Tenant and Business Partners Resources
The Coronavirus Aid, Relief, and Economic Security (CARES) Act has appropriated more than $350 billion in funds for small businesses. To help you understand and determine the potential options for your business, we've outlined two options for financial relief, both administered through the U.S. Small Business Administration (SBA).
This information is not intended as financial, legal, or tax advice. See Disclaimer. Readers should seek specific financial, legal, and/or tax advice from a qualified professional before acting with regard to the subjects mentioned herein.
Additional Highlights from the CARES Act
Over $300B in relief for individuals is comingAmerican singles making $99k or less, or households making $198k or less, should see funds in the coming weeks.
Businesses are getting a tax breakCertain business and income taxes will be deferred, and the extended due date to file a 2019 tax return is July 15, 2020. The ability to use certain tax benefits such as net operating losses (NOLs) and alternative minimum tax (ATM) credits has also been refined with an aim to provide near-term liquidity.
Plus, additional support for our communitiesThere will be vastly expanded unemployment benefits, support for our healthcare system, and more.
Understanding the new loans
You can apply for both EIDL and PPP loans as long as they do not pay for the same expenses. Before taking both, talk to your lender or a financial advisor.
The overall package is pending further guidance from the Small Business Administration (SBA), but there are steps to take now. While your circumstances may affect your loan eligibility, we hope this informational resource helps you better determine whether to pursue these options and we encourage you to seek personalized advice from your lender or qualified professionals.
Notice: The SBA is currently not accepting new applications for the Paycheck Protection Program (PPP) or the Economic Injury Disaster Loan (EIDL)-COVID-19 related assistance program (including EIDL Advances) due to depletion of appropriated funding for such programs. Congress has passed legislation appropriating additional funds, which the president has signed into law. The SBA intends to resume accepting PPP loan applications on Monday, April 27, from approved lenders on behalf of any eligible borrower.
Option 1 - Economic Injury Disaster Loans ("EIDLs")
Get a $10,000 advance in 3 days or less
The Economic Injury Disaster Loan (EIDL) is an emergency program intended to offer small business loans up to $2M (with an interest of 3.75% and a repayment term up to 30 years) to cover ordinary and necessary business expenses during certain disasters and emergencies. It also includes a grant for eligible businesses to receive a cash advance of up to $10,000 that you're not required to repay.
Note, however, that the SBA has notified some applicants recently that due to a large volume of applications and in order to ensure that the greatest number of applicants can receive assistance, (i) the SBA will make initial loan disbursements for 2 months of working capital up to a maximum of $15K per applicant (in addition to the advance up to $10K) and (ii) the advance will provide $1K per employee up to a maximum of $10K based on the number of your employees as of January 31, 2020.
Who should consider EIDL?
Smaller businesses who require less cash
Loans are available up to $2M per business. You may want to consider this option if you have high additional costs to cover in addition to payroll. You can qualify for up to $200k without a personal guarantee. There have been reports, however, that the SBA has recently capped the loan amounts at $15,000.
Businesses who need immediate cash
If the 3-day $10,000 disbursement will help you pay payroll, provide sick leave, or finance debt, you may want to consider this option.
- Across all 50 states, any business with 500 or fewer employees (including employees of “affiliated” entities) or which meets the SBA's size standards that has been operating since Jan 31, 2020 and has been adversely impacted by COVID-19 is eligible. Certain restrictions may apply if you have affiliates or outside investors.
- Borrowers may apply for an EIDL loan in addition to a loan under the Paycheck Protection Program, provided the loans are not used for the same purpose, including for payroll costs, rent or utilities.
- Also, if you’ve received the EIDL advance of up to $10,000, that amount will be subtracted from the amount forgiven under PPP.
Are there any collateral, personal guarantee or credit requirements?
- Under the CARES Act, loans up to $200,000 can be approved without a personal guarantee.
- No collateral is required for loans up to $25,000. For loans exceeding $25,000, general security interest in business assets will be used for collateral instead of real estate.
- Under the CARES Act, the requirement to show that you could not receive funding from another lending institution has been waived.
What's the application process?
- The advance application is available online through the SBA’s application portal.
- If you have previously applied under the old application form, you'll need to reapply for the advance now that the system is updated with a streamlined application.
- The application deadline is December 31, 2020.
- We anticipate that there will be high demand for these loans and they will be granted on a first-come, first-served basis, so if you are interested, we recommend that you apply as soon as you are able.
What paperwork will I need?
You'll just need your credit score and the new self-certification form—no tax returns required.
