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Here's the latest update on COVID 19 related PPP, Disaster Loans and sick leave for businesses.
SBA PROGRAM UPDATE as of 4.23.2020
- The SBA website shows a notice of ‘Lapse in Appropriations’ for both PPP and EIDL
- Funds available for PPP were exhausted in 13 days and EIDL program ran out of money shortly thereafter
- Many PPP applicants were shut out at their bank
- Most just received word that their application was ‘accepted’ at the bank. Then no further communication on loan being approved or even submitted to SBA
- SBA previously advised that it may take 2-3 weeks before any EIDL loan would be reviewed so some of these applications may still be pending
WHAT HAPPENED IN ROUND 1 OF PPP
- Simply put, the legislation was rushed, and it took time to understand how the program was supposed to work causing delays at most banks
- Many banks were criticized for prioritizing loan applications to customers that had an outstanding debt with the bank and/or deposits
- Small banks were big winners in Round 1 as 20% of loans were processed by banks with less than $1B in assets and 60% from banks with $10B or less in assets
- There was a great disparity among states in approved loans
WHAT IS HAPPENING IN WASHINGTON
- On Tuesday 4/21 the Senate approved a bill for an additional $310 Billion for PPP which is expected to go to the House for confirmation on Thursday 4/23
- $60 Billion has been set aside specifically for smaller lending institutions like credit unions and community banks to get more funds to small businesses – a short coming in Round 1
- Some legislators have been concerned about lack of oversight with this program so further delays are possible
- No date has been set for a reopening of PPP loans
- It is unlikely there will be a Round 3
WHAT IS AVAILABLE TO YOU NOW
- Deferring payroll taxes – 50% until 12/31/21 and 50% due on 12/31/22
- Ability to carry back Net Operating Loss in 2018,2019 and 2020 for up to 5 years
- Tax credit of 50% of payroll taxes on first $10,000 wages per employee if sales have dropped by 50% from prior period
- FFCRA - Sick leave for employees covered by tax credits
WHAT SHOULD BE AVAILABLE SOON
- EIDL – Disaster Loans up to $2 Million at 3.75% available through SBA. This loan can be used for any purpose except growth
- Emergency Grant up to $10,000 – within 3 days
- PPP – Payroll Protection Plan loan amount based on 2.5 times monthly average wages & benefits up to a maximum of $10 Million
- PPP loan will be forgiven if you maintain your headcount and spend at least 75% of loan proceeds on wages & benefits
WHAT YOU SHOULD DO NOW
- Circumstances are changing daily so you need to stay informed and ready to act
- The time to complete your loan applications was yesterday
- If you were not approved in Round 1 of PPP consider submitting a second application to a community bank or credit union
- Seek guidance from a financial expert. Optima's SBA Task Force is here to help from the loan application, sourcing the right bank and setting up proper accounting contact Info@OptimaOffice.com
PAYROLL PROTECTION PLAN (PPP)NEXT STEPS ONCE YOU HAVE A LOAN
- Open a separate bank account to monitor and control all funds received under PPP and to track their disbursement
- Create new accounts in payroll, rent, utilities etc. by adding PPP to the name so you can track expenditures that qualify for loan forgiveness
- Prepare a new 8 week forecast to ensure all expenditures are meeting guidelines set forth during the covered period under PPP
- Create new accounts in payroll under FFCRA as you are not allowed to include these in your pending PPP forgiveness calculation
PPP – LOAN FORGIVENESS
- Amount forgiven is based on % of head count you retain compared to prior period either 1/1/20-2/29/20 or 2/15/19-6/30/19
- If your head count drops more than 25% you lose all forgiveness
- Loan forgiveness applies to the 8 weeks during the covered period (beginning when you receive the loan) ending 6/30 which means loans after May 5th may not enjoy full forgiveness
SBA DISASTER LOANS: ECONOMIC DISASTER LOAN ASSISTANCE (EIDL)
- Up to $2 Million at 3.75% can be paid back over 30 years
- You can use this loan for all business operations except growth
- You can apply for emergency grant up to $10,000 to be disbursed within 3 days
- Loan is through SBA and comes with credit check, potential guarantees etc. associated with conventional loans
There is no forgiveness on this loan – you do have to pay it back
Families First Coronavirus Response Act (FFCRA)
- Provides government paid sick leave due to COVID-19 for companies with 500 or fewer employees
- If someone is sick with COVID-19, or caring for a relative, they are eligible for up to 80 hours of sick leave pay from their employer under EPLSA
- Rate of pay varies depending on reason with a maximum of $511/day if employee is sick and $200/day if caring for a relative
- The Expanded Family and Medical Leave Act (E-FMLA) provides an additional 10 weeks of coverage up to $200/day with a $10,000 maximum
Additional Key Provisions
- Remember CARES is not just about loans
- Defer all of your 2020 payroll taxes during this calendar year. Pay 50% of the deferral on 12/31/2021 and the remaining 50% on 12/31/2022. Deferral is not available for employers receiving loan forgiveness under PPP
- Payroll tax credit of 50% on payroll taxes of first $10,000 wages of each employee if you have a sales reduction of 50% or greater compared to the prior year
- Carry back any 2018-2020 Net Operating Loss up to 5 years
Moving Forward
- Evaluate current operations and create a specific plan how you and your employees can get the most from CARES & FFCRA
- Stay up to date with announcements as the environment is changing rapidly
- Make sure you have informed employees of all benefits afforded them under FFCRA
- Put new accounting procedures in place to track all COVID-19 related funding and disbursements
CONTACT
You can contact Taylor Gibson at https://optimaoffice.com/contact-optima/
If you would like to learn more about Optima Office please visit https://optimaoffice.com/
If you would like to speak to someone on the Optima team, please call us at 858-283-1234
Material contained in this presentation is offered in summary form for informational purposes only. If you have questions about specific details of either CARES or FFCRA, please contactInfo@OptimaOffice.com
