COVID-19 small business relief

Loans are available up to $2M per business, and you can qualify for up to $200,000 without a personal guarantee. However, for COVID-19 related loans, the loan amount has been capped at 6 months of working capital and it has been reported that the SBA has capped the loan amounts at $150,000 per applicant.

• (i) Any business with 500 or fewer employees (including employees of “affiliated” entities), (ii) any business which meets the SBA's size standards, (iii) any agricultural enterprise with 500 or fewer employees or (iv) any individual who operates under a sole proprietorship or as an independent contractor, in each case, that has been operating since January 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 PPP loan, provided the loans are not used for the same purpose, including for duplicative payroll costs, rent or utilities. 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 loan.
  
  
• Also, if you’ve received the EIDL advance of up to $10,000, that amount will not be subtracted from the amount forgiven under PPP. The Consolidated Appropriations Act, 2021, repealed the prior requirement for PPP borrowers to deduct the amount of their EIDL advance from their PPP forgiveness amount.

• 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. 

• You can apply directly at the SBA website.
• The application deadline for the Emergency EIDL Grant and the Targeted EIDL Advance is December 31, 2021.

Emergency EIDL Grant: You'll just need your credit score (or an alternative appropriate method to determine your ability to repay) and the new self-certification form — no tax returns required.

Targeted EIDL Advance: The SBA may require any information, including tax records, as deemed necessary to verify that the applicant meets the requirements.

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. Processing of Targeted EIDL Advances will take priority over Emergency EIDL Grants.

The maximum loan amount of a first-time loan under PPP is the lesser of $10M or 2.5 times the average monthly payroll costs² paid or incurred during a covered period³. Whether or not subject to affiliation rules or eligible for affiliation waivers, businesses that are part of a single corporate group⁴ may not receive more than $20 million of PPP loans in the aggregate. It is an applicant’s responsibility to notify the lender of a violation of such limit in an application or loans received and to withdraw or request cancellation of any pending application or approved loan.

The maximum loan amount of a second draw PPP loan is the lesser of $2M or 2.5 times the average monthly payroll costs paid or incurred during a covered period³; except that a business with NAICS code beginning in 72 (i.e., businesses in the accommodation and food service industry) may receive a second draw loan up to the lesser of $2M or 3.5 times the average monthly payroll costs² paid or incurred during the calendar year 2020 or, at the election of the borrower, the calendar year 2019. Businesses that are part of a single corporate group⁴ may not receive more than $4M of second draw PPP loans in the aggregate. See SBA Guidance on How to Calculate First Draw PPP Loan Amounts and Second Draw PPP Loan Amounts.

Borrowers who returned all or part of their PPP loan may reapply for the maximum amount applicable (so long as they have not received forgiveness). Additionally, existing borrowers who would have been eligible to receive an increased loan amount under the latest rules (reflecting the Consolidated Appropriations Act, 2021) will be eligible to reapply for the difference regardless of whether the loan has been fully disbursed.

For independent contractors, self-employed individuals and sole proprietors, see the following regarding maximum loan amount and loan forgiveness: Treasury Guidance as well as the loan application forms and loan forgiveness forms found at the SBA website.

² _{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, including housing stipend, allowance provided to an employee as part of compensation, and all cash compensation (but all compensation must be capped at $100K on an annualized basis for each employee, as prorated for the period during which the payments are made or the obligation to make the payments is incurred) – provided that non-cash benefits, including the following, exceeding $100K may be included in the calculation of Payroll Costs:}

     <sub>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 (e.g., group life, disability, vision, or dental insurance), 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 (e.g., group life, disability, vision, or dental insurance), including insurance premiums;
6. Payment of any retirement benefit; and
7. Payment of state and local taxes assessed on employee compensation.</sub>

_{For an independent contractor, self-employed individual or sole proprietor, Payroll Costs consist of: Wage, commissions, income, or net earnings from self-employment or similar compensation. (but all compensation must be capped at $100K on an annualized basis); provided that the share of payroll costs that represents compensation of the owner may be based on either (x) net profit or (y) gross income; provided, further, that the individual’s total compensation may not exceed $100K on an annualized basis, as prorated for the period during which the payments are made or the obligation to make the payments is incurred.  See Guidance regarding independent contractors, self-employed individuals and sole proprietors as well as the loan application forms and loan forgiveness forms found at the SBA website.
In all cases, payroll costs that are qualified wages taken into account in determining the Employer Retention Credit are not eligible for loan forgiveness}

