Coronavirus Business Center
In these unprecedented times, staying informed on daily changes while still trying to operate a business is overwhelming. Resources will be posted here to help keep you informed.
Webinar: PPP – A Roadmap & Strategies to Maximize Use
Feedback from attendees includes:
“I attended a few presentations over the past few days and S&Gs was the most informative. The worksheet was excellent. ”
“This was by far the best presentation on this topic I have heard. 5 Star!”
“Thank you for the informative presentation today by S&G with the MetroWest Chamber of Commerce…the presentation was quite helpful to get a better understanding.”
Governor Baker Phase-In Plan for Massachusetts Businesses
Helpful Links for the Paycheck Protection Program
The PPP-Forgiveness-Application can be found at: https://home.treasury.gov/system/files/136/3245-0407-SBA-Form-3508-PPP-Forgiveness-Application.pdf
For Paycheck-Protection-Program-Frequently-Asked-Questions visit: https://home.treasury.gov/system/files/136/Paycheck-Protection-Program-Frequently-Asked-Questions.pdf
You can find the US Treasury PPP Loan website at: https://home.treasury.gov/policy-issues/cares/assistance-for-small-businesses
Webinar: Maximize Loan Forgiveness – How to Track & Spend Your PPP Money
CARES Act – Paycheck Protection Program Update 4/1/20
- Lenders received initial loan application instructions from the SBA late yesterday and received the application form.
- Secretary Mnuchin stated that he expected to have the program up and running by April 3rd.
- The PPP Act provided that any unspent loan proceeds on the allowable expenses that were defined by the new law would have to be paid back within a maximum of 10 years with a maximum rate of interest of 4%. In yesterday’s guidance to the banks they set the payback period to 2 years and a rate of interest of .5%. (We assume a short time period was selected to ensure that the money is used as intended by the new law.)
- The CARES Act is separate from the Small Business Administration (SBA) Direct Disaster Relief Loan which is maxed out at $2M. Applicants can not apply to both programs.
Coronavirus Aid, Relief and Economic Security Act (CARES Act)
Paycheck Protection Program – Small Business Loan Guarantees
As we assume you are aware, the CARES Act was signed into law on Friday, March 27,2020. The law is broken down into six separate Titles and each Title has numerous sections which define the law specifics.
A major part of the Act is the Paycheck Protection Program (PPP), which provides $350 billion to guarantee loans to small businesses up to $10 million. The loans are designed to cover costs incurred from the period beginning on February 15, 2020 and ending on June 30, 2020 (the covered loan period). We have summarized the highlights below.
How Do You Apply
The program is an expanded SBA loan program and the loans will be made by banks and credit unions that are current SBA 7(a) lenders. Other lenders who are not approved to make SBA 7(a) loans, can join the program.
Our recommendation is to contact your bank as soon as possible, find out if they are an approved SBA lender, and if they are let them know that you want to apply for the loan. Be advised that as of this writing, lenders are still waiting on the SBA to provide final procedures for the applications.
If their not approved SBA lenders, ask them if they are going to join and what the timetable is. It may be more expedient to file an application to an approved SBA lender. The downside is, they may be prioritizing loans to their existing clients.
We assume that once the $350B limit is reached, no other loans will be considered after that, unless they expand the program in additional legislation, which is already under consideration.
Borrowers Good Faith Certification
Borrowers must certify that:
- The loan is necessary due to the uncertainty of current economic conditions caused by Covid-19 to support the borrower’s ongoing operations
- Acknowledge that the funds will be used to retain workers and maintain payroll or make mortgage, lease and utility payments
- Certify that there is not another application pending for a loan under another SBA program for the same use, nor have they received any funding from such loan
The PPP defines eligibility for loans as: small businesses, 501 (c) (3) non-profit, a 501 (c) (19) veteran’s organization or Tribal business concern described in section 31 (b) (2) (C) of the Small Business Act that employ not more than the greater of:
- 500 employees or
- the applicable size standard size for the industry as provided by the SBA
The term employees includes full-time, part-time or other basis.
Sole proprietors, independent contractors and other self-employed individuals are also eligible.
Eligible borrowers must have been in business on February 15, 2020 and paid salaries, wages or other compensation thereafter.
Waves the aggregation rules of affiliates for businesses in the hospitality and restaurant industries, franchises that are approved on the SBA’s Franchise Directory and small businesses that receive financing through the Small Business Investment Company (SBIC) program.
