Header of PDF guidance from Sen. Cardin on CARES Act

Important information for small business survival during the COVID-19 pandemic

Things are moving fast and it can be confusing for business. Anyone that tried to initially apply for a SBA Disaster Loan endured an online system crashing, only to be replaced by a file upload feature for PDF documents without any quick response or follow-up.

That seems to be changing and every organization under 500 employees, for-profit and non-profit, impacted by the COVID-19 pandemic should consider applying NOW for an Economic Injury Disaster Loan to get an Emergency Economic Injury Grant for $10,000 be paid within 3 days. Additionally, there are some other programs you need to consider next.

Emergency Economic Injury Grant

Last night, the Small Business Administration notified businesses that had previously set-up an online account for disaster relief loans that there was an “opportunity to get up to a $10,000 Advance on an Economic Injury Disaster Loan (EIDL). This Advance may be available even if your EIDL application was declined or is still pending.” A decision is promised within 3 days, but payouts might take longer.

If you’re interested, go here and fill out this quick form now — https://covid19relief.sba.gov/#/

It only takes minutes. Beside your basic identifying business and personal information, be prepared to answer the following:

• Gross Revenues for the Twelve(12) Month Prior to the Date of the Disaster (January 31, 2020). This should be your top line sales receipts

• Cost of Goods Sold for the Twelve(12) Month Prior to the Date of the Disaster (January 31, 2020). Based on a SBA training PDF, you can calculate this using the following definition: Total expenditure for inventory items which customers buy. Cost of Goods Sold consists of the cost of purchasing the items, freight, manufacturing costs, modification costs, and packaging. For services, this is the cost of providing the services, including labor, material used, and transportation

 Your bank’s routing number and your bank account number. TIP: If this last screen has you stuck, double-check for a red bar next to a required field. For the bank account number, one applicant had to enter zeroes before the actual account number until the red bar turned green, then was able to complete the application.

By completing this application, you have also started the process for an Economic Injury Disaster Loan. If you tried before, that’s okay. You don’t have to accept the loan, but at least you’ll have the option if you need it.

While more information is expected from the SBA, possibly daily, for now one of the leading guidances on the CARES Act appears to be the The Small Business Owner’s Guide to the CARES Act from Senator Ben Cardin (D-Md.) and the U.S. Senate Committee on Small Business and Entreprenuership. Here’s some highlights:

Economic Injury Disaster Loans (EIDL)

The $10,000 advance at the top of this article is part of the SBA’s Economic Injury Disaster Loan program and according to the guide: ” may be used to keep employees on payroll, to pay for sick leave, meet increased production costs due to supply chain disruptions, or pay business obligations, including debts, rent and mortgage payments.”

Based on previous requirements, these are loans up to $2 million at lower interest rates and repayment terms of up to 30 years.

Paycheck Protection Program (PPP)

This is the program that can turn a loan into a grant for 8 weeks of payroll, mortgage/rent and utilities. NOTE: Just because there is a grant opportunity here, cash flowing employees who don’t have work to perform still creates an initial outlay and compliance work for your business. With the recent expansion of unemployment benefits, many employees will have a chance to made whole on their income for up to 9 months.  

These loans run through an approved SBA 7(a) lender — jump to page 30 of this PDF or here’s a shorter list of the most active ones from August 2019 — to see lenders in Omaha, NE.

Here’s the short explanation, ” 100 percent federally guaranteed loans to employers who maintain their payroll during this emergency. If employers maintain their payroll, the loans would be forgiven, which would help workers remain employed, as well as help affected small businesses and our economy snap-back quicker after the crisis.

PPP has a host of attractive features, such as forgiveness of up to 8 weeks of payroll based on employee retention and salary levels, no SBA fees, and at least six months of deferral with maximum deferrals of up to a year,” according to the guide. Here’s key details:

• Retroactive to Feb. 15, 2020, available through June 30, 2020

• Any business under 500 employess, including nonprofits (501c3 and 501c19, charitable and religious), independent contractors and eligible self-employed individuals

• Loan size determination

  • If you were in business February 15, 2019 – June 30, 2019: Your max loan is equal to 250 percent of your average monthly payroll costs during that time period. If your business employs seasonal workers, you can opt to choose March 1, 2019 as your time period start date.
  • If you were not in business between February 15, 2019 – June 30, 2019: Your max loan is equal to 250 percent of your average monthly payroll costs between January 1, 2020 and February 29, 2020.

• If you took out an Economic Injury Disaster Loan (EIDL) between February 15, 2020 and June 30, 2020 and you want to refinance that loan into a PPP loan, you would add the outstanding loan amount to the payroll sum

• Costs not eligible include employee/owner compensation over $100,000 and qualified sick and family leave from Families First Coronavirus Response Act

• Forgiveness on a covered loan is equal to the sum of payroll costs incurred plus mortgage/rent or utilities during the covered 8 week period compared to the previous year or time period. Application for forgiveness will be made through the lender institution

• Any loan amounts not forgiven are carried forward as an ongoing loan with max terms of 10 years, at a maximum interest rate of 4%, slightly higher than an EIDL. Principal and interest will continue to be deferred, for a total of 6 months to a year after disbursement of the loan. The clock does not start again.

• You will likely need the advice of an attorney and a CPA to process an application for forgiveness. Please consult with a professional before completing a PPP application.

Stay tuned and we’ll continue to update this post as we receive more guidance.