SBA Coronavirus Relief
On March 27th President Trump signed in to law the CARES Act also known as the Paycheck Protection Program to support small businesses who have been affected by the virus.
The following are the aspects of the Paycheck Protection Plan as we have interpreted in the CARES Act. These are subject to change upon guidance from the SBA and the U.S. government.
1. Who Is Eligible? Each of the following as of 2/15/2020
- Small businesses, 501(c)(3) nonprofit, a 501(c)(19) veteran’s organization, or Tribal business concern described in section 31(b)(2)(C) of the Small Business Act with not more than 500 employees, or the applicable size standard for the industry as provided by SBA, if higher.
- Traditional small business with employees and subcontractors i.e. Sub Chapter S Corporations, Partnerships, LLC’s.
- Sole-proprietors, independent contractors, and self-employed individuals.
2. What is needed to determine Eligibility?
Business must be operational as of February 15, 2020 and had employees for whom it paid salaries and payroll taxes, or a paid independent contractor.
3. What is the allowable use of proceeds?
Allowed uses of the loan include eligible payroll support (eligible employee salaries limited to compensation of $100,000 in wages, paid sick or medical leave, insurance premiums), interest paid on a mortgage (excludes any prepayment of or payment of principal) or rent, and utility payments.
4. What is the interest rate?
Maximum 4% – Currently proposed at a .5% (a half percent)
5. Are personal guarantees required?
6. Other Conditions and Requirements
Eligible borrowers will be required to make a good faith certification that the loan is necessary due to the uncertainty of current economic conditions caused by COVID-19; they will use the funds to retain workers and maintain payroll, lease, and utility payments; and are not receiving duplicative funds for the same uses from another SBA program.
7. What will be the Application Document Checklist?
Here is a summary needed to process the SBA 7(a) relief loan:
- Completed Application
- Articles of Incorporation/Organization of each borrowing entity
- All owners Driver’s Licenses
- Payroll Expense verification documents to include:
- IRS Form 940 and 941
- W-2 & W-3 forms
- State Unemployment Form
- Payroll Summary Report with corresponding bank statement
- Breakdown of payroll benefits (vacation, group healthcare benefits, retirement benefits, etc.)
- 1099s (if Independent Contractor)
- Certification that all employees live within the United States. If any do not, provide a detailed list with corresponding salaries of all employees outside the United States
- Trailing twelve-month profit and loss statement (as of the date of application) for all applicants
- Most recent Mortgage Statement or Rent Statement (Lease)
- Most recent Utility Bills (Electric, Gas, Telephone, Internet, Water
The above checklist is subject to the final rules of documentation not yet released by the government and lending partners.
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