Coronavirus Aid, Relief, and Economic Security (CARES) Act

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. Known as the Paycheck Protection Program (PPP), the initiative provides 100% federally guaranteed loans to small businesses.

Importantly, these loans may be forgiven if borrowers maintain their payrolls during the crisis or restore their payrolls afterward. The administration has released initial guidelines; they are available at www.treasury.gov. The U.S. Chamber of Commerce has issued this guide to help small businesses and self-employed individuals check eligibility and prepare to file for a loan.

The administration has released initial guidelines; they are available at www.treasury.gov. The U.S. Chamber of Commerce has issued this guide to help small businesses and self-employed individuals check eligibility and prepare to file for a loan.

Small businesses and sole proprietors can begin applying on April 3. Independent contractors and self-employed individuals can apply beginning on April 10.

You can apply through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. Other regulated lenders will be available to make these loans once they are approved and enrolled in the program. You should consult with your local lender as to whether it is participating.While the program is open until June 30, 2020, the government is advising borrowers to apply as soon as possible given the loan cap on the program.

Please download your full guide tothe CARES Act here: https://www.uschamber.com/sites/default/files/023595_comm_corona_virus_smallbiz_loan_final.pdf?fbclid=IwAR0uT1X22cXJ6WkzRGbyjq30g7pMCzNIBVguHa41WdIM0rnUFxXGpqfN6hE

Our Chamber members Dime Community Bank (Steve Korman; 718-782-6200 ext. 5917); The First National Bank of Long Island (Linda Rowse; 516-795-0100) and Sterling National Bank (Lydia Edu-Daly 516-799-5500 ) are participating in the SBA Cares Act which includes the Payroll Protection Program. If any Chamber members have been impacted by COVID-19 and need assistance, please reach out to these local banks for details and resources.

Application for PPP Loan Forgiveness

The U.S. Small Business Administration in consultation with the U.S. Department of the Treasury has released the Paycheck Protection Program Loan Forgiveness application. The form and instructions inform borrowers on how to apply for forgiveness of their PPP loans consistent with the CARES Act. For the application and details, please visit https://www.sba.gov/sites/default/files/2020-05/3245-0407%20SBA%20Form%203508%20PPP%20Forgiveness%20Application.pdf

Preparing Documentation for PPP Forgiveness

Borrowers need to consider taking steps now to help them document their request for forgiveness. For the best chance at the maximum amount of loan forgiveness, you should:

  • Create a separate bank account to deposit and disburse the PPP loan proceeds. Your lender may even be able to open a new account for you with them just for the PPP loan, allowing for easier tracking. Make sure that you move funds out of this account directly to your payment account, and in the exact amounts to be paid.
  • Consider a separate code for costs incurred during the forgiveness period, and monitor spending throughout the period to ensure that at least 75% of the PPP loan proceeds are spent on payroll costs.
  • Maintain records for all potentially forgivable payments, including all federal and state taxes paid with payroll, mortgage interest, rent, and utilities.
  • Keep good records of employees offered to be re-hired, as well as those actually hired back, along with their position and pay rate.
  • Understand that you may need to run an off-cycle payroll on the last business day of the eight-week period to capture all eligible payroll expenditures. ​
  • Begin to speak with your lender about the forgiveness process and inquire as to when they expect to have their process and documentation requirements available.​

Make sure you continue to communicate with your advisor about the latest PPP developments. Given that the SBA has recently announced enhanced scrutiny of PPP submissions, it is more important than ever to make sure you are best positioned for a successful loan forgiveness application. (Information Provided by Chris Klampfer, MSA, AWMA®, CRPC®, Business Development Director, Kuttin Wealth Management)

SBA and Treasury Department Announce $10 Billion for CDFIs to Participate in the Paycheck Protection Program

The U.S. Small Business Administration, in consultation with the U.S. Treasury Department, announced that it is setting aside $10 billion of Round 2 funding for the Paycheck Protection Program (PPP) to be lent exclusively by Community Development Financial Institutions (CDFIs). CDFIs work to expand economic opportunity in low-income communities by providing access to financial products and services for local residents and businesses. These dedicated funds will further ensure that the PPP reaches all communities in need of relief during the COVID-19 pandemic – a key priority for President Trump.

