PREPARING APPLYING FOR THE SBAS PAYCHECK PROTECTION PROGRAM

PREPARING & APPLYING FOR THE SBA’S PAYCHECK PROTECTION PROGRAM

DISCLAIMER This training is brought to you by the South-West Texas Border SBDC Network as a public service. It is not designed as a substitute for legal or tax advice, nor is it a comprehensive statement of the law.

NETWORK Supports a 79 -county SBDC Network covering the following areas: • • • San Antonio Alpine Austin Corpus Christi Eagle Pass • • • El Paso Laredo Rio Grande Valley San Angelo Victoria

San Antonio MBDA, COVID-19 Business Resilience Center (210) 458 -2480 sanantonio. MBDACenter. com

PRESENTER NESTOR ASTORGA Accountant & Auditor, Certified Mediator, Business Owner Senior Business Advisor Helping clients to explore: Access to Capital: Traditional & Non Traditional Funding Sources INCOME Alternatives PROFIT Alternatives NESTOR ASTORGA UTSA SBDC COVID BUSINESS RECOVERY ACCELERATOR

COVID BUSINESS RECOVERY ACCELERATOR SBDC COVID Business Recovery Accelerator (210) 458 -2272 businessrecovery@utsa. edu Monday - Friday 8: 00 am - 5: 00 pm CST Relief Rebooting Recovery Resiliency

OUR SERVICES Services provided: Business One-on. One Counseling Business Training, Events & Information

DEFINITIONS OF RESILIENCY • The capacity to recover quickly from difficulties • The ability to spring back into shape; elasticity

PAYCHECK PROTECTION PROGRAM (PPP)

TODAY’S PROGRAM • Overview • ACT 1: Applying for the 2021 PPP • ACT 2: Use of Funds • ACT 3: Requesting Forgiveness • Other Related Information • References and Guidance

2021 PPP OVERVIEW

2021 PPP OVERVIEW LOAN CAN BE FORGIVEN IF MEETS PPP FORGIVENESS GUIDANCE Was Reopened on 2021 Will close on 03/31/21 Came as 1 st Draw and 2 nd Draw (further details) Has more Non-Payroll Concepts eligible forgiveness (further details) Is Processed thru an Authorized SBA Lender Eligibility & In. Eligibility –Detailed & New SBA Controls (further details) 1 st Draw, 2 nd Draw and Forgiveness are established in New Separate Regulations Updated New Forgiveness Application Forms 3508, 3508 ez & 3508 s

2021 PPP OVERVIEW CONT. . SEASONAL BUSINESSES MAY QUALIFY YOU WERE IN OPERATION ON 02/15/20 How Much I Can Borrow – New Specifics Interest Rate @ 1% // Term: Max 5 Yrs No Collateral No Personal Guarantee Shuttered Venue Operators Grant EIDL No cost to apply No obligation to take the loan if offered Potential Increases

2021 PPP OVERVIEW CONT. . 1 st & 2 nd Draw NEW: Non-Payroll Concepts eligible for FORGIVENESS Covered Operations Expenditures Covered Property Damage Costs Covered Supplier Costs Covered Worker Protection Expenditures

2021 PPP OVERVIEW CONT. . ELIGIBILITY on the st 1 Draw i. You, together with any affiliates are: • A SMALL BUSINESS CONCERN under the applicable revenue-based size standard established by SBA or under the SBA alternative size standard , OR, • You are AN INDEPENDENT CONTRACTOR, eligible SELF-EMPLOYED individual, or SOLE PROPRIETOR; OR You are a BUSINESS CONCERN, AND ii. You WERE IN OPERATION ON February 15, 2020, AND either • had employees for whom you paid salaries and payroll taxes or • paid INDEPENDENT CONTRACTORS, as reported on a Form 1099 -MISC or • you were an eligible SELF-EMPLOYED individual, INDEPENDENT CONTRACTOR, or SOLE PROPRIETORSHIP with no employees. THERE ALSO INDUSTRY-SPECIFIC ELIGIBILTY ISSUES to be considered.

