The Coronavirus Aid, Relief, and Economic Security (CARES) Act, the Paycheck Protection Program and Health Care Enhancement Act, the Paycheck Protection Program Flexibility Act of 2020, the Consolidated Appropriations Act, 2021 and the American Rescue Plan Act of 2021 developed and/or appropriated funds for the Paycheck Protection Program (PPP), the Economic Injury Disaster Loans (EIDLs), including the EIDL grant program, the Restaurant Revitalization Fund (RRF) and the Shuttered Venue Operators Grant (SVOG). We have outlined these relief programs administered through the U.S. Small Business Administration (SBA).
This information is not intended as financial, accounting, legal, or tax advice. See Disclaimer. Readers should seek specific financial, accounting, legal, and/or tax advice from a qualified professional before acting with regard to the subjects mentioned herein.
Understanding the programs
March 2021 Updates:
- PPP funding formula for independent contractors, self-employed individuals, and sole proprietors has been revised to allow them to receive more financial support.
- 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.
- A supplemental Targeted EIDL Advance of $5,000 will be available to “severely impacted” small businesses.
While your circumstances may affect your loan eligibility, we hope this informational resource helps you better understand these programs and we encourage you to seek personalized advice from your lender and qualified professionals.
See below for general details about the two programs – for more details, see the Treasury’s PPP Guidance, Second Draw PPP Loan Guidance, and Treasury’s FAQ.
Economic Injury Disaster Loans ("EIDLs")
Get a $10,000 advance
The Economic Injury Disaster Loan (EIDL) is an emergency program intended to offer small business loans (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 included a grant up to $10,000 for eligible businesses (“Emergency EIDL Grant”).
Targeted EIDL Advance: Funds have been set aside for priority, targeted grants for small businesses (i) that have applied for an Emergency EIDL loan (including the Emergency EIDL Grant), (ii) with less than 300 employees, (iii) located in low-income communities and (iv) that suffered at least a 30% reduction in gross receipts during any 8-week period between March 2, 2020 and December 31, 2021 relative to a comparable 8-week period immediately preceding March 2, 2020, or during 2019. Eligible businesses will receive $10,000, regardless of whether they are approved for an EDIL loan, they accept the EDIL loan, or they previously received an EDIL loan, provided, however, that eligible businesses that have already received an Emergency EIDL Grant will receive the difference between $10,000 and the amount of the previously received grant. $5,000 supplemental grants will be available to “severely impacted” small businesses that (A) have suffered an economic loss of greater than 50%, (B) are located low-income communities and (C) have 10 or fewer employees.
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.
Paycheck Protection Program ("PPP")
Get up to 24 weeks of operating expenses back
The Paycheck Protection Program (PPP) offers approved business owners 100% federally guaranteed loans up to $10M for first-time borrowers (with a fixed, non-compounding interest rate capped at 1.00% and a repayment term of 5 years). The Consolidated Appropriations Act, 2021, permits certain eligible businesses to apply for a second draw PPP loan up to $2M.
The PPP forgives up to the amount spent (or incurred) on certain operating expenses1 during any period (determined by the borrower) ranging from 8 to 24 weeks following lender’s first disbursement of loan. The amount of forgiveness is subject to reductions, if any (see Who's eligible?).
Loan proceeds must be used for eligible operating expenses, including interests on debt obligations incurred before February 15, 2020, EIDL loan refinancing, payroll costs2 and other covered expenses1. In order to receive full loan forgiveness, at least 60% of the loan proceeds must be spent on payroll costs2 and up to 40% may be spent on nonpayroll costs. The loans can be deferred until the date on which the SBA remits the borrower’s loan forgiveness amount to the lender (with interest accruing during deferment), which can occur up to 90 days after forgiveness amounts are determined, or notifies the lender that no loan forgiveness is allowed. If a borrower fails to apply for loan forgiveness within 10 months after the last day of the applicable forgiveness period, the borrower must begin to make payments of principal, interest, and fees on its loan after such 10-month period. The repayment term of any loans made before June 5, 2020 is 2 years but borrowers and lenders may mutually agree to extend it to 5 years.