Paycheck Protection Program Flexibility Act

On June 3, 2020, the Senate passed a bipartisan bill (Paycheck Protection Program Flexibility Act) extending and easing some of the requirements of the PPP Loan Forgiveness.

The bill has been sent to the President to be signed into law, which we anticipate will be done shortly.

Once signed into law, the bill will make the following changes to the PPP program:

  • Extend the repayment terms from 2 years to 5 years for any portion of the loan proceeds that are not forgiven.
  • Increase the deferral of the loan payment for the non-forgiven portion of the loan to 6 months after the determination of forgiveness or 10 months if a borrower fails to apply for forgiveness within 10 months after the end of the covered period.
  • Extend the 8 week covered period to 24 weeks or December 31, 2020 (whichever is earlier), giving the borrower additional time to spend the loan proceeds on eligible forgivable expenses. Those borrowers who received the loan proceeds prior to the Act being signed into law have the option to select the original 8 week period.
  • Increase the amount borrowers can spend on non-payroll costs (i.e. mortgage interest, rent, utilities) to a maximum of 40% of loan proceeds instead of 25%.
  • Adjusted the safe harbor rules for restoring employee salary and full-time-equivalent (FTE) reductions to December 31, 2020 from June 30, 2020.
  • Provide additional loan forgiveness exemptions for borrowers who can document an inability to rehire individuals who were employed on February 15, 2020 or similarly qualified individuals for the unfilled positions before December 31, 2020.
  • Provide additional loan forgiveness exemptions for borrowers who can document an inability to return to the same level of business as they were operating at February 15, 2020 due to compliance with requirements established by the Secretary of Health & Human Services, the Director of the Centers for Disease Control and Prevention, or the Occupational Safety and Health Administration during the period of March 1, 2020 through December 31, 2020 due to the maintenance of standards for sanitation, social distancing, or any other worker or customer safety requirements related to COVID-19  
  • Allow borrowers who receive forgiveness to defer payroll tax payments to December 31, 2021 and December 31, 2022, at the request of the borrower (CARES Act 2302).

(Information provided by John M. Spatola, CPA/ABV/CFF, CVA, CFE, Senior Manager, NawrockiSmith Certified Public Accountants & Business Consultants)

Summary of the Paycheck Protection Program Flexibility Act

As enacted on June 5, 2020:

1. Current PPP Borrowers extend the 8-week period to 24 weeks.
2. New borrowers have a covered period of 24 weeks after the loan proceeds are received or 12/31/2020, whichever is earlier.
3. The 75% payroll expenditure requirement is reduced to 60%.
4. Borrowers can use the 24-week period to restore their workforce levels and wages to the pre-pandemic levels required for forgiveness. This must be done by 12/31/20.
5. There are 2 new exceptions allowing borrowers to achieve full PPP loan forgiveness even if they don’t fully restore their workforce. You can exclude from calculations employees who turned down good faith offers to be rehired at the same hours and wages as before the pandemic. You can also adjust if you cannot find qualified employees or are unable to restore business operation to 2/15/20 levels due to COVID-19 related operating restrictions.
6. Repayment period extended to five years for new loans.
7. Businesses that took the PPP loan can delay payment of their 2020 remaining Social Security Payroll tax liability into 2021 and 2022. 50% of the deferred tax must be paid by 12/31/21 and the remainder must be paid by 12/31/22.

(Information provided Johnson, CPA)

New Guidance for Paycheck Protection Program (Revised June 15, 2020)

The SBA revised an earlier interim final rule to reflect certain changes made in the recently passed Paycheck Protection Program Flexibility Act.

