DCV Disaster Relief Team

Small Business Relief; CARES Act (Stimulus Package)

Provides eligibility for businesses in certain industries with more than one physical location and with no more than 500 employees per physical location.

Waives affiliation rules 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 program.

A borrower that receives a 7(a) loan for employee salaries, payroll support, mortgage payments and/or other debt obligations would not be able to receive an SBA economic injury disaster loan (EIDL) for the same purpose, or co-mingle funds from another loan for the same purpose.

Eligible borrowers would be required to make good faith certification that they have been affected by COVID-19 and will use funds to retain workers and maintain payroll and other debt obligations.

Both borrower and lender fees for 7(a) loans would be waived.

The “credit elsewhere” test and collateral and personal guarantee requirements would be waived during the covered period.

Government guarantee of 7(a) loans would be increased to 100% through December 31, 2020. After that date, guarantee percentages would return to 75% for loans exceeding $150,000 and 85% for loans equal to or less than $150,000.

A complete deferment of 7(a) loan payments would be allowed for not more than one year and would require SBA to disseminate guidance on the deferment process within 30 days.

Any statutory limitations on SBA’s 7(a) lending authority would be removed through December 31, 2020.

The maximum loan for an SBA Express loan would be increased from $350,000 to $1 million through December 31, 2020, after which point the Express loan would have a maximum of $500,000.

Other Provisions Loan Forgiveness – Provides a process by which borrowers would be eligible for loan forgiveness in an amount equal to the amount spent by the borrower during an eight-week period after the origination date of the loan on the following items:

  • 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;
  • Payment on any utility for which service began before February 15, 2020.

The amount forgiven would be reduced in proportion to any reduction in employees retained compared to the prior year and to the reduction in pay of any employee beyond 25% of her prior year compensation. Borrowers that rehire workers previously laid off will not be penalized for having reduced payroll at the beginning of the period.

Emergency EIDL Grants – Establishes an emergency grant to allow an eligible entity that has applied for an EIDL loan to request an advance on that loan of no more than $10,000, which the SBA must distribute within three days. An applicant would not be required to repay such an advance payment, even if it is subsequently denied an EIDL loan. Eligible entities would include startups, cooperatives and ESOPs with fewer than 500 employees, and any individual operating as a sole proprietor or an independent contractor.

For EIDL loans made in response to COVID-19 before December 31, 2020, the SBA must waive any personal guarantee on advances and loans below $200,000, as well as the requirement that an applicant be in business for the one-year period before the disaster and the “credit elsewhere” requirement.

Entrepreneurial Development – Authorizes the SBA to provide additional financial awards to resource partners (including Small Business Development Centers and Women’s Business Centers) to provide counseling, training and education on SBA resources and business resiliency to small business owners affected by COVID-19.

Waiver of Matching Funds Requirement Under the Women’s Business Center Program – Eliminates the non-federal match requirement for a period of three months.

Minority Business Development Agency – Authorizes $10 million for grants to Minority Business Centers for the purpose of providing counseling, training and education on federal resources and business response to COVID-19 for small businesses. Eliminates the non-federal match requirement for three months.

Contracting – Requires federal agencies to extend contract performance time by no fewer than 30 days for small business affected by COVID-19 until September 2021, unless the agency considers the contract mission critical. Also requires the federal government to continue to pay small business contractors and revise delivery schedules, holding them harmless for being unable to perform because of COVID-19 until September 2021. Federal agencies must first consult with the director of the Office of Small and Disadvantaged Business Utilization before seeking to cancel a small business prime contract due to a failure to meet terms of the contract caused directly or indirectly by COVID-19.

Waiver of Prepayment Penalty – Removes prepayment penalties for loans made under this title on or before December 31, 2020.

