*updated as of 04/09/20
Once the likelihood of a prolonged economic shutdown was imminent we immediately reached out to our banking team at Chase and our accounting team at BKD. We needed to gain a better understanding of the SBA loans that may be available to ourselves & fellow small business owners. Our accountant gave us the rundown of the approved 7(a) & 7(b) loan options know as the Paycheck Protection Program and the Economic Injury Disaster Loan respectively. Now that the Congress has passed the 2 Trillion dollar stimulus package, or CARE Act , businesses will be able to quickly get the necessary funding they need to cover critical expenses like payroll, rent, utilities & more during this unprecedented time of business disruption. Fed announces that $349 Billion has been set aside to create the Paycheck Protection Program. We compare the two options below and provide as many details that are currently available to us.
The following content was provided to us by Kimberly Flasch & Stephanie Ferguson of BKD and republished with their express permission.
Paycheck Protection Program –SBA 7(a) Loan:
Eligible businesses generally include those with no more than 500 employees, although businesses in the accommodation and food sector may have up to 500 employees in each of their physical locations. PPP is designed to incentivize companies to keep employees on staff. It is expected to move cash more quickly than the SBA’s other program, for faster economic relief. To calculate how much you will qualify for, you can use this spreadsheet template, that the SBA provided bankers/accountants & work with your accountant to figure out the right dollar amount.
*Update: Due to the overwhelming response, and poor execution banks of all sizes were flooded with applications. The backlog is causing excessive delays. We went through Chase and after a lot of confusion, we were able to apply on April 7th with our banker who after a lot of persistence found our claim number in the sea of applications.
*Eligible borrowers are expanded to include sole proprietors, independent contractors and eligible self-employed individuals. >>> Self-Employed Information Here
Economic Injury Disaster Loan – SBA 7(b) loan:
All US states and territories have declared disaster areas. Federally declared disaster areas have access to the EIDL program through SBA. The program provides funds up to $2 million at a 3.75% rate with a term of up to 30-years. Each loan is underwritten individually, and the amount granted and length of repayment is evaluated based on the business need and ability to repay. You can apply for this loan now – HERE .
Comparing The Two Loan Options
*Note- new interest minimum of 1% for the PPP program as of 04/05/2020
Our accountants recommended gathering any & all financial documentation you can prior to applying to make the process as painless as possible:
- Average monthly payroll – would base on 2019 where available or what you are still paying at a minimum
- Average monthly mortgage payments – P & I
- Average monthly rent payments
- Payments on other obligations during the prior year (Avg for seasonal businesses 3/1/19 to 6/30/19)
- Current financials – give them YTD 2020, if at all possible
- 2019 Tax Returns
- Payroll amounts or current YTD payroll
- Personal Financial Statements or similar statements
- SBA Form 5 – Disaster Business Loan Application
- SBA Form 413 – Personal Financial Statement
- SBA Form 1368 – Additional Filing Requirements providing monthly sales figures
- SBA Form 2202 – Schedule of Liabilities
- IRS Form 4506-T – Request for Transcript of Tax Return
- Most recent Federal income tax returns for the applicant business
- Truthful Information Certification
This blog post by Fortune also does a good job of breaking down the Paycheck Protection information and the best resource for the EDIL information is the SBA’s website.
The Families First Coronavirus Response Act
(IRS 2020-57) was signed by President Trump on March 18, 2020. The act is providing assistance to employees who have been diagnosed with Coronavirus or are having to care for a family member who has been diagnosed and is unable to work.
Paid Sick Leave for Workers
For COVID-19 related reasons, employees receive up to 80 hours of paid sick leave and expanded paid childcare leave when employees’ children’s schools are closed or child care providers are unavailable.
- Employers receive 100% reimbursement for paid leave pursuant to the Act.
- Health insurance costs are also included in the credit.
- Employers face no payroll tax liability.
- Self-employed individuals receive an equivalent credit.
For an employee who is unable to work because of Coronavirus quarantine or self-quarantine or has Coronavirus symptoms and is seeking a medical diagnosis, eligible employers may receive a refundable sick leave credit for sick leave at the employee’s regular rate of pay, up to $511 per day and $5,110 in the aggregate, for a total of 10 days. For an employee who is caring for someone with Coronavirus, or is caring for a child because the child’s school or child care facility is closed, or the child care provider is unavailable due to the Coronavirus, eligible employers may claim a credit for two-thirds of the employee’s regular rate of pay, up to $200 per day and $2,000 in the aggregate, for up to 10 days. Eligible employers are entitled to an additional tax credit determined based on costs to maintain health insurance coverage for the eligible employee during the leave period.
The above content was provided to us from our Austin Accounting team at BKD. We are not accountants and we advise consulting your tax or financial consultants for next steps. If you would like an introduction to BKD or Chase, please reach out to our team and we’d be happy to connect you.
WE ARE NOT LAWYERS OR A LAW FIRM AND WE DO NOT PROVIDE LEGAL, BUSINESS OR TAX ADVICE. NONE OF OUR REPRESENTATIVES ARE LAWYERS AND THEY ALSO DO NOT PROVIDE LEGAL, BUSINESS OR TAX ADVICE. THE ACCURACY, COMPLETENESS, ADEQUACY OR CURRENCY OF THE CONTENT IS NOT WARRANTED OR GUARANTEED. OUR SITES AND SERVICES ARE NOT SUBSTITUTES FOR THE ADVICES OR SERVICES OF AN ATTORNEY. WE RECOMMEND YOU CONSULT A LAWYER OR OTHER APPROPRIATE PROFESSIONAL IF YOU WANT LEGAL, BUSINESS OR TAX ADVICE.