1. For loans made before June 5, 2020, the maturity is two years, but this can be extended by agreement of the borrower and lender. For loans made on or after June 5, the maturity is five years. The date that a loan is made is the one on which the SBA assigns a number to that loan.

2. If a loan forgiveness application is submitted to the lender within 10 months after the end of the loan forgiveness covered period, no payments of principal or interest need be made before the date on which SBA remits the loan forgiveness amount to the lender, or notifies the lender that no loan forgiveness is allowed. The lender must in turn notify the borrower of remittance by the SBA of the loan forgiveness amount, or notify the borrower that the SBA determined that no loan forgiveness is allowed and concomitantly specify the date that the first payment is due. Interest continues to accrue during the deferment period.

If a loan forgiveness application is not submitted within 10 months after the end of the covered period, principal and interest payments are due after that period. For example, if a borrower’s PPP loan is disbursed on June 25, 2020, the 24-week period ends on December 10, 2020. If the borrower does not submit a loan forgiveness application to its lender by October 10, 2021, the borrower must begin making payments on or after October 10, 2021.

3. The covered period is the 24-week period beginning on the date the PPP loan is disbursed. However, if the loan was made before June 5, 2020, an election is allowed (ostensibly, on lender paperwork) to make the loan forgiveness covered period be the eight-week period after the loan was disbursed.

4. The actual amount of loan forgiveness will depend, in part, on the total amount of payroll costs, payments of interest on mortgage obligations incurred before February 15, 2020, rent payments on leases dated before February 15, 2020, and utility payments for service that began before February 15, 2020, over the loan forgiveness covered period. To receive full loan forgiveness, a borrower must use at least 60 percent of the PPP loan for payroll costs, and not more than 40 percent of the loan forgiveness amount may be attributable to non-payroll costs.

For example, if a borrower receives a $100,000 PPP loan, and during the covered period the borrower spends $54,000 (or 54 percent) of its loan on payroll costs, then because the borrower used less than 60 percent of its loan on payroll costs, the maximum amount of loan forgiveness that the borrower may receive is $90,000 (with $54,000 in payroll costs constituting 60 percent of the forgiveness amount and $36,000 in non-payroll costs constituting 40 percent of the forgiveness amount.)

(Information Provided by Chris Klampfer, MSA, AWMA®, CRPC®, Business Development Director, Kuttin Wealth Management)

PPP EZ Forgiveness Application

NEWS RELEASE: SBA and Treasury Announce New PPP EZ Forgiveness Application

Revised Full Forgiveness Applications Also Available

WASHINGTON—On June 17, 2020, the U.S. Small Business Administration, in consultation with the U.S. Department of the Treasury, posted a revised, user-friendly Paycheck Protection Program loan forgiveness application implementing the PPP Flexibility Act of 2020. In addition to revising the full forgiveness application, the SBA also published a new “EZ” version of the forgiveness application applying to borrowers who:

  • Are self-employed and have no employees;OR
  • Did not reduce the salaries or wages of their employees by more than 25%, and did not reduce the number or hours of their employees; OR
  • Experienced reductions in business activity as a result of health directives related to COVID-19 and did not reduce the salaries or wages of their employees by more than 25%

“This is great news for small businesses,” said SBA Regional Administrator Steve Bulger, who oversees agency operations in the Atlantic and Mid-Atlantic regions. “The EZ application requires fewer calculations and less documentation, which makes the process much less intimidating. I’m sure this will go a long way toward improving access and helping us distribute the remaining PPP appropriations to support small business owners and their employees.”

Details regarding the applicability of these provisions are available in the instructions to the new EZ application form. Both applications give borrowers the option of using the original 8-week covered period (if their loan was made before June 5, 2020) or an extended 24-week covered period. These changes will result in a more efficient process and make it easier for businesses to realize full forgiveness of their PPP loan.

Click here to view the EZ Forgiveness Application.

Click here to view the Full Forgiveness Application.