There are two set-asides (1) for small businesses with 10 or fewer employees and (2) for loans up to $250,000 to businesses located in low- to moderate-income (LMI) areas:
• $15 billion set-aside for initial PPP loans
• $25 billion set-aside for second draw PPP loans
1 (i) payroll costs (including compensation to furloughed employees, bonuses and hazard pay, in each case, up to $100K on an annualized basis), (ii) owner compensation replacement, (iii) rent obligations on real and personal property pursuant to agreements effective before 2/15/2020, (iv) utilities for services that began before 2/15/2020, and (v) interests on mortgage obligations on real or personal property incurred before 2/15/2020.
The Consolidated Appropriations Act, 2021, expanded the covered expenses to include the following and allows any PPP loans (whether made before or after the enactment of the Act (i.e., 12/27/2020)) to be eligible to utilize the expanded forgivable expenses, except the following items (2) through (5) may not apply to loans to which the borrower has already received loan forgiveness: (1) payroll costs now includes group life, disability, vision, and dental insurance benefits, (2) operations expenditures (e.g., payment for any software, cloud computing, and other human resources and accounting needs), (3) property damage costs (e.g., costs related to property damage due to public disturbances that occurred during 2020 that are not covered by insurance), (4) supplier costs (i.e., expenditures to a supplier pursuant to a contract, purchase order, or order for goods in effect prior to taking out the loan that are essential to the recipient’s operations at the time at which the expenditure was made, except supplier costs of perishable goods can be made before or during the life of the loan) and (5) worker protection expenditure (i.e., personal protective equipment (PPE) and adaptive investments to help a loan recipient comply with federal health and safety guidelines or any equivalent State and local guidance related to COVID-19 during the period between March 1, 2020, and the end of the national emergency declaration).
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:
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.
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
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.
- 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.
(See SBA’s PPP website for application forms and instructions for PPP loans and loan forgiveness.)
Restaurant Revitalization Fund (RRF)
The American Rescue Plan Act of 2021 allocated $28.6 billion to establish a new “Restaurant Revitalization Fund” (RRF) to be administered by the SBA. Under the program, the SBA will offer grants to eligible small and mid-sized restaurants and other food and drinking establishments, such as bars, lounges and caterers, and bakeries, breweries and wineries with sufficient on-site sales, that (a) are not permanently closed (i.e., a business is eligible for RRF if it is temporarily closed or opening soon (with expenses incurred as of March 11, 2021)) (b) as of March 13, 2020, own or operate (together with any affiliated businesses) no more than 20 locations (regardless of whether those locations do business under the same or multiple names), (c) are not publicly traded entities and (d) do not have a pending application for or have not received a “Shuttered Venue Operators” grant. A business operating as a franchise that (1) meets the Federal Trade Commission definition of a franchise and (2) is assigned a franchise identifier code by the SBA is eligible for the RRF – any brands not listed on the SBA directory must submit the Franchise Disclosure Document (or other agreement) and all other documents a franchisee is required to sign to email@example.com for review of SBA’s other eligibility criteria. $500 million has been set aside for applicants with 2019 gross receipts of not more than $50,000; an additional $5 billion has been set aside for applicants with 2019 gross receipts of not more than $500,000; and an additional $4 billion has been set aside for applicants with 2019 gross receipts from $500,001 to $1,500,000.
An eligible business may receive a tax-free federal grant equal to the amount of its “pandemic-related revenue loss,” calculated by (i) subtracting its 2020 gross receipts from its 2019 gross receipts minus (ii) any amounts received from the PPP First Draw and Second Draw loans in 2020 and/or 2021. When calculating the grant amount, the 2020 gross receipts (in part (i) of the calculation above) exclude any amounts received from any PPP loans, an Economic Injury Disaster Loan (EIDL), EIDL Advance, Targeted EIDL Advance, Randolph-Sheppard Act Financial Relief and Restoration Payments (FRRP) Appropriation or any state and local small business grants (via CARES Act or otherwise). The maximum grant amount for an eligible business and any affiliated businesses is $10 million, with a limitation of $5 million per physical location of the business. A business may apply for the RRF with a pending application for a PPP loan, however, any PPP loan received will affect the RRF funding calculation, and, under SBA’s guidance, upon applying for the RRF, the applicant should withdraw any outstanding PPP applications. An applicant is eligible for the RRF whether or not it has applied for or has received an Economic Injury Disaster Loan (EIDL), EIDL Advance or Targeted EIDL Advance. See cross-program eligibility.
