CARES Act - Small business relief update: April 3rd
Updated: Apr 1
Not sure what the CARES Act is? Read this first. Update @ 11AM CST, April 3rd.
First, I'd like to declare that April 3rd be National Bankers Day! They are scrambling and working overtime to make sure they can uphold what the administration has been telling the public about the relief provided through the SBA. However, the lenders don’t fully understand the government’s requirements, so they have not been able to open up their loan applications yet. Imagine a blimp dropping $350 billion onto the streets with no rules... this is how bankers are feeling today with little to no guidance from our administration. Technically, applications are now live for small businesses and sole proprietorships, but Bank of America is the only big bank with an online portal to accept these applications so far...
It will likely be next week before many small businesses can actually apply for relief under the Payment Protection Program, and banks are now saying that you must have had a relationship with the bank prior to Feb. 15th, 2020 to apply. Don’t wait, contact your bank right now!
The SBA has released some official information. The latest update can be found here. The Final Borrower application is now live, but it still needs to be sent to your bank for processing. You can find it here.
Still unsure about what the heck to do today?
Here’s what I did, at Proof: I emailed both of our bankers and attached a filled out application (as seen above) and I attached our monthly payroll reports showing how much we paid each employee during 2019. If you’re a sole proprietor, whip up a report showing how much you paid yourself or other employees during 2019. And now, I'm just waiting for more guidance from my bank.
Coronavirus Relief Options - There’s been a lot of confusion around what relief is available to small businesses. Here’s an outline of what relief you can qualify for, right now:
Paycheck Protection Program - This loan program provides loan forgiveness for retaining employees by temporarily expanding the traditional SBA 7(a) loan program and has been what I've primarily been discussing
EIDL Loan Advance - This loan advance will provide up to $10,000 of economic relief to businesses that are currently experiencing temporary difficulties.
SBA Express Bridge Loans - Enables small businesses who currently have a business relationship with an SBA Express Lender to access up to $25,000 quickly.
SBA Debt Relief - The SBA is providing a financial reprieve to small businesses during the COVID-19 pandemic.
Read my first blog article for even more resources available.
S Corporation business owners - unless you pay yourself through payroll, you will not be eligible for loan forgiveness. S Corp owners who only take draws will not qualify for the Paycheck Protection Program.
Payments to independent contractors do not qualify as qualified costs under the Paycheck Protection Program as they are able to apply and qualify, themselves, for the same relief starting April 10th.
Only 25% of the loan proceeds can be used for non-payroll costs and be eligible for forgiveness.
Exclusions from payroll costs: compensation of an employee who lives outside of the US and federal employment taxes withheld between 2/15/20 - 6/30/20 (including both the employee's and employer's share of FICA, and income taxes required to be withheld from employees).
FAQs Do I even qualify? Read my initial post for those requirements, but go ahead and fill out the application above and send it to your banks. It doesn’t hurt to be proactive, even if it turns out they don’t have capacity or you do not qualify.
Who at the bank should I contact? Anyone with a pulse. Seriously, if you do not have a dedicated lender who assisted you in opening your account, contact the support line and any small business lender that you can get ahold of at your bank.
How much can I actually borrow? Aggregate your payroll costs for 2019. Subtract any compensation paid to an employee in excess of an annual salary of $100,000. Divide this amount by 12 and multiply by 2.5 to see the maximum amount you can borrow. Keep in mind, your bank will have the final say on your loan amount so don't get too tied up on these calculations. As more information is released, I will continue updating, but the most important thing you can do right now is to be in contact with your banker or local bank and have:
Filled out application ready, and
Monthly payroll reports for 2019
Please utilize me as a resource if your business needs help applying for relief or budgeting during this difficult time. Email me 👉 firstname.lastname@example.org
God bless! AZ