2021 PPP OVERVIEW CONT. . 1 st Draw ELIGIBILITY – New Additions & More Details Tax-Exempt Non. Profits Tax-Exempt Veterans Organizations Tribal Business Concern Housing Cooperatives Destination Marketing Organizations Certain News Organizations Partnerships

2021 PPP OVERVIEW CONT. . 1 st Draw ELIGIBILITY – New Additions & More Details Seasonal Businesses - Dormant or not fully operating Hospitals owned by Governmental Entities Legal Gambling Certain Electric Cooperatives Certain Telephone Cooperatives 501©(6) Organizations

2021 PPP OVERVIEW CONT. . 2 nd Draw ELIGIBILITY BUSINESS CONCERN INDEPENDENT CONTRACTOR Eligible Self-employed individual Sole Proprietor Nonprofit organization eligible for 1 st draw PPP Veterans Organization Tribal Business Concern Housing Cooperative Small Agricultural Cooperative Eligible 501©(6) organization or Destination Marketing Organization Eligible Nonprofit news organization

2021 PPP OVERVIEW CONT. . ELIGIBILITY on the st 2 2 nd Draw CAUSES You have to had received previously a PPP FIRST DRAW, AND • have used or will use the full amount of the initial PPP loan • for authorized purposes • on or before the expected date of disbursement of the Second Draw PPP Loan • You have 300 or fewer employees and • You experienced a revenue reduction in 2020 relative to 2019 of at least 25% A BORROWER TEMPORARILY CLOSED or TEMPORARILY SUSPENDED REMAINS ELIGIBLE FOR A SECOND DRAW PPP

2021 PPP OVERVIEW CONT. . In-ELIGIBILITY on the x. st 1 & nd 2 Draw CAUSES 1 st & 2 nd Draw An entity that, together with its domestic and foreign affiliates, does not meet the 500 -employee, 300 -employee, or other applicable PPP size standard. xi. Entities that use PPP funds to support non-U. S. workers or operations. xii. The applicant or the owner of the applicant becomes the debtor in a bankruptcy proceeding after submitting a PPP application but before the loan is disbursed, xiii. A HEDGE FUND or PRIVATE EQUITY FIRM xiv. Business is DEBARRED OR SUSPENDED TO SELL TO THE GOVERNMENT xv. Suspended or Debarred to do business with the Government; which can become a federal criminal act for misrepresentations for not disclosing being debarred. xvi. YOU APPLIED AND GOT MORE THAN 1 PPP

2021 PPP OVERVIEW CONT. . 1 st & 2 nd Draw NEW: IN-ELIGIBILITY – Additions & More Details ILLEGAL ACTIVITY Incarcerated, Felony, Crime HOUSEHOLD EMPLOYER Delinquent on SBA or Federal Loans Or Defaulted within last 7 years Business was NOT in operation on 02/15/20 President, Vice President, Member of Congress, etc. Business Permanently Closed with no intention of reopening Shuttered Venue Operators Grant Program Political or Lobbying Activities A Permanently closed entity Issuer of Securities Bankruptcy

2021 PPP OVERVIEW CONT. . 2 nd Draw NEW: IN-ELIGIBILITY – Additions & More Details AN ENTITY THAT HAS PREVIOUSLY RECEIVED A PPP 2 ND DRAW CREATED IN OR ORGANIZED UNDER THE LAWS OF CHINA OR HONG KONG Has significant operations with China or Hong Kong Owns or Holds directly or indirectly not less than 20 % or retains as a member of the board of directors, a person who is resident of China Persons required to submit a registration statement of the Foreign Agents Registration Act Receives a Grant for the Shuttered Venue Operators Political Controlling Interest

2021 PPP OVERVIEW CONT. . 2 nd Draw 2021 2 ND DRAW PPP INELIGIBILITY on the First Draw very possible will affect an ineligibility on a Second Draw. An entity that is ineligible to receive a First Draw PPP Loan under the CARES Act or Consolidated First Draw PPP IFR is also ineligible for a Second Draw PPP Loan Subsection (e)(1) ensures that a borrower that received a First Draw PPP Loan despite being ineligible to receive the loan is not eligible to receive a Second Draw PPP Loan.

