Updated 4/24, 1:00pm EST
Update: Congress has allocated an additional $310 billion to replenish the SBA’s Paycheck Protection Program effective 4/24. This can be accessed through the same banks as the prior round of funding. In some cases, banks are approving and funding applications received during the prior round and in other cases businesses need to reapply. Businesses should follow up with their bank to confirm.
As part of the Industrious COVID-19 response program, Continuous, we’ve compiled a list of resources to help businesses navigate assistance programs that may be available to them.
On Friday March 27, the President signed the Coronavirus Aid, Relief, and Economic Security (CARES) Act, a $2 trillion economic stimulus package that includes assistance programs designed for American businesses. We’ve updated this content as of April 3, to reflect both the Treasury guidance issued March 31 and the Treasury guidance issued April 2. While the CARES Act is the largest stimulus package in US history, many speculate that additional business relief will be required. We will continue to monitor for any additional assistance that the Federal government makes available to businesses, for more information please refer to our government assistance page.
The following information is intended to serve only as a starting point. As always, you should consult with your advisors, supplement the below with your own research and treat it as subject to change with further clarification from Treasury, SBA and banks.
Paycheck Protection Program Loans
Applications for the loan will go live on Friday, April 3rd for small businesses and sole proprietorships and on Friday, April 10 for independent contractors and self-employed individuals. Note that some banks have announced that they will not open applications until after April 3rd, to ensure that they are properly set up to administer the loans. Applications will be open until June 30, though we encourage you to apply as quickly as possible because there is a funding cap. For small businesses, these loans are likely going to be the fastest form of financial assistance in the CARES Act.
Only you and your advisors can make the decision whether to apply for the Paycheck Protection Program loans, but if you anticipate your business running into cash flow issues over the coming months, then these loans could be a good option to consider. Here are the basics:
Eligibility: The law is intended to impact as many companies as possible, so there are relatively few restrictions regarding eligibility. What we know:
Employees of affiliated businesses might be counted in your total employee count if these affiliates are deemed to control your business by the SBA, which may make companies backed by PE funds or VC investors ineligible. If this is a concern for your business, we recommend that you speak with your advisors and consult additional information. One resource we found helpful on the SBA site is linked here, and the SBA might issue further guidance on this issue.
Total loan amount: the loan size that your business is eligible for is equal to two times your average monthly payroll costs from the last year plus an additional 25% to cover other eligible expenses (based on the March 31 Treasury Guidance). The maximum loan amount is $10 million. Payroll costs include:
Here are instructions on how to calculate your total loan amount from the SBA guidance.
The government will forgive a portion of the loan equal to payroll costs, mortgages, rent and utilities for the eight weeks following loan origination if you retain your workforce. How this will work:
How the application will work: Businesses will be able to apply for these loans through approved SBA lenders beginning on April 3rd, 2020 (the application form is available here). Many commercial banks are already approved SBA lenders, including ones that you might work with already for bank accounts or credit cards. Please note that some approved SBA lenders have not yet decided if they will be accepting new customers or simply servicing existing customers (our belief is that they will but will start with existing customers. So, applying via your existing bank if they are an approved SBA lender already may be the best place to start, but we recommend consulting your advisors to make this determination.). In addition to existing approved SBA lenders, the SBA has indicated that it is working to approve new banks in order to speed up loan deployments. This program increases the normal SBA loan program ten-fold, and demand will be high for these loans. Banks are aggressively working to digitize as much of the process as possible, and, as mentioned, the SBA Secretary is going to expedite both the addition of new lenders and other enhancements to the loan process. We encourage you to consult with your own advisors before making an application, and for more detailed information to refer to our Resources for Applying blog post.
In addition to your application, banks may require businesses to self-certify their eligibility (i.e., that they meet the criteria for these loans). You will have to determine eligibility with your advisors, including your counsel, and sign a document verifying that you’re eligible, which will be subject to audit later. Below is what you will need to certify:
How to request loan forgiveness: Submit a request to your lender including documentation of the number of full-time equivalent employees on payroll and payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities for the eight weeks after getting the loan. You’ll need to certify that you’re using the funds for eligible expenses and to retain employees. The lender must make a decision on the forgiveness within 60 days.
The government is working to get funds out as quickly as possible, but given confusion around key provisions, the scale of the program and limited bank direction to date, the exact timeline is still evolving. What we know:
What should I do if I’m interested in applying?
If you’re ready to apply, we recommend consulting your advisors and reviewing our Resources for Applying blog post.
If you’re considering applying, here are a few recommended next steps. Note that access to the funds is first come first serve, so we recommend making a determination of what is right for your business as soon as possible.
What other assistance to businesses is available
The CARES Act includes a number of other provisions that are of interest to businesses:
Tax relief and write-offs are available to businesses, including the deferral of certain payroll tax payments until 2021.
Links that we found helpful (but are not affiliated with and have not verified):
This information is not final, subject to change, and meant for informational purposes only. Please note that nothing on this web page should be regarded as legal advice, and we encourage you to consult with your own advisors before making any business decisions. This information is solely presented as a convenience but is not meant to replace the advice of attorneys or other advisors.