US Treasury Program Management Authority – Allows the Department of Treasury (in consultation with the SBA and other federal financial regulatory agencies) to establish a process by which lending institutions that are not currently authorized to offer SBA loan products are able to provide SBA small business interruption loans for the length of the president’s national emergency declaration. Allows Treasury to determine the eligibility criteria and terms for the lenders it approves to disseminate small business interruption loans, and to write regulations outlining these criteria and terms.

Subsidy for Certain Loan Repayments – Requires the SBA to pay the principal, interest and any associated fees that are owed on the defined loans for a six-month period starting on the next payment due date. Loans that are already on deferment would include an additional six months of payment by the SBA beginning with the next payment. Loans made during this period until six months after the enactment of the legislation would also qualify for six months of deferral payment by the SBA. Defines eligible loans as existing 7(a) (including Community Advantage), 504 and microloan products.

Key tax provisions include:
Tax credit rebates of up to $1,200 per individual and $500 per child that are phased out for taxpayers with AGI over $75,000 ($150,000 MJF and $112,500 HOH) and will be “rapidly advanced;”

The delay of employer payroll tax deposits for 2020 (50% due by December 31, 2021, and 50% due by December 31, 2022);

A refundable employer retention credit equal to 50% of qualified wages against quarterly employment taxes, to offset up to $10,000 of wages paid per employee in 2020;

The reinstatement of NOL carrybacks for the 2018–2020 taxable years, and repeal of the 80% taxable income limitation for the 2018–2020 taxable years;

A TCJA technical correction that classifies qualified improvement property as 15-year recovery period, allowing the bonus depreciation deduction to be claimed for such property retroactive as if it was included in the TCJA at the time of enactment;

Penalty-free withdrawals of tax retirement funds of up to $100,000 (income recognized over a three-year period);

A temporary waiver of RMD requirements in 2020;

The suspension of charitable contribution limits for 2020;

The deferral of excess business loss limitations until 2021;

An increase in the business interest deduction limitations from 30% to 50% of adjusted taxable income for the 2019 and 2020 taxable year;

An exclusion from income for employer-payments made on employee student loans paid before January 1, 2021;

The acceleration of the corporate credit for prior-year minimum tax liability, allowing 100% of the credit to be claimed in 2019 (2018 at the election of the taxpayer); and

A COD exclusion of small business loans forgiven under the Act.

Answers to the Most Common Questions
The four questions are below the most common asked by business owners we have talked with over the last few weeks.
1. What are the requirements to secure an SBA Disaster Assistance Loan?
2. By applying for Disaster Assistance, what can I expect?
3. How long does it take to get for a response from the SBA?
4. How fast is the SBA funding?

Let’s start with the requirements for an SBA Disaster Assistance Loan.
The program is designed to help business owners pay for fixed debts, payroll, accounts payable and other operating expenses. You must be able to provide the following:
1. Your most current P&L, for example, Jan and Feb, 2020.
2. Each owner of the business with an interest of 20% or more is required to provide their most
recent tax return.
a. If an extension has been filed for 2019, the year-end 2019 P&L and Balance is needed.
3. Have a copy of your insurance declaration page and lease agreement available for reference.
4. There is a schedule of debt to fill out; be sure you have a complete understanding of your liabilities.

The next question: What can I expect after applying?
1. The SBA reviews your credit before conducting an inspection of your application.
2. The SBA verifier will decide on eligibility after reviewing other recovery options you might have such as from your business insurance.

How long does it take to get for a response from the SBA
1. The SBA’s goal is to arrive at a decision within 2-3 weeks.
2. A loan officer will contact you to discuss next steps.
3. As part of the last step, the SBA will prepare and send your loan closing documents to you for signature.

How fast is the SBA funding?
1. Once the SBA has received your signed documents, an initial disbursement will be made to you within 5 days.
2. A case manager will be assigned to work with you to help meet all loan conditions.

The Disaster Relief Team at DCV is here for you, to prepare your loan package, to lead, guide and direct you through the process. Our phone number is 805-449-2411. We would love to be of service, to relieve you of any additional stress that no one needs right now.