- If the business was not in operation (i.e., was not making sales) for the entirety of 2019, the total eligible grant amount is (i) the difference between 12 times the average monthly gross receipts for 2019 and the gross receipts in 2020 (which 2020 gross receipts exclude any amounts received from any PPP loans, an Economic Injury Disaster Loan (EIDL), EIDL Advance, Targeted EIDL Advance, Randolph-Sheppard Act Financial Relief and Restoration Payments (FRRP) Appropriation or any state and local small business grants (via CARES Act or otherwise)) minus (ii) any amounts received from the PPP First Draw and Second Draw loans in 2020 and/or 2021.
- If the business opened (i.e., started making sales) between January 1, 2020 and March 10, 2021 or if the business has not yet opened (i.e., has not yet made any sales) as of the application date but, as of March 11, 2021, has incurred “eligible expenses,” it can receive a grant equal to (i) the amount of “eligible expenses” between February 15, 2020 and March 11, 2021 minus any of its 2020 and 2021 (through March 11, 2021) gross receipts (which 2020/2021 gross receipts exclude any amounts received from any PPP loans, an Economic Injury Disaster Loan (EIDL), EIDL Advance, Targeted EIDL Advance, Randolph-Sheppard Act Financial Relief and Restoration Payments (FRRP) Appropriation or any state and local small business grants (via CARES Act or otherwise)) minus (ii) any amounts received from the PPP First Draw and Second Draw loans in 2020 and/or 2021.
- Note: Day “in operation” means the day the entity started making sales.
The SBA will prioritize awarding funds to small businesses at least 51 percent owned and controlled by individuals who are women, veterans, and/or socially and economically disadvantaged individuals. SBA will consider an applicant to be eligible for priority in awarding funds if the applicant is a small business that is at least 51 percent owned by one or more individuals who are women, veterans, or socially and economically disadvantaged and if the management and daily business operations of the applicant are controlled by one or more women, veterans, or socially and economically disadvantaged individual.
Grants must be used by March 11, 2023 on eligible expenses incurred between February 15, 2020 and March 11, 2023. If the business permanently closes, the covered period will end when the business permanently closes or on March 11, 2023, whichever occurs sooner. Recipients that are unable to use all of the funds received on eligible expenses by the end of the covered period must return any unused funds to Treasury. Eligible expenses include payroll costs (including sick leave and costs related to the continuation of group health care, life, disability, vision, or dental benefits during periods of paid sick, medical, or family leave, and group health care, life, disability, vision, or dental insurance premium), principal or interest on mortgage obligations, rent, principal or interest on business debt service, utilities, maintenance expenses (including, without limitation, maintenance on walls, floors, deck surfaces, furniture, fixtures and equipment), construction of outdoor seating, business supplies (including protective equipment and cleaning materials), food and beverage expenses (including raw materials for beer, wine or spirits), certain covered supplier costs, day-to-day operational expenses (such as inventory, training, legal, marketing, insurance, licenses and fees), , and past-due expenses (if they were incurred beginning on February 15, 2020 and ending on March 11, 2023).
Three ways to apply: (1) Through a recognized SBA Restaurant Partner (2) through SBA directly at restaurants.sba.gov (3) telephonically at (844) 279-8898. For assistance preparing your application, you can access the following:
For more details, see Program Guide and look for updates on the SBA’s website as well as resources from the U.S. Chamber of Commerce and the Restaurants Act.
Shuttered Venue Operator Grant (SVOG)
The Consolidated Appropriations Act, 2021, allocated $15 billion and the American Rescue Plan Act of 2021 allocated an additional $1.25 billion for the SBA to offer grants to each eligible live venue operator or promoter, theatrical producer, live performing arts organization operator, museum operator, motion picture theatre operator, or talent representative that was fully operational on February 29, 2020 and who demonstrates at least a 25% reduction in gross earned revenues during at least one quarter of 2020 relative to the same 2019 quarter.
A business is ineligible (a) if it is a publicly traded company or is controlled by a publicly traded company, (b) received more than 10% of its gross revenue in 2019 from Federal funding (other than under the Robert T. Stafford Disaster Relief and Emergency Assistance Act) or (c) if it (or its majority owner) meets all three characteristics: (i) owns or operates venues in more than one country; (ii) owns or operates venues in more than 10 states; and (iii) employs more than 500 full-time employees (working 30 or more hours per week) as of February 29, 2020.
The SBA may make an initial grant of up to $10 million to an eligible applicant and a supplemental grant that is equal to 50% of the initial grant, provided the aggregate of the initial and supplemental grants may not exceed $10 million.