<sub>3 In general, borrowers can calculate their aggregate payroll costs using a covered period of either, at the borrower’s election, the calendar year 2020 or the calendar year 2019; provided that second draw borrowers who are not self-employed, sole proprietorships or independent contractors are also permitted to use the 1-year period before the date on which the loan is made. For seasonal employers, the covered period to calculate the average monthly payroll costs is any 12-week period (at applicant’s election) between 2/15/2019 and 2/15/2020. For an applicant that was not in business for the one-year period preceding 2/15/2020, the average monthly payroll costs is calculated by dividing the payroll costs by the number of months in which those payroll costs were paid or incurred.

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 customary 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).

4 Businesses are part of a single corporate group if they are majority owned, directly or indirectly, by a common parent.</sub>

• First Draw Loan: (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 3 in What is the maximum loan amount? for calculations of average number of employees), (ii) any business that meets the SBA's industry based size standards or the alternative size standard5, 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 applicant must have been operating on February 15, 2020 (or, for a seasonal business, must have been in operation for any 12-week period between February 15, 2019 and 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 the Treasury’s FAQ above for more details (including sample application of affiliation exemptions to hotel and restaurant businesses).
  
  
• Second Draw Loan: Any first draw PPP borrower (i) with less than 300 employees, (ii) that has used or will use the full amount of the first draw PPP loan (on eligible expenses) before receipt of the second loan, (iii) that demonstrates at least a 25% reduction in gross receipts⁶ during at least one quarter of 2020 relative to the same quarter in 2019 (except (a) if you were not in business prior to Q3 2019, then relative to Q3 or Q4 2019, (b) if you were not in business prior to Q4 2019, then relative to Q4 2019, or (c) if you were not in business in 2019, then relative to Q1 2020). Businesses with multiple locations that qualified under the initial PPP requirements may apply for a second draw loan if they employ not more than 300 employees per physical location. Affiliation rules and the waiver of such rules that apply to first draw PPP loans apply to second loans with the modification that a business (together with its affiliates) must have not more than 300 employees.

• An independent contractor, eligible self-employed individual or sole proprietor (with no employees), who was in operation on February 15, 2020 (or, for a seasonal business, who was in operation for any 12-week period between February 15, 2019 and February 15, 2020) is eligible for PPP loans. The following are not eligible for any PPP loans: (1) recipients of the Shuttered Venue Operator Grants and (2) publicly traded companies. The following are not eligible for second draw PPP loans:  applicants with one or more board members resident in the People’s Republic of China (PRC) or with 20% or more direct or indirect ownership by a PRC or Hong Kong (HK) company (or by a company with significant operations in the PRC or HK).
  
  
• Student loan debt delinquency will no longer be a disqualifier to participating in the PPP. Non-citizen small business owners who are lawful U.S. residents will have access to the PPP by using the Individual Taxpayer Identification Number (ITIN) to apply.