Calculating the Maximum Eligible Loan Amount
The amount is calculated by multiplying the average total monthly payments for payroll costs as defined below (or income of sole proprietor or independent contractor) incurred during the one year period before the date of the loan by 2.5 to a maximum of $10M.
There are some other time periods that could be elected if a business is seasonal or if a business was not in business during the period 2/15/19 to 6/30/19. Please contact us if your business falls into either category and we will be happy to discuss your individual situation with you.
Payroll costs defined:
- Salary, wage, commission or similar compensation
- Payment of cash tip in equivalent
- Payment for vacation, parental, family, medical or sick leave
- Allowance for dismissal or separation
- Group health benefits including health insurance
- Payment of any retirement benefit
- Payment of State or local tax assessed on the compensation of employees
Payroll cost exclusions:
- The payroll costs shall not include salary, commission or similar compensation (for the self-employed net earnings) in excess of $100,000
- Any compensation of an employee whose principal place of business is outside the US
- Qualified sick or family leave wages for which a credit is available under the Families First Coronavirus Response Act
Allowable Use of Proceeds
- Payroll costs
- Group health care benefits during periods of paid sick, medical or family leave and insurance premiums
- Employee salaries, commissions or similar compensation
- Payment of interest on any mortgage obligation
- Rent (including rent under a lease agreement)
- Utilities (electricity, gas, water, telephone internet access)
- Interest on any other debt obligations that were incurred before the covered period
Loan Application Waivers of Existing SBA Requirements
- Waives borrower loan fees
- Waives the credit elsewhere test for funds provided under the program
- Waives collateral and personal guarantee requirements under the program
Note, that any loan not spent on the allowable uses, that portion of the loan will be paid back over a time period not to exceed 10 years and the guarantee for that portion of the loan will remain intact.
The borrower is eligible for loan forgiveness for businesses that retain employees or re-hire laid-off workers, equal to the amount spent during an 8 week period after the origination of the loan on allowable expenses (the eligible forgiveness amount), reduced as described below.
The eligible loan forgiveness amount is reduced, but not increased, by multiplying this amount by the quotient obtained by:
• dividing the average monthly full time equivalents (FTE) during the covered time period (February 15, 2020 to June 20, 2020), by
• the average monthly FTE during the time period of February 15, 2019 to June 30, 2019 (at the election of the borrower there are three options depending on their individual circumstances, the primarily one being, being in business between 2/15/19 through 6/30/19).
And by the amount of any reduction in total salary wages of an employee during the covered period in excess of 25% of the total wages paid during the most recent full quarter before the covered period.
Exception For Re-hires And The Raise Of Previously Lowered Wages
The act provides relief from the loan forgiveness reduction if the employer rehires any laid-off employees and/or raises any previously lowered wages and salaries beyond 25% that occurred between 2/15/20 and 30 days after enactment of the Act and did so no later than 6/30/20.
Any cancelled indebtedness will not be included in the borrower’s taxable income.
Loan Amount Not Forgiven Payback Terms
Any loan amounts not forgiven is carried forward as an ongoing loan with a max term of 10 years with a maximum interest of 4% and 100% loan guarantee by the borrower.
Emergency Economic Injury Disaster Loan (EIDL) Grants
Allows eligible entities who have applied for a loan due to COVID-19 to request an advance of that loan, not to exceed $10,000, which the SBA must distribute within 3 days.
SBA Economic Injury Disaster Loans For Coronavirus Related Economic
Disruptions Webinar Highlights
March 23, 2020
The following are certain highlights of the Covid 19 Virus SBA Loan Assistance Program. Some of which were comments made by Ili Spahiu, the SBA representative conducting the webinar:
- Up to $2M can be borrowed based on not being able to get needed credit elsewhere, current need and repayment ability
- 30 year loan at 3.75% interest (2.75 for non-profits)
- No payments for first 12 months
- Does not go through banks, it’s a direct loan from the Government
- No fees to apply or borrow
- There is no place on the Loan Application to put in a requested loan amount (the SBA will determine that based on financial information submitted)
- Approval of loans still needs to be based on historic cash flow (not the more recent since the crisis hit) to demonstrate ability to pay
- Credit Score of 600 and above
- Credit Scores below 600 will still be considered, but on a case by case basis
- Loans over $25,000 need personal guarantee
- All owners of 20% or more must guarantee loan
- Loan will be secured by real estate if available (2nd lien position)
- If no real estate available, will take pledge of other available assets
- Recommended to use the Electronic Loan Application for faster processing
- Infrastructure was not built for the amount of claims being received so can be very slow
- It is encouraged that you keep trying to get yourself in the process que and try later at night
- Application must match the business name and address exactly as the Federal Income Tax Return filing. Biggest reason for applications being bounced
- When you register, you’ll be asked to set up a password. This will allow you to go back into your file, as needed, to complete the application as you pull together the financial information that’s required.
