CARES ACT 2 Advisory MCBL disseminates information as
CARES ACT “ 2”
Advisory: MCBL disseminates information as updates are available from: SBA. GOV USTreasury. gov Hawai’i Congressional Delegates also provide timely updates and informational webinars. Please visit their sites.
The Cares Act includes 3 major fund programs tailored to businesses injured by Covid 19 • Economic Injury Disaster Loan (aka EIDL and EIDL-Covid 19) • EIDL Loan Advance (aka EIDL LA and 10 k Grant) • Paycheck Protection Program (PPP)
CARES ACT “ 1” “Our nation's small businesses are facing an unprecedented economic disruption due to the Coronavirus (COVID-19) outbreak. On Friday, March 27, 2020, the President signed into law the CARES Act, which contains $376 billion in relief for American workers and small businesses. ” Source: sba. gov
CARES ACT “ 2” (in billions): $26 ‐ Safety Net (e. g. expanded State Unemployment Benefits) $43. 7 ‐ Education/Other $153. 5 ‐ Public Health $377 ‐ Small Businesses (EIDL, Loan Advance and PPP) $560 – Individuals (aka $1, 200 one‐time check) $500 – Non‐small Businesses
SOLE PROPRIETORS, PARTNERSHIPS AND CORPORATIONS (including Non‐Profits) are eligible: • Tax‐exempt corporations exempt under section 501(c)(3) of the Internal Revenue Code (IRC), • Tax‐exempt Veterans organizations exempt under in section 501(c)(19) of the IRC, and • Tribal business concerns exempt under section 31(b)(2)(C) of the Small Business Act
What are the Size Rules for Businesses to Qualify for PPP? • 500 or less employees, or • A business which does not exceed the maximum revenue limit for its industry according to SBA Size Standards IN ADDITION, as of March 27, 2020 (alternative size standard): • (1) Maximum tangible net worth of the business is not more than $15 million; and • (2) The average net income after Federal income taxes (excluding any carry‐ over losses) of the business for the two full fiscal years before the date of the application is not more than $5 million.
SBA SIZE STANDARDS TOOL The SBA Size Standards are used to determine a firm’s eligibility to compete for Government contracts. https: //www. sba. gov/size‐standards/
Size Standards Used To Define Small Business Concerns What size standards has SBA identified by North American Industry Classification System (NAICS) Business Size Standards by NAICS Industry NAICS codes NAICS U. S. industry title Size standards in millions of dollars Size standards in number of employees Subsector 486—Pipeline Transportation 486110 486210 486990 Subsector 487—Scenic and Sightseeing Transportation 487110 487210 487990 Pipeline Transportation of Crude Oil Pipeline Transportation of Natural Gas Pipeline Transportation of Refined Petroleum Products Scenic and Sightseeing Transportation, Land Scenic and Sightseeing Transportation, Water Scenic and Sightseeing Transportation, Other 1, 500 $30. 0 1, 500 $8. 0
NAICS codes Subsector 486—Pipeline Transportation 486110 486210 486990 Subsector 487—Scenic and Sightseeing Transportation 487110 487210 487990 NAICS U. S. industry title Pipeline Transportation of Crude Oil Pipeline Transportation of Natural Gas Pipeline Transportation of Refined Petroleum Products Scenic and Sightseeing Transportation, Land Scenic and Sightseeing Transportation, Water Scenic and Sightseeing Transportation, Other Size standards in millions of dollars Size standards in number of employees 1, 500 $30. 0 1, 500 $8. 0
US TREASURY FAQ – 4/26/2020 QUESTION: “Does my business have to qualify as a small business concern (as defined in section 3 of the Small Business Act, 15 U. S. C. 632) in order to participate in the PPP? ANSWER: No. In addition to small business concerns, a business is eligible for a PPP loan if • the business has 500 or fewer employees whose principal place of residence is in the United States, or • the business meets the SBA employee‐ based size standards for the industry in which it operates (if applicable). ”
OTHER FACTORS USED TO MEASURE SIZE: Eectronic Code of Federal Regulations e-CFR data is current as of April 24, 2020 Title 13 → Chapter I → Part 121 • Affiliation – Ownership interests including individual shareholders and size/revenue of other firms who have a controlling interest • Primary Industry *There is a process for Firms to contest SBA’s size determination.