2021 PPP OVERVIEW CONT. . 2021 2 ND DRAW PPP INELIGIBILITY • Delinquent or defaulted on federal loans is a cause • Businesses not in operation on or before 02/15/20, • Businesses exceeding the 500 employee limit • SBA will make a publication soon about the reasons for eligibility. 2 nd Draw

2021 PPP OVERVIEW CONT. . NEW: st 1 Draw & nd 2 Draw PPP’s - DIFFERENCES 1 ST DRAW SBA ACT 7(a)(36) Who can Apply: 1 st Time Applicants, that did not receive a First Draw 01/13/21 SBA Procedural Notice 500020076 provides additional situations 2 ND DRAW SBA ACT 7(a)(37) Who can Apply: Borrowers that previously received a PPP and Have used or will use the full amount of the initial PPP for authorized purposes on or before the expected date of disbursement of the 2 nd Draw PPP

2021 PPP OVERVIEW CONT. . NEW: st 1 Draw & nd 2 Draw PPP’s - DIFFERENCES 1 ST DRAW 2 ND DRAW Employs not more than 300 employees Experienced a 2020 25% reduction in revenue Form to Apply: 2483 -SD

2021 PPP OVERVIEW CONT. . NEW: st 1 Draw & nd 2 Draw PPP’s - DIFFERENCES 1 ST DRAW – CALCULATION MAX AMOUNT 2 ND DRAW – CALCULATION MAX AMOUNT Most Useful for MOST APPLICANTS In General Self-Employed w/w. o. Employees Seasonal Employers Self-Employed Farmers & Ranchers w/w. o. Employees Partnerships w/w. o. Employees Single Corporate Group

2021 PPP OVERVIEW CONT. . NEW: 1 st Draw & 2 nd Draw PPP’s - DIFFERENCES 1 ST DRAW – CALCULATION MAX AMOUNT 2 ND DRAW – CALCULATION MAX AMOUNT S Corporations C Corporations Nonprofit Organizations Nonprofit Religious Institutions Veteran Organizations Tribal Businesses LLC Owners NAICS Code 72

2021 PPP OVERVIEW CONT. . NEW: st 1 Draw & nd 2 Draw PPP’s - DIFFERENCES 1 ST DRAW – CALCULATION MAX AMOUNT 2 ND DRAW – CALCULATION MAX AMOUNT Borrower that did not exist during the 1 year period preceding 02/15/20 BUT was in operation on 02/15/20 (“new entity”) Corporations or Nonprofits NOT IN OPERATION for the full 1 -year preceding 02/15/2020

ACT 1: APPLYING FOR THE 2021 PPP

(a) Reduction in Revenue in 2020 min 25% It is measured as follows: (1) the applicant had GROSS RECEIPTS during the first, second, third, or fourth quarter in 2020 that demonstrate at least a 25 percent reduction from the applicant’s GROSS RECEIPTS during the same quarter in 2019 (for example, an applicant that had GROSS RECEIPTS of $50, 000 in the second quarter of 2019 and had GROSS RECEIPTS of $30, 000 in the second quarter of 2020 experienced a 40 percent revenue reduction between these two quarters);

Reduction in Revenue in 2020 min 25% (2) If the applicant was not in business during the first or second quarter of 2019, but was in business during the third and fourth quarters of 2019, the applicant had GROSS RECEIPTS during the first, second, third, or fourth quarter of 2020 that demonstrate at least a 25 percent reduction from the applicant’s GROSS RECEIPTS during the third or fourth quarter of 2019 (for example, an applicant that had GROSS RECEIPTS of $50, 000 in the third quarter of and had GROSS RECEIPTS of $30, 000 in the third quarter of 2020–demonstrating a percent from the applicant’s GROSS RECEIPTS during the third quarter in 2019); 2019 reduction of 40

