Is my Business eligible?
Eligible recipients include small business concerns, nonprofit organizations (IRC 501(c)(3)), veterans organization (IRC 501(c)(19)) if they have:
Not more than 500 employees; or (if greater)
Meet the applicable size standard in number (link to table) of employees established by the SBA
Individuals who operate under a sole proprietorship or as an independent contractor and eligible self-employed individuals shall be eligible (these individuals will be required to submit documentation substantiating such classification such as payroll tax filings, 1099-MISC and other information)
Business concerns with more than 1 physical location that employs not more than 500 employees per physical location of the business concern and that is assigned an NAICS code beginning with 72 at the time of disbursal shall be eligible
What is the maximum loan amount my business could qualify for?
The maximum amount of the loan is the lesser of:
Sum of average total monthly payments by the applicant for payroll costs incurred during the 1-year period before the date on which the loan is made multiplied by 2.5 plus any outstanding principal balance of any EIDL loan previous issued after January 1, 2020 and ending on the date on which covered loans are made available OR
$10,000,000
Additional provisions regarding the above calculation
Additional information regarding the average monthly payment calculation:
Seasonal employers will utilize the payroll costs incurred for the 12-week period beginning February 15, 2019 or at the election of the eligible recipient, March 1, 2019 and ending June 30, 2019
If the eligible recipient was not in business during the period of February 15, 2019 and June 30, 2019, the recipient would use the average total monthly payments for payroll costs incurred during the period January 1, 2020 through February 29, 2020
What is included in ‘payroll costs’?
Payroll costs will include any compensation with respect to employees, as follows:
Salary, wage commission or similar compensation
Payment of cash tip or equivalent
Payment for vacation, parental, family medical or sick leave
Allowance for dismissal or separation
Payment required for group health care benefits, including insurance premiums
Payment for any retirement benefits
Payment for state or local tax assessed on the compensation
Payments of any compensation to or income of a sole proprietor or independent contractor that is wage, commission, income, net earnings from self-employment or similar that is not more than $100,000 in 1 year, as prorated for the covered period
Reduced by the following:
Compensation of an individual employee in excess of an annual salary of $100,000, as prorated for the covered period
Taxes imposed or withheld under chapters 21, 22, or 24 of the Internal Revenue Code of 1986
Compensation of an individual whose principal place of residence is outside the USA
Qualified sick leave wages for which a credit is allowed under section 7001 of the Families First Coronavirus Response Act (PL 116-127) (“FFCRA”)
Qualified family leave wages for which a credit is allowed under section 7003 of the FFCRA
What can I use allocated loan dollars for?
Payroll costs
Payments for the continuation of group health care benefits, which includes paid sick, medical and family leave and insurance premiums
Employee salaries, commissions or similar compensations
Payments of interest on any mortgage obligation. However, the payment cannot be used for prepayment of or payments for principal.
Rent
Utilities
Interest on any other debt obligations that were incurred before the covered period.
What are the borrower requirements and are there fees?
An eligible recipient must make a good faith certification stating:
The uncertainty of current economic conditions makes necessary the loan request to support the ongoing operations of the eligible recipient.
The funds to retain workers and maintain payroll or make mortgage payments, lease payments, and utility payments.
The business does not have an application pending for a SBA loan for the same purpose and duplicative amounts applied for or received under a “covered loan”.
During the period beginning on February 15, 2020 and ending on December 31, 2020, the eligible business has not received amounts under a similar SBA program for the same purpose and duplicative of amounts applied for or received under a “covered loan”.
Would I be eligible for loan deferment on payments?
Lenders are required to provide complete payment deferment relief of covered loans for a period of no less than 6 months to no more than 1 year.
What are the limitations on loan forgiveness?
Below are the provisions relating to loan forgiveness on loans under the Paycheck Protection Program. Please note that that any reference to ‘covered period’ in this section means the 8-week period beginning on the date of the origination of a covered loan:
Eligible recipient of a Payroll Protection Program loan will be eligible for forgiveness of indebtedness on a covered loan in an amount equal to the following:
Payroll costs
Payment of interest on any covered mortgage obligation – defined as indebtedness incurred in the ordinary course of business that is a liability of the borrower, a mortgage on real/personal property and was incurred before February 15, 2020
Payment on any covered rent obligation – defined as under a leasing agreement in force before February 15, 2020
Covered utility payments – defined as electricity, gas, water, transportation, telephone or internet access starting February 15, 2020
Limits on Forgiveness:
Forgiveness not to exceed loan principal
Reduction based on reduction in number of employees – average number of full-time equivalents (FTEs) for this calculation is determined by calculating the average number of FTE employees for each pay period falling in a month
Amount of loan forgiveness shall be reduced by the quotient obtained by dividing
Average full-time equivalent employees (FTEs) per month employed by the recipient during the covered period BY
Either (at the election of the borrower) –
Average number of FTEs per month employed during the period of February 15, 2019 to June 30, 2019 OR
Average number of FTEs per month employed during the period of January 1, 2020 to February 29, 2020
Additional provisions exist for seasonal employers
Reduction relating to salary and wages – amount of loan forgiveness shall be reduced by the amount of any reduction in total salary or wages of any employee described below during the covered period that is in excess of 25% of the total salary or wages of the employer during the most recent full quarter which the employee was employed before the covered period
Employees to be considered for this calculation is ANY employee who did not receive, during a single pay period during 2019, wages or salary at an annualized rate of pay in an amount more than $100,000.
Additional provisions exist that employers with tipped workers may receive forgiveness for additional wages paid to those employees
Loan forgiveness calculation will be determined without regard to reduction in FTEs from February 15, 2020, to 30 days after the enactment of CARES Act if, by June 30, 2020, an eligible employer has eliminated the reduction in salary or wages of those employees
Loan forgiveness shall be determined without regard to reductions above in the number of FTEs or a reduction in the salary of 1 or more employees during the period beginning on February 15, 2020, and ending 30 days after enactment of the CARES Act, IF the employer rectifies these reductions not later than June 30, 2020
Eligible recipient seeking loan forgiveness will need to submit proof to lender supporting calculations for the forgiveness amount and certify amounts were spent on appropriate items
Amounts forgiven under this section will be excluded from gross income for taxability considerations
Are there any other conditions?
During the “covered period” the SBA is waiving typical SBA fees
During the “covered period” the requirement that a small business concern is unable to obtain credit elsewhere shall not apply to a “covered loan”, which is removing the typical requirement the SBA be the lender of last resort.
During the “covered period” for a “covered loan”, no personal guarantee shall be required and no collateral shall be required
There will be no prepayment penalty for any payment made on a “covered loan”.
General Terms
For any remaining balance after application of forgiveness, the maximum maturity shall not exceed 10 years and will have an interest rate not to exceed 4 percent.
*You should consult your own tax, legal and accounting advisors before engaging in any transaction.
**This is only an estimate and is not an agreement or confirmation by Vibrant Credit Union