- Upon final submittal of the application, you’ll get a case number that you can then refer too
- Current loan process time is 4 weeks and is projected to get longer
- If your funding need can’t wait 4 weeks or more, look into getting a bridge loan which you can then pay back from the SBA proceeds
Note: that late Wednesday night, March 25 2020, the Senate passed the Keeping American Workers Paid and Employment Act. The House will vote on it Friday. If it passes as is, there is another Business Relief Loan Program of up to $10M for qualifying businesses. Business owners will have to decide which loan provisions are more favorable to them and choose one to apply to. The law specifically prohibits applying to both. Once the law is passed and signed by the President we will update our resource materials accordingly.
DOL’s Family First Coronavirus Response Act Q&A
As provided under new legislation, the U.S. Department of Labor will be issuing implementing regulations. Additionally, as warranted, the Department will continue to provide compliance assistance to employers and employees on their responsibilities and rights under the FFCRA.
“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 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.
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, use the number of hours that you and your employee agreed that the employee would work upon hiring. And if there is no such agreement, you may calculate the appropriate number of hours of leave based on the average hours per day the employee was scheduled to work over the entire term of his or her employment.
6. When calculating pay due to employees, must overtime hours be included?
Yes. The Emergency Family and Medical Leave Expansion Act requires you to pay an employee for hours the employee would have been normally scheduled to work even if that is more than 40 hours in a week.
However, the Emergency Paid Sick Leave Act requires that paid sick leave be paid only up to 80 hours over a two-week period. For example, an employee who is scheduled to work 50 hours a week may take 50 hours of paid sick leave in the first week and 30 hours of paid sick leave in the second week. In any event, the total number of hours paid under the Emergency Paid Sick Leave Act is capped at 80.
If the employee’s schedule varies from week to week, please see the answer to Question 5, because the calculation of hours for a full-time employee with a varying schedule is the same as that for a part-time employee.
Please keep in mind the daily and aggregate caps placed on any pay for paid sick leave and expanded family and medical leave as described in the answer to Question 7.
Please note that pay does not need to include a premium for overtime hours under either the Emergency Paid Sick Leave Act or the Emergency Family and Medical Leave Expansion Act.
7. As an employee, how much will I be paid while taking paid sick leave or expanded family and medical leave under the FFCRA?
It depends on your normal schedule as well as why you are taking leave.
If you are taking paid sick leave because you are unable to work or telework due to a need for leave because you (1) are subject to a Federal, State, or local quarantine or isolation order related to COVID-19; (2) have been advised by a health care provider to self-quarantine due to concerns related to COVID-19; or (3) are experiencing symptoms of COVID-19 and are seeking medical diagnosis, you will receive for each applicable hour the greater of:
◦ your regular rate of pay,
◦ the federal minimum wage in effect under the FLSA, or
◦ the applicable State or local minimum wage.
In these circumstances, you are entitled to a maximum of $511 per day, or $5,110 total over the entire paid sick leave period.
If you are taking paid sick leave because you are: (1) caring for an individual who is subject to a Federal, State, or local quarantine or isolation order related to COVID-19 or an individual who has been advised by a health care provider to self-quarantine due to concerns related to COVID-19; (2) caring for your child whose school or place of care is closed, or child care provider is unavailable, due to COVID-19 related reasons; or (3) experiencing any other substantially-similar condition that may arise, as specified by the Secretary of Health and Human Services, you are entitled to compensation at 2/3 of the greater of the amounts above.
Under these circumstances, you are subject to a maximum of $200 per day, or $2,000 over the entire two week period.
If you are taking expanded family and medical leave, you may take paid sick leave for the first ten days of that leave period, or you may substitute any accrued vacation leave, personal leave, or medical or sick leave you have under your employer’s policy. For the following ten weeks, you will be paid for your leave at an amount no less than 2/3 of your regular rate of pay for the hours you would be normally scheduled to work. The regular rate of pay used to calculate this amount must be at or above the federal minimum wage, or the applicable state or local minimum wage. However, you will not receive more than $200 per day or $12,000 for the twelve weeks that include both paid sick leave and expanded family and medical leave when you are on leave to care for your child whose school or place of care is closed, or child care provider is unavailable, due to COVID-19 related reasons.