Reduction in Revenue in 2020 min 25% (3) if the applicant was not in business during the first, second, or third quarter of 2019, but was in business during the fourth quarter of 2019, the applicant had GROSS RECEIPTS during the first, second, third, or fourth quarter of 2020 that demonstrate at least a 25 percent reduction from the fourth quarter of 2019 (for example, an applicant that had GROSS RECEIPTS of $50, 000 in the fourth quarter of 2019 and had GROSS RECEIPTS of $30, 000 in the fourth quarter of 2020–demonstrating a reduction of 40 percent from the applicant’s GROSS RECEIPTS during the fourth quarter in 2019); or

Reduction in Revenue in 2020 min 25% (4) If the applicant was not in business during 2019, but was in operation on February 15, 2020, the applicant had GROSS RECEIPTS during the second, third, or fourth quarter of 2020 that demonstrate at least a 25 percent reduction from the GROSS RECEIPTS of the entity during the first quarter of 2020 (for example, an applicant that had GROSS RECEIPTS of $50, 000 in the first quarter of 2020 and had GROSS RECEIPTS of $30, 000 in the fourth quarter of 2020 – demonstrating a reduction of 40 percent from the applicant’s GROSS RECEIPTS during the first quarter in 2020).

(b) Reduction in Revenue in 2020 min 25% An applicant that was in operation in all four quarters of 2019 is deemed to have experienced the revenue reduction in subsection (c)(1)(iv)(A)(1) if it experienced a reduction in annual receipts of 25 percent or greater in 2020 compared to 2019 and the borrower submits copies of its annual tax forms substantiating the revenue decline

Gross Receipts (i) GROSS RECEIPTS INCLUDE All revenue in whatever form received or accrued (in accordance with the entity’s accounting method) from whatever source, including from the sales of products or services, interest, dividends, rents, royalties, fees, or commissions, reduced by returns and allowances. Generally, receipts are considered “total income” (or in the case of a sole proprietorship, independent contractor, or self-employed individual “gross income”) plus “cost of goods sold, ” and excludes net capital gains or losses as these terms are defined and reported on IRS tax return forms.

Gross Receipts GROSS RECEIPTS do not include the following: taxes collected for and remitted to a taxing authority if included in gross or total income (such as sales or other taxes collected from customers and excluding taxes levied on the concern or its employees); proceeds from transactions between a concern and its domestic or foreign affiliates; and amounts collected for another by a travel agent, real estate agent, advertising agent, conference management service provider, freight forwarder or customs broker. All other items, such as subcontractor costs, reimbursements for purchases a contractor makes at a customer's request, investment income, and employee-based costs such as payroll taxes, may not be excluded from GROSS RECEIPTS.

Gross Receipts (Specific Cases) (ii) GROSS RECEIPTS OF AFFILIATES (iii) For an eligible nonprofit organization, a veterans organization, an eligible nonprofit organization, an eligible 501(c)(6) organization, or eligible destination marketing organization, (iv) The amount of any forgiven First Draw PPP Loan shall not be included toward any borrower’s GROSS RECEIPTS. news

FORM COMPARISON – RELEVANT DIFFERENCES 1 ST DRAW – SBA FORM 2483 2 ND DRAW – SBA FORM 2483 -SD Applicant (including affiliates, if applicable) Meets Size Standard (check one): q No more than 500 employees (or 300 employees, if applicable) q SBA industry size standards q SBA alternative size standard (Average Monthly Payroll) x 2. 5 + EIDL (Do Not Include Any EIDL Advance) equals Loan Request Amount: $$ (Average Monthly Payroll) x 2. 5 (or x 3. 5 for NAICS 72 applicants) equals Loan Request Amount (may not exceed $2, 000): $$

