How to Apply for a Loan to Help Your Small Business

The following information is provided compliments of

Meadows Urquhart Acree & Cook, LLP

The impacts of the virus haven’t affected all industries equally to this point. Think about it - the slowdown of projects for many businesses may not occur in the next week or even month, but undoubtedly there will be some backlash.

Company cash flow may be in a healthy position currently, but new projects may be delayed, materials may not be available and collections will certainly be extended. How can you extend your cash to last? We are recommending two immediate actions:

  • Talk to your trusted advisors about new legislation that could provide cash flow in the form of tax credits or loans and

  • Project your worst, best and most likely cash flow scenarios over the next 3 months.

We’ve developed a free cash flow tool that could help you in this process. Click HERE to request the tool. We’re all in this together; in times like this relying on trusted advisors is one way to alleviate some of the stress.

While we are currently awaiting further clarification from the SBA regarding the Payroll Protection Program, we are recommending that our clients gather the following documents which will likely be needed in the calculation of the loan value.

  1. 2019 IRS Quarterly 940, 941 or 944 payroll tax reports.

  2. Last 12 months of Payroll Reports beginning with your last payroll date and going backwards 12 months.

  3. Payroll report must show the following for the time period above:

  4. Gross wages for each employee, including the officer(s) if paid W-2 wages.

  5. Paid time off for each employee.

  6. Vacation pay for each employee.

  7. Family medical leave pay for each employee.

  8. State and Local taxes assessed on the employee’s compensation for each employee.

  9. 1099s for 2019 for independent contractors that would otherwise be an employee of your business.

  10. Do NOT include 1099s for services.

  11. Documentation showing total of all health insurance premiums paid by the Company Owner under a group health plan.

  12. Include all employees and the company owners.

  13. Document the sum of all retirement plan funding that was paid by the Company Owner (do not include funding that came from the employee’s out of their paycheck deferrals).

  14. Include all employees, including company owners.

  15. 401K plans, Simple IRA, SEP IRAs.

Lastly, we have broken down the differences between the many payroll resources available to employers HERE.


The following information was provided by NFIB

SBA Coronavirus Loans

(Paycheck Protections Program/Loans)

Who is Eligible?

  • Businesses of 500 employees or fewer, businesses within the SBA small business size threshold, self-employed individuals (sole-proprietors and independent contractors), and accommodation and food services businesses (NAICS Code 72) with 500 or fewer employees per location and less than $500 million in gross annual receipts in 2019, any business assigned a franchise operator code from, and any business that receives assistance under the Small Business Investment Act.

  • If you had employees, you had to have been in business on 2/15/2020 and paid taxes on your employees or paid independent contractors.

  • All applications must certify the following: The uncertainty of current economic conditions makes necessary the loan request to support the ongoing operations of the eligible recipient. Acknowledging that funds will be used to retain workers and maintain payroll or make mortgage payments, lease payments, and utility payments.

What Can You Use the Loan On?

  • Payroll costs - Which include salary or wages, family and sick leave, allowance for dismissal or separation, health care benefits, retirement benefits, payment of state and local tax assessed on the compensation of an employee, the sum of payments to an independent contractor. Salaries in excess of 100k are not covered, compensation of employees outside of the US are not covered, and sick or family leave where a payroll tax credit is already taken are not covered

  • Payments on a mortgage obligation

  • Rent

  • Utilities

  • Interest on any other debt obligations that were incurred before 2/15/2020.

  • The loan can only be used on these expenses incurred between 2/15/2020 and June 30, 2020

Where Do You Get the Loan?

  • Loans would be available immediately through more than 800 existing SBA-certified lenders, including banks, credit unions and other financial institutions, and SBA would be required to streamline the process to bring additional lenders into the program.

  • The Treasury Secretary would be authorized to expedite the addition of new lenders and make further enhancements to quickly expedite delivery of capital to small employers.

Maximum Size of the Loan

  • Multiply the average total monthly payments for payroll costs incurred during the one-year period before the date the loan was made by 2.5 or $10,000,000. The recipient shall receive the lesser of the two.

  • In the case of seasonal employers the average total employees shall be calculated for the period between 2/15/19 and 6/30/19.

Payment Deferments

  • Payments on principal, interest, and fees will be deferred for at least six months and up to one year after the loan is issued.

Interest Rates

  • Shall not exceed 4%

Loan Maturity

  • 10 years

Collateral

  • There is no personal/individual guarantee on the loan. The SBA guarantees 100% of the loan.

Prepayment Penalty

  • None, all prepayment penalties are waived.

Loan Forgiveness

  • The following costs will be forgiven during the eight-week period starting the day the loan is issued and ending in eight weeks.