To calculate the number of hours for which you are entitled to paid leave, please see the answers to Questions 5-6 that are provided in this guidance.
8. What is my regular rate of pay for purposes of the FFCRA?
For purposes of the FFCRA, the regular rate of pay used to calculate your paid leave is the average of your regular rate over a period of up to six months prior to the date on which you take leave. If you have not worked for your current employer for six months, the regular rate used to calculate your paid leave is the average of your regular rate of pay for each week you have worked for your current employer.
If you are paid with commissions, tips, or piece rates, these wages will be incorporated into the above calculation.
You can also compute this amount for each employee by adding all compensation that is part of the regular rate over the above period and divide that sum by all hours actually worked in the same period.
9. May I take 80 hours of paid sick leave for my self-quarantine and then another amount of paid sick leave for another reason provided under the Emergency Paid Sick Leave Act?
No. You may take up to two weeks—or ten days—(80 hours for a full-time employee, or for a part-time employee, the number of hours equal to the average number of hours that the employee works over a typical two-week period) of paid sick leave for any combination of qualifying reasons. However, the total number of hours for which you receive paid sick leave is capped at 80 hours under the Emergency Paid Sick Leave Act.
10. If I am home with my child because his or her school or place of care is closed, or child care provider is unavailable, do I get paid sick leave, expanded family and medical leave, or both—how do they interact?
You may be eligible for both types of leave, but only for a total of twelve weeks of paid leave. You may take both paid sick leave and expanded family and medical leave to care for your child whose school or place of care is closed, or child care provider is unavailable, due to COVID-19 related reasons. The Emergency Paid Sick Leave Act provides for an initial two weeks of paid leave. This period thus covers the first ten workdays of expanded family and medical leave, which are otherwise unpaid under the Emergency and Family Medical Leave Expansion Act unless the you elect to use existing vacation, personal, or medical or sick leave under your employer’s policy. After the first ten workdays have elapsed, you will receive 2/3 of your regular rate of pay for the hours you would have been scheduled to work in the subsequent ten weeks under the Emergency and Family Medical Leave Expansion Act.
Please note that you can only receive the additional ten weeks of expanded family and medical leave under the Emergency Family and Medical Leave Expansion Act for leave to care for your child whose school or place of care is closed, or child care provider is unavailable, due to COVID-19 related reasons.
11. Can my employer deny me paid sick leave if my employer gave me paid leave for a reason identified in the Emergency Paid Sick Leave Act prior to the Act going into effect?
No. The Emergency Paid Sick Leave Act imposes a new leave requirement on employers that is effective beginning on April 1, 2020.
12. Is all leave under the FMLA now paid leave?
No. The only type of family and medical leave that is paid leave is expanded family and medical leave under the Emergency Family and Medical Leave Expansion Act when such leave exceeds ten days. This includes only leave taken because the employee must care for a child whose school or place of care is closed, or child care provider is unavailable, due to COVID-19 related reasons.
13. Are the paid sick leave and expanded family and medical leave requirements retroactive?
14. How do I know whether I have “been employed for at least 30 calendar days by the employer” for purposes of expanded family and medical leave?
You are considered to have been employed by your employer for at least 30 calendar days if your employer had you on its payroll for the 30 calendar days immediately prior to the day your leave would begin. For example, if you want to take leave on April 1, 2020, you would need to have been on your employer’s payroll as of March 2, 2020.
If you have been working for a company as a temporary employee, and the company subsequently hires you on a full-time basis, you may count any days you previously worked as a temporary employee toward this 30-day eligibility period.
Summary Key Provisions – Keeping American Workers Paid and Employment Act
Note: Late Wednesday night, March 25 2020, the Senate passed the Keeping American Workers Paid and Employment Act. The summary of key provisions is based on provisions that the Senate passed. The House approved and the President signed it into law Friday. Upon review we will be updating our resource materials accordingly.
Sec. 1101: Definitions
Sec. 1102: Paycheck Protection Program
**see expanded explanation at the top of this page**
Sec. 1106: Loan Forgiveness
Establishes that the borrower shall be eligible for loan forgiveness equal to the amount spent by the borrower during an 8-week period after the origination date of the loan on payroll costs, interest payment on any mortgage incurred prior to February 15,2020, payment of rent on any lease in force prior to February 15, 2020, and payment on any utility for which service began before February 15, 2020.