FORM COMPARISON – RELEVANT DIFFERENCES 1 ST DRAW – SBA FORM 2483 2 ND DRAW – SBA FORM 2483 -SD PPP First Draw SBA Loan Number Did the Applicant receive an SBA Economic Injury Disaster Loan between January 31, 2020 and April 3, 2020? If yes, provide details on a separate sheet identified as addendum B. Pag 2. Certification Bullet Point # 4) if NAICS 72, employs no more than 500 employees per physical location; Pag 2. Certification Bullet Point # 3) if NAICS 72, employs no more than 300 employees per physical location;

FORM COMPARISON – RELEVANT DIFFERENCES 1 ST DRAW – SBA FORM 2483 (5) A news organization that is majority owned or controlled by a NAICS code 511110 or 5151 employs no more than 500 employees per location (8) Any EIDL loan received by the Applicant (Section 7(b)(2) of the Small Business Act) between January 31, 2020 and April 3, 2020 was for a purpose other than paying payroll costs and other allowable uses for loans under the Paycheck Protection Program Rules. 2 ND DRAW – SBA FORM 2483 -SD (4) if a news organization that is majority owned or controlled by a NAICS code 511110 or 5151 employs no more than 300 employees per location

FORM COMPARISON – RELEVANT DIFFERENCES 1 ST DRAW – SBA FORM 2483 2 ND DRAW – SBA FORM 2483 -SD (3) The Applicant has realized a reduction in gross receipts in excess of 25% relative to the relevant comparison time period. For loans greater than $150, 000, Applicant has provided documentation to the lender substantiating the decline in gross receipts. For loans of $150, 000 or less, Applicant will provide documentation substantiating the decline in gross receipts upon or before seeking loan forgiveness for the Second Draw Paycheck Protection Program Loan or upon SBA request.

FORM COMPARISON – RELEVANT DIFFERENCES 1 ST DRAW – SBA FORM 2483 2 ND DRAW – SBA FORM 2483 -SD (4) The Applicant received a First Draw Paycheck Protection Program Loan and, before the Second Draw Paycheck Protection Program Loan is disbursed, will have used the full loan amount (including any increase) of the First Draw Paycheck Protection Program Loan only for eligible expenses.

FORM COMPARISON – RELEVANT DIFFERENCES 1 ST DRAW – SBA FORM 2483 2 ND DRAW – SBA FORM 2483 -SD #5 The Applicant has not and will not receive another loan under the Paycheck Protection Program, section 7(a)(36) of the Small Business Act (15 U. S. C. 636(a)(36)) (this does not include Paycheck Protection Program second draw loans, section 7(a)(37) of the Small Business Act (15 U. S. C. 636(a)(37)). # 7 The Applicant has not and will not receive another Second Draw Paycheck Protection Program Loan. #6 The Applicant has not and will not receive a Shuttered Venue Operator grant from SBA. #8 The Applicant has not and will not receive a Shuttered Venue Operator grant from SBA.

FORM COMPARISON – RELEVANT DIFFERENCES 1 ST DRAW – SBA FORM 2483 2 ND DRAW – SBA FORM 2483 -SD #11 CHINA & HONG KONG CERTIFICATIONS #12 The Applicant is not required to submit a registration statement under section 2 of the Foreign Agents Registration Act #13 The Applicant is not a business concern or entity primarily engaged in political or lobbying activities

ACT 2: USE OF ELIGIBLE FUNDS FORGIVENESS

PPP USE: PAYROLL COSTS • Salary, wages, commissions, or similar compensation; • Cash tips or the equivalent (based on employer records of past tips or, in the absence of such records, a reasonable, good-faith employer estimate of such tips); • Payment for vacation, PARENTAL, family, medical, or sick leave; • Allowance for separation or dismissal; • Payment for the provision of employee benefits consisting of group health care or group life, disability, vision, or dental insurance, including insurance premiums, and retirement; • Payment of state and local taxes assessed on compensation of employees;

