Coronavirus emergency loans via cares act -small business guide & checklist

Coronavirus emergency loans via cares act -small business guide & checklist

• 1.
  Prepared by theU.S. CHAMBER OF COMMERCE CORONAVIRUS EMERGENCYL ANS Small Business Guide and Checklist The Coronavirus Aid, Relief, and Economic Security (CARES) Act allocated $350 billion to help small businesses keep workers employed amid the pandemic and economic downturn.KnownasthePaycheckProtectionProgram, theinitiativeprovides100%federallyguaranteedloans to small businesses. Importantly, these loans may be forgiven if borrowers maintain their payrolls during the crisis or restore their payrolls afterward. The administration soon will release more details including the list of lenders offering loans under the program. In the meantime,theU.S.ChamberofCommercehasissued this guide to help small businesses and self-employed individuals prepare to file for a loan. Here are the questions you may be asking— and what you need to know.
• 2.
  Am I ELIGIBLE? Youare eligible if you are: • A small business with fewer than 500 employees • A small business that otherwise meets the SBA’ssize standard • A501(c)(3)withfewerthan500employees • An individual who operates as a sole proprietor • An individual who operates as an independent contractor • An individual who is self-employed who regularly carries on any trade or business • A Tribalbusiness concern that meets the SBA size standard • A 501(c)(19) Veterans Organization that meets the SBA size standard In addition, some special rules may make you eligible: • If you are in theaccommodationandfood services sector(NAICS72), the 500-employee rule is applied on a per physical location basis • If you are operating as a franchise or receive financial assistance fromanapprovedSmallBusinessInvestmentCompanythenormal affiliation rules do not apply REMEMBER: The 500-employee threshold includes all employees: full-time,part-time,andanyotherstatus. Whatwilllendersbe LOOKINGFOR? In evaluating eligibility, lenders are directed to consider whether the borrower was in operation before February 15, 2020 and had employees for whom they paid salaries and payroll taxes or paid independent contractors. Lenders will also ask you for a good faith certification that: 1. The uncertainty of current economic conditions makes the loan request necessary to support ongoing operations 2. The borrower will use the loan proceeds to retain workers and maintain payroll or makemortgage,lease,and utilitypayments 3. Borrower does not have an application pending for a loan duplicative of the purpose and amounts applied for here 4. From Feb. 15, 2020 to Dec. 31, 2020, the borrower has not received a loan duplicative of the purpose and amounts applied for here (Note: There is an opportunity to fold emergency loans made between Jan. 31, 2020 and the date this loan program becomes available into a new loan) If you are an independent contractor, sole proprietor, or self-employed individual, lenders will also be looking for certain documents (final requirements will be announced bythe government) such as payrolltaxfilings,Forms1099-MISC,andincomeandexpensesfrom the sole proprietorship. Whatlenderswill NOT LOOK FOR • That the borrower sought and was unable to obtain credit elsewhere. • A personal guarantee is not required for the loan. • No collateral is required for the loan. Prepared by the U.S. CHAMBER OF COMMERCE 1 2
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  HowmuchcanI BORROW?Loans can beup to 2.5 x the borrower’s average monthly payroll costs, not to exceed $10 million. How do I calculate my average monthly PAYROLL COSTS? NON SEASONAL EMPLOYERS: Maximum loan= 2.5 xAverage total monthly sum of INCLUDED payroll costs sum of EXCLUDED payroll costs Payroll Cost: PAYROLL COSTS payroll costs incurred during the year prior to the loan date For businesses not operational in 2019: 2.5 xAverage total monthly payroll costs incurred for 1. For Employers: The sum of payments of any compensation with respect to employees that is a: • salary,wage,commission,orsimilarcompensation; • payment of cash tip or equivalent; • paymentforvacation,parental,family,medical,orsick leave • allowancefordismissalorseparation • payment required for the provisions of group health care benefits includinginsurancepremiums • payment of anyretirement benefit • payment of state or local tax assessed on the compensation of the employee 2. ForSoleProprietors,IndependentContractors,andSelf-Employed Individuals: The sum of payments of any compensation to or income of a sole proprietor or independent contractor that is a wage,commission,income,netearningsfromself-employment,or similar compensation and that is in an amount that is not more than $100,000 in one year, as pro-rated for the covered period. Payroll Cost: 1. Compensationofanindividualemployeein excessof anannualsalary of $100,000,as prorated for the period February 15, to June 30, 2020 2. Payrolltaxes,railroadretirementtaxes,andincometaxes 3. Any compensation of an employee whose principal place of residence is outside of the United States 4. Qualified sick leave wages for which a credit is allowed under section 7001oftheFamiliesFirstCoronavirusResponseAct(PublicLaw116– 5 127);orqualified familyleave wages for which a credit is allowed undersection7003oftheFamiliesFirstCoronavirusResponseAct January and February 2020 SEASONAL EMPLOYERS: Maximum loan= 2.5 xAverage total monthly payments for payroll costs for the 12-week period beginning February 15, 2019 or March 1, 2019 (decided by the loan recipient) and ending June30,2019 Prepared by the U.S. CHAMBER OF COMMERCE 3 INCLUDED EXCLUDED
• 4.
  Willthisloanbe FORGIVEN? Borrowers are eligibleto have their loans forgiven. How Much? A borrower is eligible for loan forgiveness equal to the amount the borrower spent on the following items during the 8-week period beginning on the date of the origination of the loan: • Payroll costs (using the same definition of payroll costs used to determineloaneligibility) • Interest on the mortgage obligation incurred in the ordinary courseof business • Rent on a leasing agreement • Paymentsonutilities(electricity,gas,water,transportation, telephone,or internet) • For borrowers with tipped employees, additional wages paid to those employees The loan forgiveness cannot exceed the principal. Howcouldtheforgivenessbereduced? The amount of loan forgiveness calculated above is reduced if there is a reduction in the number of employees or a reduction of greater than 25% in wages paid to employees. Specifically: WHAT'S NEXT? Look out for more information about eligible lendersand additional guidance from the SBA soon. For more guidance and resources for small businesses, visit uschamber.com/co Reductionbasedonreduction ofnumber ofemployees Reductionbasedonreductioninsalaries Option 1: AveragenumberofFTEsper monthfrom February15,2019toJune30,2019 Option 2: AveragenumberofFTEsper monthfrom January1, 2020 to February 29,2020 ForSeasonalEmployers: AveragenumberofFTEsper monthfrom February15,2019toJune30,2019 For any employee who did not earn during any pay period in 2019 wages at an annualized rate more than $100,000, the amount of any reduction in wages that is greater than 25% compared to their most recent full quarter. Whatif I bringbackemployeesor restore wages? Reductions in employment or wages that occur during the period beginning on February 15, 2020,and ending 30 days after enactment oftheCARESAct,(ascomparedtoFebruary15,2020)shallnotreduce the amount of loan forgiveness IF by June 30, 2020 the borrower eliminates the reduction in employees or reduction in wages. Prepared by the U.S. CHAMBER OF COMMERCE Average Number of Full-Time Equivalent Employees (FTEs) Per Month for the 8-WeeksBeginning on LoanOrigination PAYROLL COST Calculated onpage2 PAYROLL COST Calculated onpage2 4