Summary: SBA Financial Assistance Under the CARES Act

Paycheck Protection Program (“PPP”): loan to fund costs associated with retaining employees during COVID-19 by temporarily expanding the traditional SBA 7(a) loan program to cover payroll and other operating costs and providing for certain loan forgiveness

Uses

• Payroll costs for employees and some independent contractors, including
  • Costs related to the continuation of group health care benefits during periods of paid sick, medical, or family leave, and insurance premiums
  • Employee’s salaries, commissions, or similar compensations
• Interest payments on mortgage obligations
• Rent
• Utilities
• Interest payments on other debt obligations that were incurred before application for the PPP loan
• 75% of the PPP loan must be used for payroll costs

Eligibility Requirements

¹ Calculation of employees in determining eligibility includes only employees whose principal place of residence is in the United States.

² A business and another entity are affiliates and their employees are aggregated for purposes of determining PPP loan eligibility if one entity controls or has the power to control the other entity, or a third party controls or has the power to control both entities.

Loan Amount

250% of the average total monthly payroll costs (with a maximum annual compensation of $100,000 per employee) incurred during the 1-year period prior to the date the PPP loan is made (with adjustments for seasonal workers); plus any EIDL loans being refinanced with the PPP loan

Overall maximum amount of $10,000,000

Term

2 years from the date borrower applies for forgiveness of the PPP loan

Interest Rate

1%, with accrual beginning on the date the PPP loan is made

Repayment Terms

Portion of PPP loan that is used for the following during the 8-week period following receipt of the PPP loan is 100% forgiven:

• Payroll costs (excluding FICA and federal income tax withholdings) for employees (full, part, or other; independent contractors not included) up to a maximum annual compensation of $100,000 per employee, as prorated for the covered period
• Interest payments on covered mortgage* obligations
• Rent payments on covered lease* obligations
• Covered utility* payment

Note this does not include forgiveness for all permitted uses of the PPP loan. 75% of the amount to be forgiven must be attributable to payroll costs.

Forgivable amounts are proportionately reduced to the extent the number of employees or salaries are reduced

Borrower can apply for forgiveness, which will be determined within 60 days of such application, with submission of the following:

• Documentation verifying number of full time equivalent employees on payroll and their pay rates, including payroll tax filings and state income, payroll, and unemployment insurance filings
• Documentation verifying payments on covered mortgage* obligations, covered lease* obligations, and covered utilities*

Principal and interest payments on the PPP loan are deferred for at least 6 months and up to 1 year, and only the amount advanced but not forgiven must be repaid

Amount of PPP loan forgiven is excluded from gross income

Interest accrued on amount of PPP loan forgiven will also be forgiven

*Covered mortgage means a mortgage obligation that was incurred prior to the Crisis Period; covered lease means a lease that was in force prior to the Crisis Period; covered utility means utility service that began prior to the Crisis Period.

Collateral

None

Personal Guarantee

None

Fees

None paid by borrower

Prepayment Penalty

None

Application Process

Through local SBA approved commercial lender. If you need a referral, please contact a DW attorney.

Estimated Timeline

• Small businesses and sole proprietorships are able to apply for and receive PPP loans beginning April 3, 2020
• Independent contractors and self-employed individuals are able to apply for and receive PPP loans beginning April 10, 2020
• Approval within 24 hours after application is submitted
• Funds disbursed 1-3 days after application is submitted
• Program available through June 30, 2020

Economic Injury Disaster Loans (“EIDL”): provide economic relief to businesses that are currently experiencing a temporary loss of revenue due to COVID-19 by expanding the traditional SBA 7(b)(2) disaster relief loan program

Uses

The following that could have been paid had COVID-19 not occurred:

• Fixed debts
• Payroll
• Accounts payable
• Insurance premiums
• Rent
• Other bills

Eligibility Requirements

• Business, private non-profit organization (not including religious organizations), tribal business, independent contractor, sole proprietorship with or without employees, cooperative, ESOP, agricultural cooperative
• In operation on January 31, 2020
• Less than 500 employees
• Otherwise complies with SBA guidelines (other than no credit elsewhere), including located in disaster-declared area and ability to repay

Loan Amount

Up to $2,000,000, based on SBA’s review of borrower’s financials; may be increased on a case-by-case basis after initial funding

Term

Up to 30 years

Interest Rate

3.75% (2.75% for non-profit organizations) with accrual beginning on the date the EIDL loan is made

Repayment Terms

Principal and interest payment deferred for 1 year

Collateral

SBA 7(a) requirements for EIDL loans over $25,000; can be waived

Personal Guarantee

None for EIDL loans $200,000 or less; SBA 7(a) requirements for EIDL loans over $200,000

Fees

None paid by borrower

Prepayment Penalty

None

Application Process

SBA (https://COVID-19relief.sba.gov/#/)

Estimated Timeline

• Approval within 2-3 days after application is submitted
• Funds disbursed within 5 days after application is approved
• Program available through December 31, 2020

EIDL Emergency Advance (“EIDL Advance”): advance on a potential EIDL loan to address the economic need between application submission and loan funding

Uses

• Providing paid sick leave to employees unable to work due to the direct effect of the COVID-19
• Maintaining payroll to retain employees during business disruptions or substantial slowdowns
• Meeting increased costs to obtain materials unavailable from original source due to interrupted supply chains
• Making rent or mortgage payments
• Repaying obligations that cannot be met due to revenue losses

Eligibility Requirements

• Business, private non-profit organization (including religious), tribal business, independent contractor, sole proprietorship with or without employees, cooperative, ESOP, agricultural cooperative
• In operation on January 31, 2020
• Less than 500 employees

Loan Amount

Up to $10,000

Term

N/A

Interest Rate

3.75% (2.75% for non-profit organizations) with accrual beginning on the date the EIDL Advance is made

Repayment Terms

Borrower is not required to repay any EIDL Advance, even if subsequently denied an EIDL loan

If borrower transfers into or is approved for a PPP loan, the EIDL Advance amount will be reduced from the loan forgiveness amount for a PPP loan

Collateral

N/A

Personal Guarantee

N/A

Fees

N/A

Prepayment Penalty

N/A

Application Process

Apply for EIDL loan and request that $10,000 of the EIDL loan be immediately advanced

Estimated Timeline

• Funded within 3 days after application is submitted
• Program available through December 31, 2020

SBA Express Bridge Loan (“Bridge Loan”): support to small businesses to help overcome the temporary loss of revenue due to COVID-19 while waiting for EIDL loan approval; can be used as an amortizing term loan if no EIDL loan

Uses

Working capital to support the survival and/or reopening of the small business

Eligibility Requirements

• Small business
• Operational as of March 13, 2020
• Adversely impacted by COVID-19
• Otherwise comply with Section 7(a) requirements (including no credit elsewhere), other than disaster-location requirement (COVID-19 location requirement is any state, territory and the District of Columbia that has been adversely impacted by COVID-19)

Loan Amount

Up to $25,000

Term

Up to 7 years

Interest Rate

Prime plus 6.5% with accrual beginning on the date the Bridge Loan is made

Repayment Terms

Repaid in full or in part by proceeds from EIDL loan

OR

Loan may amortize if borrower does not obtain EIDL loan

Collateral

Same as Section 7(a) loans

Personal guarantee

Same as Section 7(a) loans

Fees

Same as Section 7(a) loans

Application Process

Through SBA Express Lender that borrower has existing banking relationship with

Timeline

• Funded within 45 days after approval is received
• Available through March 13, 2021