CARES Act - Coronavirus Aid Relief

Type of Funding	Forgivable Loan (7a)	Disaster Loan (7b)	Disaster Loan Advance (Grant) (7b)
Allowed Uses	Rent Payroll Mortgage Interest Debt Obligations Before 02/15/2020	Rent Payroll Mortgage Interest Other Expenses That Can't be Paid Due to Disaster's Impact	Working Capital Rent Inventory Payroll Marketing
Dollar Amount	Up to $10,000,000 2.5 Business' Average Monthly Payroll	Up to $2,000,000	Up to $10,000
Percentage Rate	1% Fixed	3.75% Fixed for Businesses 2.75% Fixed for Non-Profits	Not Applicable
Payment Terms	2 Years	30 Years	Not Applicable
Forgiveness	100% Is Eligible	0% Is Eligible	100% Is Eligible
Application Access	sba.gov/document/sba-form--paycheck-protection-program-borrower-application-form	SBA.gov/page/disaster-loan-applications	SBA.gov/page/disaster-loan-applications
Additional Information	Loans are available through SBA Approved Lenders. Many lenders are imposing strict eligibility requirements.		To access the advance, you first apply for an EIDL and then request the emergency advance. The advance of up to $10,000 is paid within 3 days and does not need to be repaid under any circumstances.

The Paycheck Protection Program (PPP)

The PPP authorizes up to $349 billion in forgivable loans to small businesses to pay their employees during the COVID-19 crisis. All loan terms will be the same for everyone.  The loan amounts will be forgiven as long as:

1. The loan proceeds are used to cover payroll costs, and most mortgage interest, rent, and utility costs over the 8 week period after the loan is made; and
2. Employee and compensation levels are maintained

Payroll costs are capped at $100,000 on an annualized basis for each employee. Due to likely high subscription, it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs.

The loan term is for 2 years with a fixed annual rate of 1%.  However, Loan payments will be deferred for 6 months.  If properly managed, most, if not all, of the loan could be forgiven.

Paycheck Protection Program Loan Checklist

Information to gather for a PPP Loan:
- Last 4 quarters of payroll tax forms (Form 941)
- A payroll report with each employee's 2019 compensation
- A general ledger showing health care benefits paid per employee
- A general ledger showing retirement benefits paid per employee

2019 Payroll Information

Because payroll is the core of this forgivable loan, all applicants will need to provide payroll information that includes:

• Total annual payroll amount
• A list of employees with compensation in excess of $100,000 that includes:
• Employee name
• 2019 gross compensation
• Total employee compensation to non-US residents
• Cash tips (or equivalents) paid outside of the payroll system
• Vacation, parental, family, medical or sick leave paid outside of the payroll system
• Employer health insurance contributions
• Employer retirement benefits contributions
• State and local income tax assessed

Supporting Documentation

The below documents will be required to help support the above provided details.

Basic Application Information

• Entity type – Sole Proprietor, Partnership, C-Corp, S-Corp, LLC, Independent Contractor, Self-Employed Individual, 501C3, 501C19, or Tribal Business
• Legal name
• DBA (Doing Business As)
• Physical address
• Primary contact name and phone number
• Business tax ID (EIN or Federal Tax ID)

Payroll Documentation

The below documents will be required to help support the payroll calculations provided.

• 2019 IRS Form 940
• 2019 Payroll Report by Employee (W-2 Summary)
• Payroll Report by Employee (W-2 Summary) – If the business did not start operations until after June 30, 2019, provide January 1, 2020 – February 29, 2020.
• Proof of 2019 Payroll Costs Not Included in 2019 Payroll Report – Health Insurance, Retirement, etc.
• Proof of Payroll and Payroll Taxes Paid on or Through 2/15/2020
• February 2020 Business Bank Account Statement – Show February payroll payment.

Sole Proprietors and Self-Employed

Sole proprietors, self-employed, and 1099 contractors will require variations to the above requirements

• Independent Contractors – 2019 IRS Form 1099-MISC for any independent contractors paid and not to exceed $100,000 for the year.
• Sole Proprietorship – 2019 IRS Form 1040-C

The SBA’s Economic Injury Disaster Loan (EIDL)

On March 29, 2020, following the passage of the CARES Act, the SBA provided small business owners and non-profits impacted by COVID-19 with the opportunity to obtain up to a $10,000 Advance on their Economic Injury Disaster Loan (EIDL). The amount of your Advance will be determined by the number of your pre-disaster (i.e., as of January 31, 2020) employees. The Advance will provide $1,000 per employee up to a maximum of $10,000.