• Any borrower that receives a PPP loan is eligible for loan forgiveness up to the full principal amount of the loan and any accrued interest, provided, however, that if less than 60% of the loan proceeds were spent on payroll costs, the maximum forgiveness amount shall be reduced such that the amount actually spent on payroll costs constitutes 60% of the maximum forgiveness amount. The amount of forgiveness is reduced proportionally by, first, any decrease in total employee salaries or wages (excluding any other forms of compensation and any employees with annualized compensation over $100K during 2019) exceeding 25% and, second, any decrease in average monthly number of FTE employees (i.e., employee who works 40 hours or more, on average, each week), in each case, during the applicable 8-24 weeks (as determined by borrower) after lender’s first disbursement of the loan relative to a reference period⁷. Compensation reduction is applied on a per employee basis, not in the aggregate. To ensure that borrowers are not doubly penalized, the compensation reduction applies only to the portion of the decline in employee compensation that is not attributable to the FTE reduction. See Loan Forgiveness Guidance/FAQs for further details. Borrowers can correct reductions in payroll that occurred from February 15 through April 26, 2020 by rehiring or remedying compensation by December 31, 2020 (or, with respect to a loan made after December 27, 2020, not later than the last day of the applicable 8-24-week period) to receive full loan forgiveness – based on the latest guidance, this corrective measure does not seem to be available for reductions in compensation or FTEs that occurred before February 15 or after April 26, 2020. Also, borrowers are exempt from the proportional reduction in loan forgiveness due to a reduction in FTEs (Safe Harbor), if the borrower is able to document in good faith that for the period between February 15 and December 31, 2020 (or, with respect to a loan made after December 27, 2020, ending on the last day of the applicable 8-24-week period), the borrower was unable to: (a) rehire employees who had been employed on February 15, 2020, and hire similarly qualified employees for unfilled positions by December 31, 2020 (or, with respect to a loan made after December 27, 2020, on or before the last day of the applicable 8-24-week period); or (b) return to the same level of business activity at which the borrower was operating before February 15, 2020, due to compliance with requirements or guidance issued by the Secretary of Health and Human Services, the Director of the Centers for Disease Control and Prevention, or the Occupational Safety and Health Administration between March 1 and December 31, 2020 (or, with respect to a loan made after December 27, 2020, ending on the last day of the applicable 8-24-week period), relating to standards of sanitation, social distancing, or other worker or customer safety requirements related to COVID-19. A borrower may exclude any reduction in FTE employee headcount attributable to an employee if the employee declines the borrower’s good faith, written offer to restore the reduction in hours and compensation to the same amount as was earned by the employee in the last pay period prior to the reduction in hours. When an employee of the borrower is fired for cause, voluntarily resigns, or voluntarily requests a reduced schedule during the covered period (FTE reduction event), the borrower may count such employee at the same full-time equivalency level before the FTE reduction event when calculating the FTE employee reduction penalty. A borrower with a loan of $50,000 or less, other than any borrower that together with its affiliates received first draw loans totaling $2 million or more or second draw loans totaling $2 million or more, is exempt from any reductions in loan forgiveness amount based on reductions in FTE employees or reductions in employee salary or wages that would otherwise apply. For independent contractors, self-employed individuals and sole proprietors, gross income is an alternative to net profit as a basis to calculate loan forgiveness amount – see the following for details: Treasury Guidance as well as the loan application forms and loan forgiveness forms found at the SBA website.
  
  
• Borrowers may apply for an EIDL loan in addition to a loan under the PPP, provided the loans are not used for the same purpose, including for duplicative payroll costs, rent or utilities. 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 loan.

• The requirement to deduct the amount of EIDL advance received by a borrower from the PPP forgiveness amount has been repealed and no longer applies. Borrowers will be made whole if they received forgiveness and their EIDL was deducted from that amount.

_{5  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.}

_{6 Gross receipts is roughly equivalent to revenue (but expressly excludes any forgiveness amount of a first draw loan received in 2020). The receipts of all affiliates are required to be aggregated.  As a result, unless the Treasury/SBA issues contrary guidance, it appears that organizations will be eligible for second draw loans based on the revenues of their entire affiliated group.}

_{For example, an applicant that meets the receipt standard individually does not appear to qualify if its affiliates’ receipts offset the applicant’s receipts to prevent the affiliated group from meeting the 25% threshold.  Similarly, an applicant that does not meet the receipt standard individually appears to qualify if its affiliates suffered significant reductions in receipts that would bring down the affiliated group’s total to meet the 25% threshold.}

_{7 The Reference Periods for:}

_{-Reductions in Compensation is the most recent full quarter during which the employee was employed before the covered period; and}

_{-Reductions in FTEs is (i) between 2/15/2019 and 6/30/2019, or (ii) between 1/1/2020 and 2/29/2020, or (iii) alternatively for seasonal employers, either of the two preceding methods or any consecutive 12-week period (at borrower’s election) between 2/15/2019 and 2/15/2020.}

No collateral or personal guarantee required and no requirement to show that you were not able to obtain credit elsewhere.

• 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 (visit SBA Lender Match or view lenders near you on a map.)
  