Applicants MUST go to your bank’s website to view their requirements and application steps. Basic documents will include the items listed below. Individual Banks will provide their own detailed list and instructions for their customers: 1. Articles of Incorporation or Articles of Organization and any amendments 2. By Laws or Operating Agreements and any amendments 3. Registration of Trade Name – if doing business under a trade name 4. Federal and State ID numbers 5. Reports generated through business’ accounting software (or manually calculated) which show average monthly payroll and paid payroll liabilities for 12‐ month period prior to Jan. 2020 (or from Jan. 1‐ Feb. 15 for new businesses).
Non‐bank lenders are being approved by the SBA. Those that we can verify clients who have successfully applied (funded) so far include: • • Pay. Pal Intuit Square Up Kabbage Beware of fraudulent non‐bank lenders. See SBA. GOV for a list of approved Lenders.
SBA Economic Injury Disaster Loans: • The SBA helps businesses year‐round with business training, guidance, financial assistance and more. • The Economic Injury Disaster Loan (EIDL) is one of several programs available to small U. S. businesses in times of hardship. • See other disaster assistance programs at SBA. GOV
EIDL - Covid 19 • A special EIDL program has been created specifically in response to the extra‐ordinary hardships caused by Covid 19. • Typically, EIDL funds can be used to pay fixed expenses such as rent, insurance, salaries, wages, long and short‐ term liabilities (including payroll) and other bills. • EIDL ‐ Covid 19 contains enhance features, including a $10 K advance and extended repayment terms.
The EIDL – Covid 19 EIDL Loan Advance (10 K) EIDL (up to 2 million) • ONE Loan Application is used to apply for two funds: EIDL and EIDL Loan Advance • The Loan Advance is for up to $10, 000 and does not need to be re‐paid (also called the “$10 Grant”) • The Paycheck Protection Loan (PPP) is not a feature of EIDL. Apply for PPP through participating Banks.
The EIDL – Covid 19 EIDL Loan Advance (10 K) EIDL (up to 2 million) • For any small business with less than 500 employees (including sole proprietorships, independent contractors and self‐employed persons). • Private non‐profit organization or 501(c)(19) veterans organizations. • Businesses in certain industries may have more than 500 employees if they meet the SBA’s size standards for those industries.
The EIDL – Covid 19 EIDL Loan Advance (10 K) EIDL (up to 2 million) Additional guidance for faith‐ based organizations can be found and downloaded at: https: //www. sba. gov/sites/default/files/2020‐ 04/SBA%20 Faith‐Based%20 FAQ%20 Final. pdf
To apply for EIDL and EIDL Loan Advance, visit the SBA. The Application and instructions are at: https: //www. sba. gov/
More than 5, 000 disaster loans made to date!
Ways to apply: 1. Online: Go to SBA. gov and follow the link at the top of the page to apply 2. In‐person: Once Disaster Recovery Centers open, SBA staff will be on hand to assist you 3. By mail: Download paper forms at: https: //disasterloan. sba. gov/ela/Information/Paper. Forms 4. Call us at 1‐ 800‐ 659‐ 2955 ‐ Disaster Customer Service
FAQs Q: Where/how do I specify the amount of funds that our business needs? A: Once you submit the EIDL application, the SBA will determine 1) if your business is eligible and 2) the loan amount your business qualifies for. Q: Can we just apply for the 10 K Loan Advance and not the full EIDL Loan? A: The EIDL Loan Advance requires completion of the EIDL Application. You may decline the EIDL Loan and only choose the Advance if you prefer. Or, you can decline both. Q: What’s the difference between a “Loan Advance” and a “Grant”? A: In the case of the EIDL‐Covid 19, there is no difference. The Loan Advance does not have to be re‐paid under any circumstance.