These grants must be used for specified expenses incurred between March 1, 2020, and December 31, 2021 (with an extended period for supplemental grants), such as payroll costs, rent, utilities, and personal protective equipment (PPE). Funds that are not used within one year of disbursement must be returned to the SBA.
If you receive this grant you may not apply for a new PPP loan.
Visit the SBA’s website for more details.
Tax Specific FAQs
Information relating to business tax provisions, social security tax deferral, and employee retention credit considerations under the CARES Act and Consolidated Appropriations Act, 2021, can be accessed here.
Business Tax Provisions FAQs
Social Security Tax Deferral FAQs
(6/5/2020 Update: Borrowers are eligible for both the payroll tax deferral and PPP loan forgiveness – the CARES Act has been amended to remove the prior restrictions on benefiting from both.)
Employee Retention Credit FAQs | IRS Summary and FAQs
Update Re: Consolidated Appropriations Act, 2021, and American Rescue Plan Act of 2021:
Employee Retention Tax Credit (ERTC)
- Beginning on January 1, 2021, and continuing through December 31, 2021, the credit will: (i) be available to offset 70% of each employee’s qualified wages (up from 50%); (ii) offset qualified wages up to $10,000 per employee per quarter (up from $10,000 per year); and (iii) allow group health plan expenses to be considered qualified wages, even when no other wages are paid to an employee.
- In effect, the maximum amount of ERTC available per employee is $28,000 ([$10,000 for Q1 + $10,000 for Q2 + $10,000 for Q3 + $10,000 for Q4] x 70%).
- Previously, employers who receive a PPP loan were not eligible for the ERTC. This has been changed such that employers can take advantage of both the PPP loan and the ERTC in 2020 and 2021 as long as the PPP loan and the ERTC do not cover the same payroll expenses.
- Overturning IRS’s previous determination, the Consolidated Appropriations Act, 2021, established that gross income does not include emergency EIDL grants and any amount that would otherwise arise from the forgiveness of a PPP loan. Deductions are allowed for otherwise deductible expenses paid with the proceeds of emergency EIDL grants or a PPP loan that is forgiven, and the tax basis and other attributes of the borrower’s assets will not be reduced as a result of the grant or loan forgiveness. This is effective as of 3/27/2020. Targeted EIDL Advances, Grants for Shuttered Venue Operators and Second Draw PPP loans are treated similarly, effective for tax years ending after 12/27/2020.
Main Street Lending Program
The Federal Reserve has established a Main Street Lending Program (MSLP) to support lending to small and medium-sized businesses that were in sound financial condition before the onset of the COVID-19 pandemic. The MSLP will operate through five facilities, including the Main Street New Loan Facility (MSNLF), the Main Street Priority Loan Facility (MSPLF), and the Main Street Expanded Loan Facility (MSELF).
Structure. Under the MSLP, eligible lenders will make loans to eligible borrowers (that is not forgivable), and the Federal Reserve will purchase a 95% participation in each loan from lenders (up to $600 billion in the aggregate). Loans issued under the MSLP will have a five-year maturity with an interest rate of LIBOR +3%, deferral of principal payments for two years, and deferral of interest payments for one year. The MSLP will be administered by the Federal Reserve Bank of Boston.
Eligibility. As detailed further in the term sheets, U.S. businesses established before March 13, 2020 may be eligible for loans if the business either: (1) has 15,000 employees or fewer; or (2) had 2019 revenues of $5 billion or less. (Certain restrictions may apply if a borrower has affiliates or outside investors.) Paycheck Protection Program borrowers are eligible for the MSLP as well.
Details. See a summary of each facility and see here for the term sheets and FAQs providing more information regarding eligibility and conditions. Further details and forms can be found on the Federal Reserve Bank of Boston’s website. Contact your bank/lender for details and advice (including whether your lender is participating, and about your eligibility and application process).
Business Resources by State
See a list of state, local, and private resources available to small businesses.
Webinar: Financial Relief Opportunities for Small Businesses
Brookfield Properties and Covington hosted informational calls to help our tenants better understand the federal relief provided for small businesses pursuant to the CARES Act.
These calls provide initial, specific information about how to potentially access these loan programs, the criteria for eligibility, and addresses other key questions.
Listen to webinar recordings
If you have additional questions, please reach out to your Brookfield Properties contact.
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