By Kyle Bryant, CPA, Founding Partner — Tax and Business Consulting Services
Although some of this information is subject to change, we wanted to provide an update about existing and pending programs that offer support for small businesses during the COVID-19 pandemic.
Program #1: (Currently Live)
SBA COVID-10 Economic Injury Disaster Loan (EIDL)
Amount: Up to $2 Million
Implementation: Directly from SBA (link below)
Rate:
Small Businesses 3.75%
Non-Profits: 2.75%
Terms: Up to 30 Years (Actual terms determined on a case-by-case basis based on borrower’s ability to repay)
Collateral: SBA will take what collateral is available (potentially including real estate), but loan does not have to be fully secured.
Our take: This is a true loan program with what seems to be lesser qualification and application requirements. The payment terms are advantageous compared to those readily available in the commercial market. The application process is lighter than a normal SBA loan, and it seems that funds are being implemented and funded rather quickly.
Additional resources:
Proposed Program #2: (Awaiting Approval from House of Representative – Expected Friday)
SBA Keeping American Workers Paid and Employed Act
*IMPORTANT*
The information noted below is tentative and subject to change, but represents aspects of the currently proposed framework.
The program is broken up into a few divisions but provides roughly $377 Billion in funds.
The Paycheck Protection Program would provide up to 8 weeks of cash-flow assistance through 100% federally guaranteed loans to small employers who maintain their payroll during the emergency. If the employer maintains payroll, then the portion of the loan used for “covered payroll costs,” interest on mortgage obligations, rent, and utilities would be forgiven (I suspect that there may be limits to the forgiveness, so please understand that full details on forgiveness are not yet available… but any level of debt forgiveness can certainly be advantageous).
The proposal would be retroactive to February 15th, to help bring workers who may have already been laid off back onto payrolls.
Our take: This bill is not yet law. Once approved, the SBA will have to adopt and implement the noted changes. Additionally, the SBA will have to instruct the lenders as to the streamlined process. Given the urgency behind these actions, it is expected that once (if) approval is provided, the aforementioned adoption and implementation will be rapid, but an exact timeframe is unknown.
Additional information: SBA Division One-Pager (PDF)
Paycheck Protection Program
(Note: Part of Program #2)
Eligibility:
Small Businesses (500 or fewer employees)
Self-employed individuals / “gig-economy” individuals
Some non-profits, including 501(c)(3) and 501(c)(19)
Amount: Up to 250% of average monthly payroll (maximum of $10 million); covered payroll costs include salary, wages, payment of cash tips, employee group health care benefits, insurance premiums, retirement contributions, and covered leave
Cost: Cost of participation could be offset with fee waivers
Payment: Deferment of up to 1 year
Implementation: Available almost immediately (once finalized and approved) from SBA-certified lenders through a streamlined process
Our take:
The bill would further expand eligibility for entities suffering harm due to COVID-19 to access SBA’s EIDL (Program #1 above)
The bill would allow for expedited access to capital for those who apply for EIDL of up to $10,000 in Emergency Grant funds available within 3 days to maintain payroll, provide paid sick leave, and service other debt obligations.
Additional information: https://www.sba.gov/page/coronavirus-covid-19-small-business-guidance-loan-resources
Check back for more information and updates surrounding accounting implications of COVID-19. If you have questions surrounding any of these programs, contact us.