PPP USE: PAYROLL COSTS For an INDEPENDENT CONTRACTOR or SOLE PROPRIETOR, • Wages, commissions, income, or net earnings from SELF-EMPLOYMENT, or similar compensation

PPP USE: NON-PAYROLL RENT Covered Operation Expenditures Covered Worker Protection Expenditures MORTGAGE INTEREST Covered Property Damage UTILITIES Covered Supplier Costs

ACT 3: REQUESTING FORGIVENESS

TIME TO SUBMIT THE FORGIVENESS APPLICATION A borrower may submit a loan FORGIVENESS application: • Any time on or before the maturity date of the loan • Within 10 months AFTER the last day of the maximum COVERED PERIOD of 24 weeks • If the borrower has used all of the loan proceeds for which the borrower is requesting FORGIVENESS, • Except that a borrower applying for FORGIVENESS of a SECOND DRAW PPP Loan that is more than $150, 000 must submit the loan FORGIVENESS application for its FIRST DRAW PPP Loan before or simultaneously with the loan FORGIVENESS application for its SECOND DRAW PPP Loan

FORMS TO APPLY FORGIVENESS 3508 ez 3508 s

OTHER RELATED INFORMATION

BOOKS & RECORDS • For loans of more than $150, 000, As noted on the loan FORGIVENESS application forms, the borrower must retain PPP documentation in its files for six years AFTER the date the loan is forgiven or re. PAID in full • For loans of $150, 000 and under, The borrower must retain records relevant to the form that prove compliance with the requirements of section 7(a)(36) or 7(a)(37), as applicable, of the Small Business Act • For employment records, For the 4 -year period following submission of the loan FORGIVENESS application, and • For other records, For the 3 -year period following submission of the loan FORGIVENESS application

PPP INCREASES

PPP INCREASES • According to IFR 01/06/21, D. 7; Seasonal Employers that received a PPP before 12/27/20 can apply for a Loan Increase in certain circumstances. • According to the 01/13/21 SBA Procedural Notice 20076 Section 313 of the Economic Aid Act changed the calculation of the maximum loan amount for certain FARMERS and RANCHERS may be able to request an Increase.

PPP INCREASES According to the 01/13/21 SBA Procedural Notice 20076 The following borrowers can reapply or request an INCREASE in their PPP loan amount: a. If a borrower returned all of a PPP loan, the borrower may reapply for a PPP loan in an amount the borrower is eligible for under current PPP rules. (See Correlation: 011321 SBA Procedural Notice 20076) b. If a borrower returned part of a PPP loan, the borrower may reapply for an amount equal to the difference between the amount retained and the amount previously approved. c. If a borrower did not accept the full amount of a PPP loan for which it was approved, the borrower may request an INCREASE in the amount of the PPP loan up to the amount previously approved.

VIOLATIONS

MISUSE OF THE PPP FUNDS If you use PPP funds for unauthorized purposes, SBA will direct you to repay those amounts. If you knowingly use the funds for unauthorized purposes, you will be subject to additional liability such as charges for fraud. If one of your shareholders, members, or partners uses PPP funds for unauthorized purposes, SBA will have recourse against the shareholder, member, or partner for the unauthorized use.

MISUSE OF THE PPP FUNDS If the applicant or the owner of the applicant becomes the debtor in a bankruptcy proceeding after submitting a PPP application but before the loan is disbursed, It is the applicant’s obligation to notify the lender and request cancellation of the application. Failure by the applicant to do so will be regarded as a use of PPP funds for unauthorized purposes.

APPEALS SEE: 08/11/20 IFR ON APPEALS

REFERENCES & GUIDES www. sba. gov https: //home. treasury. gov/policy-issues/cares/assistance -for-small-businesses

CONTACT US San Antonio MBDA, COVID-19 Business Resilience Center SBDC COVID Business Recovery Accelerator (210) 458 -2480 (210) 458 -2272 sanantonio. MBDACenter. com businessrecovery@utsa. edu Monday - Friday 8: 00 am - 5: 00 pm CST

QUESTIONS