How soon will I see relief?
The $10,000 grant was intended to be administered within 3 days of submitting your application. Additional loan relief is being offered on a first come, first serve basis to businesses across all 50 states, so you may see longer wait times for loans.
Recent reports suggest that it may take multiple weeks for loan applications to be processed and approved.
Option 2 - Paycheck Protection Program ("PPP")
Get 8 weeks of operating expenses back
The Paycheck Protection Program (PPP) offers approved business owners 100% federally guaranteed loans up to $10M (with an interest rate capped at 1.00% and a 2-year repayment term) and forgives up to the amount spent on certain operating expenses (including payroll, rent, and utilities) during the first 8 weeks after lender’s first disbursement of loan. At least 75% of the loan proceeds must be spent on payroll costs and at least 75% of the forgiven amount must be for payroll costs. Any non-forgiven amounts can be deferred by 6 months (with interest accruing during deferment).
Who should consider PPP loans?
Medium-sized businesses who need more cash
The maximum loan amount under PPP is the lesser of $10M per business or 250% of the average monthly payroll costs* during a covered period**, while the EIDL program is capped at $2M.
Businesses with high payroll costs
A business with high payroll costs* will be able to take out a larger loan, and can get 8 weeks of most operating expenses back, subject to possible reductions, if any (see Who's eligible?).
* Payroll Costs consist of:
1. Compensation to employees (whose principal place of residence is the U.S. but excluding payments to independent contractors and sole proprietors) in the form of salary, wages, commissions, or similar compensation (capped at $100K on an annualized basis for each employee) – provided that non-cash benefits, including the following, exceeding $100K may be included in the calculation of Payroll Costs;
a. employer contributions to defined-benefit or defined-contribution retirement plans;
b. payment for the provision of employee benefits consisting of group health care coverage, including insurance premiums; and
c. payment of state and local taxes assessed on compensation of employees;
2. Cash tips or equivalent;
3. Payment for vacation, parental, family, medical, or sick leave;
4. Allowance for severance/separation or dismissal;
5. Payments required for the provisions of group health care benefits including insurance premiums;
6. Payment of any retirement benefit; and
7. Payment of state and local taxes assessed on employee compensation.
For an independent contractor or sole proprietor, Payroll Costs consist of: Wage, commissions, income, or net earnings from self-employment or similar compensation.
** Per the Treasury’s guidance: In general, borrowers can calculate their aggregate payroll costs using data either from the previous 12 months or from calendar year 2019. For seasonal businesses, the applicant may use average monthly payroll for the period between 2/15/2019, or 3/1/2019, and 6/30/2019. An applicant that was not in business from 2/15/2019 to 6/30/2019 may use the average monthly payroll costs for the period 1/1/2020 through 2/29/2020.
Borrowers may use their average employment over the same time periods to determine their number of employees, for the purposes of applying an employee-based size standard. Alternatively, borrowers may elect to use SBA’s usual calculation: the average number of employees per pay period in the 12 completed calendar months prior to the date of the loan application (or the average number of employees for each of the pay periods that the business has been operational, if it has not been operational for 12 months).
- (i) Any business with less than 500 employees (including FT and PT employees of the business as well as employees of “affiliated” entities, if any, but excluding independent contractors and sole proprietor – see footnote ** in Who should consider PPP loans? for calculations of average number of employees), (ii) any business that meets the SBA's industry based size standards or the alternative size standard*, or (iii) any single business entity in the hospitality/food services industries that employs not more than 500 employees per physical location, provided that in each case of (i), (ii) and (iii), the business must have been operating on February 15, 2020 and must have had employees for whom it paid compensation and payroll taxes. Certain restrictions may apply if you have affiliates or outside investors, except that affiliate restrictions are waived for (a) any business operating as a franchise that is assigned a franchise identifier code by the SBA (e.g., if a franchise brand is listed on the SBA Franchise Directory, its franchisor or each of its franchisees meeting one of the foregoing eligibility requirements may apply for a PPP loan, provided that the $10M cap on PPP loans is a limit per franchisee entity, and each franchisee is limited to one PPP loan), and (b) any business entity in the hospitality/food services industries with not more than a total of 500 employees (e.g., if each hotel or restaurant location owned by a parent business is a separate legal business entity, each hotel or restaurant location that employs not more than 500 employees is permitted to apply for a separate PPP loan provided it uses its unique EIN). See Treasury’s FAQ above for more details (including sample application of affiliation exemptions to hotel and restaurant businesses).
