offset: The Interaction Between Cares Act Payments/ppp Loans And Insurance Recoveries Due To Covid 19
The updated SBA Form 2483 requires applicants to certify that “the applicant qualifies for a loan under the rules in effect at the time this application is submitted issued by [SBA] implementing the Paycheck Protection Program.” The interim final rule states that “SBA plans to issue additional guidance immediately regarding the applicability of the affiliation rules at 13 CFR §§ 121.103 and 121.301 for PPP loans.”
To determine an applicant’s receipt or number of employees, each applicant must aggregate all employees by branch, including subsidiaries, and, in the case of private equity-backed and venture capital-backed companies, portfolio companies. There are exceptions to the law for:
Yes, sole proprietors, independent contractors, gig economy workers and the self-employed are all eligible for the Paycheck Protection Program.
The interim final rule states that “independent contractors” are not considered employees “for purposes of calculating the borrower’s PPP loan” or “for PPP loan forgiveness.” “Because independent contractors have the ability to apply for PPP loans.”
Big Companies Got The Small Business Ppp Loans
Loans are administered under the SBA’s Section 7(a) Loan Program as amended by the CARES Act. Loans are made and serviced by existing banks and lenders enrolled in the SBA 7(a) program, as well as other lenders that the SBA has determined to be “qualified to process, close, repay loans and to serve under warranty.” It is possible. of the board.”
The CARES Act sets the maximum loan amount under the Paycheck Protection Program at 250% of average monthly payroll costs, up to a maximum of $10 million. This amount is to cover eight weeks of labor costs and additional money to pay off debt. This 8-week period can apply anywhere between February 15, 2020 and June 30, 2020. Seasonal operating costs are measured using a 12-week period starting on February 15, 2019 or March 1, 2019, depending on the season. The employer chooses.
The interim final rule states that the maximum loan amount is the applicant’s “[a]ttotal labor costs.
The interim final rule reads: “Outstanding economic injury disaster (EIDL) payments made between January 31, 2020 and April 3, 2020 minus any ‘advance payments’ amount under the EIDL COVID 19 loan.” clarifies that it can be equal to It is included in the maximum loan amount of the PPP loan.
Covid 19 Information
Loan terms may vary. However, the term of the loan is up to 10 years, the interest rate is limited to 4% per year, and there are no prepayment penalties. SBA will also reimburse lenders for loan origination or underwriting fees in the amount of: (iii) 1% on loans of $2 million or more. SBA will issue additional regulations and guidelines regarding the other terms and conditions of the program.
The interim final rule clarifies that the interest rate is “100 basis points or 1%” and “maturity is 2 years” for PPP loans. The interim final rule further states that “the borrower shall not pay an upfront guarantee fee to the SBA” and that “the borrower shall pay an agent fee out of the fees it receives from the SBA.”
Yes, the CARES Act limits the use of Paycheck Protection Program loans to: (2) costs and premiums related to the continuation of group health benefits during paid sick, medical or family leave; (3) Salaries, commissions, or similar compensation of employees; (4) Interest payments on mortgage debt that existed on February 15, 2020 (not including advances or payments of principal on mortgage debt); (6) interest on other debts incurred before February 15, 2020; (7) Payment of utilities, including electricity, gas, water, transportation, telephone and Internet access, for services rendered in the ordinary course of business prior to February 15, 2020, for a period of eight weeks beginning in each case with the loan entry date.
The interim final rule states that “payroll costs” include “federal employment taxes imposed or withheld,” “including employee and employer contributions from Federal Insurance Contribution Act (FICA) and Railroad Retirement Act taxes,” withheld from employees, and “Families first.” Qualifying pay for sick and family leave for which credit is allowed under sections 7001 and 7003 of the Families First Coronavirus Response Act.”
Small Businesses And Certain Nonprofits Eligible For Forgivable Bridge Loans For Payroll And Other Expenses Under Cares Act
Additionally, the interim final rule states that if a borrower “uses PPP funds for any unauthorized purpose, the SBA will order [the borrower] to repay that amount” and that borrowers who “knowingly” misappropriate the funds” will be subject to additional penalties to get.” ” is specified. liability for fraud, etc.”
The interim final rule states that the grace period is six months “after the loan payment date” and that the borrower is not required to pay interest during the grace period, but that “interest remains on the PPP.” You can take out a loan during this six-month grace period. “
The loan can be forgiven to the extent that the loan is used for the following expenses and payments made in the 8 weeks after the loan is made: $100,000 or more per person per year; (2) group health benefits and premiums; (3) Mortgage interest (but not for prepayment or payment of principal on insured mortgage obligations); (4) rent payments and leases that existed before February 15, 2020; and; (5) Payment of certain utilities, including electricity, gas, water, transportation, telephone and Internet access, for services made in the normal course of business prior to February 15, 2020, were paid over a period of eight weeks that in each case begins. Loan commencement date. The Paycheck Protection Program can be used for other business expenses, such as inventory, but that portion is not forgiven.
Covid 19: What Every Small Business Needs To Know
The interim final rule clarifies that loan forgiveness amounts can be maximum.