  
• 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.
  
  
• The forgiveness process for loans under $150,000 has been simplified such that: (i) the borrower may submit a one-page certification that includes the number of employees the borrower was able to retain because of the loan, the estimated total amount of the loan spent on payroll costs, and the total loan amount and (ii) the borrower attests that borrower accurately provided the required certification and complied with PPP loan requirements. Borrowers are required to retain relevant records related to employment for four years and other records for three years.
  
  
• The application deadline is March 31, 2021.

Per the latest SBA guidance, the following documents and information are required, however, as guidance and process continues to be refined, the lender processing your application will be best positioned to provide more details on what's needed.

For Loan Application

• Loan Application form (in which borrower must make a good-faith certification concerning the necessity of its loan request; provided, however, that, with respect to a first draw loan, any borrower that, together with its affiliates, received PPP loans with an original principal amount of less than $2 million will be deemed to have made the required certification concerning the necessity of the loan request in good faith and the certification will not be audited).  If an independent contractor, a self-employed individual or a sole proprietor elected to use gross income (instead of net profit) to calculate its loan amount on the first draw loan, and it reported more than $150,000 in gross income, then the foregoing $2 million safe harbor will not apply.
  
  
• 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, including (1) documents showing that the business was in operation as of 2/15/2020, (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)) and (3) for a Second Draw loan, documents demonstrating a gross receipts reduction of at least 25%, such as annual tax forms, quarterly financial statements or bank statements. For loans with a principal amount of $150,000 or less, such documentation is not required at the time the borrower submits its application for a loan, but must be submitted on or before the date the borrower applies for loan forgiveness.

• Documentation supporting the payroll costs used to calculate the loan amount.

For Loan Forgiveness Application

• Loan Forgiveness Application form: A borrower may use Form 3508EZ instead of the standard form (i) if the borrower had no employees at the time of the PPP loan application and did not include any employee salaries in the computation of payroll in the loan application or (ii) if no reduction in forgiveness amount will apply to the borrower. A borrower may use Form 3508S only if (i) the borrower received a PPP loan of $50,000 or less and (ii) the borrower, together with its affiliates, received PPP loans totaling less than $2 million. For PPP loans under $150,000, the borrower may submit a one-page application and the SBA may not require additional materials unless necessary to substantiate revenue loss requirements or satisfy relevant statutory or regulatory requirements. For second draw PPP loans over $150,000, the borrower must submit its loan forgiveness application for the first draw PPP loan before or simultaneously with the loan forgiveness application for the second draw PPP loan, even if the calculated amount of forgiveness on the first draw PPP loan is zero.

• 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 and other covered expenses for the applicable forgiveness period (e.g., the applicable 8-24-week period) following the loan disbursement, such as cancelled checks, payment receipts, transcripts of accounts, purchase orders, orders, and invoices.
  
  
• To the extent the exemption from reduction in loan forgiveness due to FTE reduction (i.e., Safe Harbor) applies, good faith documentation evidencing that for the period between February 15 and December 31, 2020 (or, with respect to a loan made after December 27, 2020, not later than the last day of the applicable 8-24-week period), the borrower was unable to: (a) rehire employees who had been employed on February 15, 2020, and hire similarly qualified employees for unfilled positions by December 31, 2020 (or, with respect to a loan made after December 27, 2020, on or before the last day of the applicable 8-24-week period); or (b) return to the same level of business activity at which the borrower was operating before February 15, 2020, due to compliance with requirements or guidance issued by the Secretary of Health and Human Services, the Director of the Centers for Disease Control and Prevention, or the Occupational Safety and Health Administration between March 1 and December 31, 2020 (or, with respect to a loan made after December 27, 2020, not later than the last day of the applicable 8-24-week period), relating to standards of sanitation, social distancing, or other worker or customer safety requirements related to COVID-19.

• See Loan Forgiveness Application forms and instructions and consult your lender for details on necessary documentation.

SBA loans have typically taken about 45 days to process. However, PPP loans are applied directly with SBA-approved lenders and 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 SBA’s prior approval. For loan forgiveness, lenders must issue a decision within 60 days of receiving the loan forgiveness application.