- Any individual who operates under a sole proprietorship or as an independent contractor or eligible self-employed individual and who was in operation on February 15, 2020 is also eligible for the PPP loan.
- Any borrower that receives a PPP loan is eligible for loan forgiveness. The amount of forgiveness is reduced proportionally by any decrease in total employee compensation (excluding employees with annualized compensation over $100K during 2019) exceeding 25% or in average monthly number of FTE employees during the first 8 weeks after lender’s first disbursement of the loan relative to a recent comparison period. Companies can correct past reductions in payroll by rehiring or remedying compensation by June 30, 2020 to receive full loan forgiveness.
- If you received an EIDL loan between January 31, 2020 and April 3, 2020, you can apply for a PPP loan, however, if the EIDL was used for payroll costs, any PPP loan you receive must be used to refinance the EIDL.
- If you’ve received the EIDL advance of up to $10,000, that amount will be subtracted from the amount forgiven under PPP. You can take out a state bridge loan and still be eligible for the PPP loan.
A business that meets both tests in SBA’s “alternative size standard” as of March 27, 2020:
1. Maximum tangible net worth of the business is not more than $15 million; and
2. The average net income after Federal income taxes (including 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.
Are there any collateral, personal guarantee or credit requirements?
No collateral or personal guarantee required and no requirement to show that you were not able to obtain credit elsewhere.
What's the application process?
- As of April 3, 2020, you can apply directly with any number of SBA-approved lenders, including any federally insured depository institution, federally insured credit union, and Farm Credit System institution, that is participating in the PPP (see the most active SBA lenders and use the SBA’s lender match tool). The number of available lenders is expected to increase to meet the demand.
- Talk to your current lenders (or to an SBA-approved lender) as soon as possible to understand the requirements. Many banks are SBA-approved lenders, and if you have an account or an existing small business banking relationship with them, it may expedite your verification process. If you wish to begin preparing your application, you can review the application form to see the information that will be requested from you.
- The application deadline is June 30, 2020.
- We anticipate that there will be high demand for these loans and, although applications will be accepted through June 30, 2020, they will be granted on a first-come, first-served basis, so if you are interested, we recommend that you apply as soon as you are able.
What paperwork will I need?
Per the latest SBA guidance, the following documents and information are required, however, as guidance and process continues to be ironed out, the lender processing your application will be best positioned to provide more details on what's needed.
For Loan Application
- Application form (which contains the borrower certifications)
- Details of any SBA Economic Injury Disaster Loan (EIDL) received between January 31, 2020 and April 3, 2020
- List of affiliates (if the business or any owner of the business is an owner of any other business or under common management with any other business)
- Documents supporting eligibility: (1) documents showing that the business was in operation as of 2/15/2020 and (2) documents showing that the business either had employees for whom it paid salaries and payroll taxes or paid independent contractors, as reported on a Form 1099-MISC, in each case on or around 2/15/2020 (such as payroll processor records, payroll tax filings, or Form 1099- MISC, or income and expenses from a sole proprietorship (and if such documentation is not available, other supporting documentation, such as bank records, sufficient to demonstrate the qualifying payroll amount)).
- Documentation supporting the payroll costs used to calculate the loan amount.
For Loan Forgiveness Application
- Documentation/records showing use of proceeds for payroll costs.
- Documentation verifying the number of full-time equivalent employees on payroll as well as the dollar amounts of payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities for the 8-week period following the loan must be provided to the lender.
How soon will I see relief?
Loans from the SBA have historically taken about 45 days. Although we are hopeful that funds will be distributed faster, the high volume of applications may slow the process. The CARES Act removed some steps ordinarily associated with SBA loan approval to help expedite relief, including allowing approved lenders to make decisions on applications without having to back to the SBA for approval. The SBA is also bringing on new lending partners to try and help with quicker fund dispersal. For loan forgiveness, lenders must issue a decision within 60 days of receiving the loan forgiveness application.
Tax Specific FAQs
SBA Loan Guidance and Resources
Visit The Small Business Administration (SBA) for updated guidance on COVID-19 resources.
Business Resources by State
See a list of state, local and private resources available to small businesses. This list will be continuously updated as new programs and information become available.
Webinar: Financial Relief Opportunities for Small Businesses
Brookfield Properties and Covington hosted an informational call to help our tenants better understand the federal relief provided for small businesses pursuant to the CARES Act.
This call provides initial, specific information about how to potentially access these loan programs, the criteria for eligibility, and addresses other key questions.
If you have additional questions, please reach out to your Brookfield Properties contact.
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