Extension to PPP & EIDL Loan Programs

Extension to PPP & EIDL Loan Programs

The Senate has approved and the house should vote tomorrow to approve additional
funding under the PPP and EIDL loan programs. Our very strong advice if you haven’t
submitted your application for the PPP or EIDL program or have and it wasn’t
processed when the funds ran out is to push your banker to the best of your
ability! Not all applications will get processed with this tranche.
We have summarized below the EIDL loan program and additional funding for the PPP
& EIDL programs below:

EIDL Loan Program
  1. Benefits under the Program
    • $10,000 grant on three days from applying. The advance does not need to be
      repaid if you don’t qualify and is based on $1,000 per employee up to ten
      employees. No employees, no grant, but you can still apply for the EIDL loan.
    • Eligible entities can borrow up to $2 million at interest rates of 3.75% for small
      businesses and 2.75% nonprofits; the rates are fixed for the full term of the loan.
    • Terms are up to 30 years, with no prepayment penalty.
    • Seems like you could apply for each multi-member LLC but not sure if the multimember LLCs would be considered affiliates and disqualify more than one
      loan. Loans are limited to one per taxpayer ID # so technically this would not
      preclude you from filing for a loan for each separate tax id #.
    • You can apply for both a PPP loan and an EIDL loan, but they can’t be used for
      the same purposes, and can’t be used for distributions.
  2. Summary of Program
    • Most small businesses are eligible to apply.
    • Credit history and ability to repay will be considered.
    • Must show economic injury due to coronavirus (COVID-19), not other factors.
    • These loans do not go through a lender; they come directly from the SBA Disaster Loan.
    • There is no cost to apply.
    • Eligible entities can borrow up to $2 million at interest rates of 3.75% for small
      businesses and 2.75% nonprofits; the rates are fixed for the full term of the loan.
    • Terms are up to 30 years, with no prepayment penalty.
    • There is no forgiveness under this program
    • Personal guarantees are required for loans in excess of $200,000.
    • No loan payments for one year after the loan proceeds are received, but interest accrues.
    • May be used for working capital (i.e., to pay fixed debts, payroll, accounts payable), not lost sales or profits, or for expansion.
    • Loans over $25,000 generally require collateral (real estate if available, but
      SBA will not decline a loan for lack of collateral).
    • Examples of eligible industries include but are not limited to hotels, recreational
      facilities, charter boats, manufacturers, sports vendors, owners of rental property, restaurants, retailers, souvenir shops, travel agencies, wholesalers, and private nonprofits under 501(c), (d), or (e).
  3. Filing Requirements
    • Completed SBA loan application (SBA Form 5 or 5C),
    • Income tax information authorization (IRS Form 4506T) for the applicant, principals (20% or more ownership), and affiliates,
    • Copy of most recent federal income tax return,
    • Schedule of liabilities (SBA Form 2202), and
    • Personal financial statement (SBA Form 431) for owners.
    • Other information may be required (i.e., 2019 P&L if 2019 income tax return not yet filed, also SBA Form 1368 providing monthly sales figures).
    • Ineligible businesses – agricultural (need to look to USDA Rural Development), churches, public charities, gambling establishments.
    • Apply only at SBA Disaster Loan. SBA recommends clearing web history/
      cache prior to filing.
    • Timeline for approval: 18-21 days to get approval, then another 5 days to get funding, so approximately one month to get funds.
    • For urgent needs, SBA Express Lenders (local bank) may be able to access funds
      more quickly. A prior relationship is required, and the bank must have been an
      SBA Express Lender prior to the Coronavirus situation. This kind of loan is the
      only type of loan that EIDL loans can be used to pay off.

Extension to PPP & EIDL Loan Program Summary

Division A – Small Business Programs

Sec. 101. Amendments to the Paycheck Protection Program, Economic Injury Disaster
Loan, and Emergency Grants:

  • Increases the funding for the Paycheck Protection Program from $349 billion to
    $659 billion.
  • Creates a set-aside for insured depository institutions, credit unions, and community financial institutions for the Paycheck Protection Program.
  • Increases the funding for Emergency Economic Injury Disaster Loan (EIDL) grants from $10 billion to $20 billion.
  • Amends the definition of “eligible entity” for EIDL grants and loans to include agricultural enterprises, as defined in section 18(b) of the Small Business Act (15 U.S.C. § 647(b)), with fewer than 500 employees.
  • Division A sets aside the following amounts for the Paycheck Protection Program:
  • $30 billion for loans made by Insured Depository Institutions and Credit Unions, which have assets between $10 billion and $50 billion; and
  • $30 billion for loans made by Community Financial Institutions, insured depository institutions with assets of less than $10 billion, and credit unions with assets less than $10 billion.
Division B—Testing, Research, and Response Funding

HHS Funding

  • Public Health and Social Services Emergency Fund: Provides an additional $75 billion to reimburse eligible healthcare providers for healthcare-related expenses or lost revenues that are directly attributable to the coronavirus. This is in addition to the $100 billion provided for in the CARES Act.
  • Research: Provides $25 billion for expenses associated with research, development, validation, manufacture, purchase, administration, and expanding capacity for COVID-19 testing.

 

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