SBA’s Economic Injury Disaster Loans offer up to $2 million in assistance and can provide vital economic support to small businesses to help overcome the temporary loss of revenue they are experiencing.   These loans may be used to pay fixed debts, payroll, accounts payable and other bills that can’t be paid because of the disaster’s impact.

The interest rate is 3.75% for small businesses. The interest rate for non-profits is 2.75%. The SBA offers loans with long-term repayments in order to keep payments affordable, up to a maximum of 30 years. Terms are determined on a case-by-case basis, based upon each borrower’s ability to repay.

Coronavirus Federal Income Tax Relief

Many states have adjusted their payroll tax filing and payment schedules. The IRS has made changes to tax filing deadlines to help individuals and businesses affected by the impacts of COVID-19. As of an announcement on March 20, the federal income tax payment AND filing deadline is extended from April 15, 2020 to July 15, 2020.

On March 18, 2020, the U.S. Treasury Department and IRS “issued guidance allowing all individual and other non-corporate tax filers to defer up to $1 million of federal income tax (including self-employment tax) payments due on April 15, 2020, until July 15, 2020, without penalties or interest.” Corporate taxpayers are subject to a similar deferment of up to $10 million of federal income tax payments that would be due on April 15, 2020. They may defer payment until July 15, 2020, without suffering any penalties or interest.

SBA Coronavirus Disaster Assistance

California Payroll Tax Relief

Employers experiencing a financial hardship related to COVID-19 may request the EDD to grant them up to a 60-day extension to file their state payroll reports and deposit state payroll taxes without penalty or interest. The EDD must receive the written request for an extension within 60 days from the original delinquent date of the payment or return. More information is available on the Coronavirus 2019 page of the EDD website.

Business Interruption Insurance

If your company has a business insurance policy, consider reaching out to your agent to ask if your policy covers business interruption caused by the Coronavirus. Since the 2006 SARS outbreak, many insurance providers now exclude coverage for losses due to viruses or bacteria. However, many legislators are working on getting that exclusion removed, so it can be worth asking your representative to find out where you stand.

How Loan Forgiveness Works for the PPP and the EIDL Loan Programs

The PPP provides small businesses with the funds to pay up to eight weeks of payroll costs including benefits. Borrowers can apply for two months of average monthly payroll costs from the previous year plus an additional 25% of that amount. The loan amount is capped at $10 million.

PPP loans are 100% forgivable as long as the business meets the following requirements:

• From the date “when the first disbursement occurs,” the funds are used to cover 8 weeks of payroll costs including salary, wages, commissions, tips, employee benefits (health care, retirement, vacation pay, family leave (capped at $100K per employee)
• Employee headcounts and salaries are retained. Independent contractors (ICs) do not count as employees for purposes of PPP loan forgiveness. Independent contractors have the ability to apply for a PPP loan on their own, so they do not count for purposes of a borrower’s PPP loan forgiveness.
• No more than 25% of the loan is used for non-payroll costs including rent, mortgage interest, and business utilities. Any utilities, rent, and mortgage must have originated or been in service before February 15, 2020.

The forgiven portion of the PPP loan is not taxable income.

At least 75% of the PPP disbursement must be used for payroll costs, with the remaining 25% used for qualifying expenses as stated above. If any portion does not fall within these guidelines, that portion is not forgivable. You must use all the disbursements within the 8-week benefit period.

Based on the CARES Act guidelines, any portion of the loan not in compliance with the above is considered not forgiven. The difference must be paid in full within two years at the interest rate of 1%. The loan is eligible for a 6-month deferment; however, it will still accrue interest.

To receive loan forgiveness, borrowers will need to provide proof to their lenders the funds were used appropriately. The details have yet to be released but borrowers will likely have to provide documentation showing payroll rates, additional payroll costs, any unemployment insurance filings, payment receipts for rent, mortgage and utilities and possibly more.

Loan Forgiveness for Self-Employed Individuals and Independent Contractors

You are eligible to apply for the PPP, if you meet all these conditions:

• You were in operation on February 15, 2020
• Your primary place of residence is the United States
• You filed or will file a Form 1040 Schedule C for 2019 showing self-employment income.

The SBA will issue additional guidance for those individuals with self-employment income who were not in business in 2019 but were in operation on February 15, 2020.

You need to supply all of the following:

• Your 2019 1040 Schedule C (even if you haven’t filed it with the IRS yet)
• A 2019 1099-MISC, invoice, bank statement, or book of record that shows you were self-employed in 2019
• A 2020 invoice, bank statement, or book of record establishing that you were in operation on or around February 15, 2020.

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