Amounts forgiven may not exceed the principal amount of the loan. Eligible payroll costs do not include compensation above $100,000 in wages. Forgiveness on a covered loan is equal to the sum of the following payroll costs incurred during the covered 8 week period compared to the previous year or time period, proportionate to maintaining employees and wages:
Payroll costs plus any payment of interest on any covered mortgage obligation (which shall not include any prepayment of or payment of principal on a covered mortgage obligation) plus any payment on any covered rent obligation + and any covered utility payment.
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.
Allows forgiveness for additional wages paid to tipped workers.
Borrowers will verify through documentation to lenders their payments during the period. Lenders that receive the required documentation will not be subject to an enforcement action or penalties by the Administrator relating to loan forgiveness for eligible uses.
Upon a lender’s report of an expected loan forgiveness amount for a loan or pool of loans, the SBA will purchase such amount of the loan from the lender.
Canceled indebtedness resulting from this section will not be included in the borrower’s taxable income.
Any loan amounts not forgiven at the end of one year is carried forward as an ongoing loan with terms of a max of 10 years, at max 4% interest. The 100% loan guarantee remains intact.
Sec. 1107: Direct Appropriations
This section appropriates funds for the following uses:
- $349 billion for loan guarantees,
- $675 million for Small Business Administration salaries and expenses,
- $25 million for the Office of lnspector General,
- $240 million for small business development centers and women’s business centers for technical assistance for businesses,
- $25 million for resource partner associations to provide online information and training,
- $10 million for minority business centers for technical assistance for businesses,
- $10 billion for emergency EIDL grants,
- $17 billion for loan subsidies,
- $25 million for Department of Treasury salaries and expenses, and
- $100 billion for secondary market guarantee sales.
Sec. 1110: Emergency EIDL Grants
Expands eligibility for access to Economic Injury Disaster Loans (EIDL) to include Tribal businesses, cooperatives, and ESOPs with fewer than 500 employees or any individual operating as a sole proprietor or an independent contractor during the covered period (January 31, 2020 to December 31, 2020). Private non-profits are also eligible for both grants and EIDLs.
Requires that for any SBA EIDL loans made in response to COVID-19 before December 31, 2020, the SBA shall waive any personal guarantee on advances and loans below $200,000, the requirement that an applicant needs to have been in business for the I -year period before the disaster, and the credit elsewhere requirement.
During the covered period, allows SBA to approve and offer EIDL loans based solely on an applicant’s credit score, or use an alternative appropriate alternative method for determining applicant’s ability to repay.
Establishes an Emergency Grant to allow an eligible entity who has applied for an EIDL loan due to COVID-19 to request an advance on that loan, of not more than $10,000, which the SBA must distribute within 3 days.
Establishes that applicants shall not be required to repay advance payments, even if subsequently denied for an EIDL loan.
In advance of disbursing the advance payment, the SBA must verify that the entity is an eligible applicant for an EIDL loan. This approval shall take the form of a certification under penalty of perjury by the applicant that they are eligible.
Outlines that advance payment may be used for providing paid sick leave to employees, maintaining payroll, meeting increased costs to obtain materials, making rent or mortgage payments, and repaying obligations that cannot be met due to revenue losses.
Requires that an advance payment be considered when determining loan forgiveness, if the applicant transfers into a loan made under SBA’s Paycheck Protection Program.
Terminates the authority to carry out Emergency EIDL Grants on December 30, 2020.
Sec. 1112: Subsidy for Certain Loan Payments
Defines a covered loan as an existing 7(a) (including Community Advantage), 504, or microloan product. Paycheck Protection Program (PPP) loans are not covered.
Requires the SBA to pay the principal, interest, and any associated fees that are owed on the covered loans for a six month period starting on the next payment due. Loans that are already on deferment will receive six months of payment by the SBA beginning with the first payment after the deferral period. Loans made up until six months after enactment will also receive a full 6 months of loan payments by the SBA.
SBA must make payments no later than 30 days after the date on which the first payment is due. Requires the SBA to still make payments even if the loan was sold on the secondary market.
Requires SBA to encourage lenders to provide deferments and allows lenders,up until one year after enactment,to extend the maturity of SBA loans in deferment beyond existing statutory limits.