  1. Payroll costs (including everything listed above)

  2. Payments on interest of any mortgage obligation

  3. Rent

  4. Utilities

  5. *Forgiveness amount may not exceed principal amount of the loan

  • The amount forgiven will be reduced proportionally by any reduction in employees retained compared to the prior year and reduced by the reduction in pay of any employee beyond 25 percent of their prior year compensation. To encourage employers to rehire any employees who have already been laid off due to the COVID-19 crisis, borrowers that re-hire workers previously laid off will not be penalized for having a reduced payroll at the beginning of the period.

Grants

  • All those applying for a loan will be eligible for a $10,000 emergency grant to be issued within three days of the application being received.

  • Applicants must certify under threat of perjury that they believe they are eligible for the loan.

  • The emergency EIDL grant award of up to $10,000 would be subtracted from the amount forgiven under the Paycheck Protection Program.

Interaction With Previous SBA Loans

  • The SBA Administrator has the authority to purchase loans made before the date of enactment of this act and cover payments for up to six months for the borrower.

  • If an applicant has an SBA loan taken out on or after 1/31/20 they have the option to refinance the loan into a PPL loan.

Below information is compliments of Congressman Rob Wittman.

DEFINITIONS

“Paid sick leave” – means paid leave under the Emergency Paid Sick Leave Act.

“Expanded family and medical leave” – means paid leave under the Emergency Family and Medical Leave Expansion Act.

QUESTIONS & ANSWERS

1. What is the effective date of the Families First Coronavirus Response Act (FFCRA), which includes the Emergency Paid Sick Leave Act and the Emergency Family and Medical Leave Expansion Act?

The FFCRA’s paid leave provisions are effective on April 1, 2020, and apply to leave taken between April 1, 2020, and December 31, 2020.

2. As an employer, how do I know if my business is under the 500-employee threshold and therefore must provide paid sick leave or expanded family and medical leave?

You have fewer than 500 employees if, at the time your employee’s leave is to be taken, you employ fewer than 500 full-time and part-time employees within the United States, which includes any State of the United States, the District of Columbia, or any Territory or possession of the United States. In making this determination, you should include employees on leave; temporary employees who are jointly employed by you and another employer (regardless of whether the jointly-employed employees are maintained on only your or another employer’s payroll); and day laborers supplied by a temporary agency (regardless of whether you are the temporary agency or the client firm if there is a continuing employment relationship). Workers who are independent contractors under the Fair Labor Standards Act (FLSA), rather than employees, are not considered employees for purposes of the 500-employee threshold.

Typically, a corporation (including its separate establishments or divisions) is considered to be a single employer and its employees must each be counted towards the 500-employee threshold. Where a corporation has an ownership interest in another corporation, the two corporations are separate employers unless they are joint employers under the FLSA with respect to certain employees. If two entities are found to be joint employers, all of their common employees must be counted in determining whether paid sick leave must be provided under the Emergency Paid Sick Leave Act and expanded family and medical leave must be provided under the Emergency Family and Medical Leave Expansion Act.

In general, two or more entities are separate employers unless they meet the integrated employer test under the Family and Medical Leave Act of 1993 (FMLA). If two entities are an integrated employer under the FMLA, then employees of all entities making up the integrated employer will be counted in determining employer coverage for purposes of paid sick leave under the Emergency Paid Sick Leave Act and expanded family and medical leave under the Emergency Family and Medical Leave Expansion Act.

3. If I am a private sector employer and have 500 or more employees, do the Acts apply to me?

No. Private sector employers are only required to comply with the Acts if they have fewer than 500 employees.[1]

4. If providing child care-related paid sick leave and expanded family and medical leave at my business with fewer than 50 employees would jeopardize the viability of my business as a going concern, how do I take advantage of the small business exemption?

To elect this small business exemption, you should document why your business with fewer than 50 employees meets the criteria set forth by the Department, which will be addressed in more detail in forthcoming regulations.

You should not send any materials to the Department of Labor when seeking a small business exemption for paid sick leave and expanded family and medical leave.


5. How do I count hours worked by a part-time employee for purposes of paid sick leave or expanded family and medical leave?

A part-time employee is entitled to leave for his or her average number of work hours in a two-week period. Therefore, you calculate hours of leave based on the number of hours the employee is normally scheduled to work. If the normal hours scheduled are unknown, or if the part-time employee’s schedule varies, you may use a six-month average to calculate the average daily hours. Such a part-time employee may take paid sick leave for this number of hours per day for up to a two-week period, and may take expanded family and medical leave for the same number of hours per day up to ten weeks after that.

If this calculation cannot be made because the employee has not been employed for at least six months,