FAQs Q: Will our credit impact eligibility? A: The SBA requires a satisfactory credit history and will use all of the information submitted to in order to make a determination. Q: How long will we have to repay the loan? A: 15 to 30 years is the window for repayment; however, specific repayment schedules will be determined on a case‐by‐case basis. Q: What’s the difference between a “Loan Advance” and a “Grant”? A: In the case of the EIDL‐Covid 19, there is no difference. The Loan Advance does not have to be re‐paid under any circumstance.
LOAN ADVANCE UPDATE(S) LOAN ADVANCE UPDATE AS OF THURSDAY, 4/9/2020 To ensure that the greatest number of applicants can receive assistance during this challenging time: • The amount of the Advance will be determined by the number of the small business’ pre‐disaster (i. e. , as of January 31, 2020) employees. • The Advance will provide $1, 000 per employee up to a maximum of $10, 000.
FAQs Credit Requirements: Credit History – Applicants must have a credit history acceptable to SBA. Repayment – Applicants must show the ability to repay the loan. Collateral – Collateral is required for all EIDLs over $25, 000. SBA takes real estate as collateral when it is available. SBA will not decline a loan for lack of collateral, but SBA will require the borrower to pledge collateral that is available. Interest Rates: 3. 75% for private businesses and 2. 75 for non‐profits
Now let’s see what the EIDL online application looks like, as well as the additional forms that may be requested.
SBA Form 5
SBA Form 5
SBA Form 5
SBA Form 5
PAYROLL PROTECTION PROGRAM PPP The Paycheck Protection Program (PPP) provides rapid funding to small businesses in the form of a forgivable loan. • Small businesses began applying on April 3. • Self‐employed (aka Freelancers, Independent Contractors) began applying on April 10 • Program open until June 30, 2020
PAYROLL PROTECTION PROGRAM PPP • Loan amounts up to 10 million • No Collateral or Personal Guarantee • No Fees • 1% Interest Rate • No Payments for 6 Months
PPP Loan amounts will be forgiving as long as: • If approved, loan proceeds can be used to cover payroll costs, most mortgage interest, rent, and utility costs over the 8‐week period following dispersement of the loan to the borrower.
PPP Loan Forgiveness (no need to pay back) • Use 100% of funds for payroll = 100% forgiven • Use up to 75% for payroll = 75% forgiven • Use balance of 25% for other expenses = 25% must be re-paid.
Applicants are to apply through their own banks (first). Visit your bank/lenders website so see if they are participating. • If they are not participating: https: //www. sba. gov/paycheckprotection/find? page Number=1 • Due to high volume, delays/system downtimes are occurring
DOCUMENTS REQUIRED FOR PPP: Sole Proprietors, Independent Contractors, Self‐Employed 1. Sole proprietors – provide IRS form 1040 Schedule C and Schedule SE 2. If the applicant does not have the above documentation, the applicant may be asked to provide other supporting documentation to its lender (i. e. bank statements and other records sufficient to demonstrate the qualifying payroll amount
Small Businesses (fewer than 500 employees) • Date of incorporation/formation; need to be in business as of Feb 15, 2020 • Business Legal Name & Address • DBA or Tradename • Business TIN • Business phone • Primary contact
• Applicant ownership • NAICS code • Number of employees(not including independent contractors), who reside in the U. S. (no H-2 employees) • Dollar amount of average monthly payroll costs for the preceding calendar year • Wages • Payroll taxes
• Payroll processor records (if used) • Payroll tax filings • IRS Form 941 (quarterly wages) • IRS Form 944 (calendar year wages) • Healthcare costs paid by employer • Principal place of business in Hawaii
Hawaii Resource Partners can assist you with questions and direct you to Resource Partner offices on your island: www. hisbdc. org www. hawaii. score. org https: //hilo. hawaii. edu/vboc/ www. mcblhawaii. org
For help from the Patsy T. Mink Center for Business & Leadership Contact us at mcbl@ywcaoahu. org 30 minute consultations available via Phone, Zoom, Microsoft Teams and Skype Due to the high volume of requests, appointments will be scheduled in order received.
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