COVID-19 CARES Act and SBA Business Assistance

There are two main loans: (1) the Revised Economic Disaster Loan (“EIDL”) and (2) the Paycheck Protection Program loan (“PPP”). You can apply for the EIDL directly on the SBA website. You can apply for the PPP with your local bank. If you follow certain requirements, a significant portion of the PPP loan may be forgiven.

Blue Williams, LLP’s Commercial Transactions and Business Practices Group is here to answer your questions on both loans. Our contact information can be found below.

1. REVISED ECONOMIC INJURY DISASTER LOANS
EIDLs are loans available to small businesses and non-profit organizations through the U.S. Small Business Administration (“SBA”) to provide financial assistance during the COVID-19 crisis. Under the recently-passed CARES Act, certain terms and conditions of EIDLs have been relaxed or expanded. The SBA has recently issued the following notice regarding EIDLs:

The SBA established a new on-line EIDL application for those who have and those who have not already applied for an EIDL.  Under the CARES Act, EIDLs are available to most business over or under 500 employees, regardless of their structure. The new on-line EIDL application provides for an advance of up to $10,000 from the SBA within three (3) days of the SBA’s receipt an EIDL on-line application. These advances can be used for any allowable purpose for EIDLs, including maintaining payroll and operational integrity as a result of the COVID-19 crisis. If used for an allowable purpose, these advances are deemed grants that do NOT need to be repaid, even if an EIDL is not subsequently approved or accepted.  Regardless of whether you decide to proceed with accepting an EIDL, we strongly recommend that you complete the on-line EIDL application in order to obtain up to $10,000 in grant funds. 

If you wish to proceed with an EIDL, please note the following:

You will need the following information to complete the EIDL application:

2. PAYCHECK PROTECTION PROGRAM LOANS

The CARES Act also provided for the PPP. This program provides loans subject to forgiveness from February 15, 2020 to June 30, 2020 to businesses and certain individuals as a result of the COVID-19 pandemic.

The following types of entities and individuals can qualify for PPP loans:

 If you wish to proceed with an PPP loan, please note the following:
  • Loan Terms: The term is currently set at 2 years. The term will be the same for everyone.
  • LoansUse:  Loans may be used for operational expenses such as payroll and benefits, interest on mortgage and debt obligations, rent, and utility expenses.
  • Nonrecourse Loans:  Loans will be nonrecourse to the business as long as the loan funds are not used for unauthorized purposes, such as compensation for employees with a primary residence outside the U.S.
  • Tax Implication of Loan Forgiveness:  Loan forgiveness (i.e., canceled indebtedness) shall be excluded from the business’s gross income for federal income tax purposes.
  • Loan Repayment:  Complete payment deferment is currently available for 6 months.

The primary feature of the PPP loan is that loan forgiveness will be available for certain operational expenses incurred by your business over 8 weeks. An employee’s payroll over $100,000 is not subject to forgiveness.  However, it is imperative that the business note that there may be a reduction in loan forgiveness if (i) the number of employees or (ii) the payroll during the 8 week PPP loan covered period are reduced.  

The SBA has highlighted the following:

  • Your loan forgiveness will be reduced if you decrease your number of employees.
  • Your loan forgiveness will be reduced if you decrease salaries and wages by more than 25% for any employee that made less than $100,000 annualized in 2019.
  • You will have until June 30, 2020 to restore your employee numbers and salary levels for any changes made between February 15, 2020 and April 26, 2020.
  • In order to apply for PPP loan forgiveness, a business will need to submit a formal application to the bank that originated the PPP loan, including:
  • Documentation verifying the number of full-time equivalent employees and relevant pay rate, including state and federal payroll and unemployment filings.
  • Documentation verifying covered payroll, interest on debt obligations, leaves, and utility payments (such as, canceled checks, receipts, and account statements).
  • A certification from the recipient that all documentation presented is true and correct AND the amount for which the forgiveness is requested was used for permissible purposes.
  • Any other documentation required by the SBA.

The bank will subsequently issue a PPP loan forgiveness decision within 60 days.

Please see all attachments for more information. As you can see, there is a lot of information to review and consider. We are available to answer your questions and to assist you in any way we can. Please give us a call at (504) 831-4019 or e-mail us.

Best regards and stay safe! 

Blue Williams, LLP 

 

Danté V. Maraldo                  dmaraldo@bluewilliams.com     

Gregory S. LaCour                 glacour@bluewilliams.com          

Craig R. Watson                     cwatson@bluewillians.com       

Nicholas P. Arnold                 narnold@bluewilliams.com     

Christopher M. Hatcher        chatcher@bluewilliams.com       

April L. Watson                      awatson@bluewilliams.com

 

Important Attachments:

Borrower Paycheck Protection Program Application (v1)
PPP Borrower Information Fact Sheet
SBA-Lenders-in-Louisiana_UPDATE
EIDL-PPP-Loan-Comparison-Postlethwaite_and_Netterville