Update: First Glance at the Stimulus Bill
Small Business Administration
The Small Business Administration is receiving an enormous amount of funding and significant program adjustments to help small businesses weather and survive the crisis. A sample of the numbers includes:
- $349 billion for loan guarantees,
- $675 million for Small Business Administration salaries and expenses,
- $240 million for small business development centers and women’s business centers for technical assistance for businesses,
- $10 billion for emergency EIDL grants,
- $17 billion for loan subsidies,
- $100 billion for secondary market guarantee sales
Programmatic changes appear to be primarily channeled through the 7(a) loan program. Key provisions include:
Paycheck Protection Program
- Creation of the Paycheck Protection Program (PPP)
- Helps small businesses, 501(c)(3)’s, 501(c)(19)’s, and 31(b)(2)(c)
- Limited to under 500 employees
- Includes independent contractors, sole proprietors and the self-employed
- Entities must have been operational by 2/15/20; had payroll, paid taxes
- Covered loan period is 2/25/20 through 6/30/20
- Maximum loan amount via 7(a) set to $10 million through 12/31/20
- 100% loan guarantee through 12/31/20
- Eligible expenses include payroll, insurance, rent, mortgage and utilities
- Borrower cannot apply/carry both PPP and Economic Injury Disaster Loan (EIDL) for COVID-19, but can carry previous, non-COVID-19 EIDL and participate in PPP
- Borrow must good-faith certify that funds are needed for COVID-19 related purposes, the funds will be used to retain workers, and that their request is not duplicative with other SBA funds for the same purpose
- Waives borrower and lender fees
- Waives credit elsewhere requirements
- Waives collateral and personal guarantees
- Sets maximum interest rate of 4%
- No prepayment fees
- Defers payments on PPP loan for 6-12 months
- Delegates authority to all existing 7(a) lenders to expedite approvals/distributions
- Authorizes bank and non-bank lenders to participate in PPP program
- New lenders in program can only participate in PPP and not other 7(a) loans
- Amount spent by borrower in the first 8 weeks from loan origination may be forgiven; amount reduced proportionate to reductions in workforce as compared to previous year; if rehires made during 8 week period, no penalty in reflection of possible layoffs early in the 8 week period
- Allows inclusion of additional money paid to tipped workers
- Anything not forgiven or repaid by 12/31/20 will convert to a max 10 year loan at a max 4% interest rate; loan will remain 100% guaranteed
- FAQ for this program can be found HERE.
Emergency Injury Disaster Loan (EIDL)
- Eligibility expanded to include tribal businesses, cooperatives, ESOP’s, individual contractors, sole proprietors, and private non-profits with less than 500 employees
- Waives credit elsewhere requirement for advances and loans below $200,000
- Waives personal guarantee for advances and loans below $200,000
- Waives 1-year-in-business requirement for advances and loans below $200,000
- SBA has greater flexibility in determining borrower eligibility
- Entities eligible to apply for EIDL may request an advance in the form of an emergency grant of up to $10,000
- SBA must distribute EIDL emergency grant within 3 days
- Applicants are not required to repay emergency grant, even if they are ultimately denied EIDL
- Additional funding provided to Small Business Development Centers (SBDCs) and Women’s Business Centers (WBCs)
- Match requirements for WBCs are waived for 3 months
- State Trade Expansion Program funds from FY ‘18 and FY ‘19 will be made available through FY ‘21
- Requires SBA to subsidize 6 months of payments on existing 7(a), 504, or microloans beginning with the next payment.
The stimulus bill offers considerable resources related to unemployment insurance. At present, this section includes final sticking points that are delaying passage of the bill.
- Creates a temporary Pandemic Unemployment Assistance (PUA) program for those not traditionally covered by unemployment insurance (UI), including the self-employed, independent contractors, or those with limited work history
- Provides an additional $600 per week in recipients of UI and PUA for up to 4 months
- Provides an additional 13 weeks of UI after state UI expires
- Federal government will cover 100% of the cost of the first week of UI if states waive the 1 week waiting period to begin benefits
- Federal government will reimburse states for 50% of the costs incurred through 12/31/20 of unemployment benefits for state agencies and non-profits
- Federal government will pay 100% for ‘short-time’ programs in states with exiting programs in law and 50% of costs for states that begin ‘short-time’ programs during the covered period
A series of tax credits to ease the burden of keeping staff on payroll.
- Employee retention benefit: 50% refundable payroll tax credit during COVID-19 crisis for businesses that either fully or partially shut down OR have a 50% decrease in receipts versus the same quarter in the previous year and continue to pay employees.
- Based on qualified wages paid to employees during crisis, tied to number of employees (100+ full time employees = wages paid when they are not providing services due to COVID-19 and less than 100 full time employees = wages paid regardless of business closure status)
- Covers up to $10,000 paid per employee, including benefits, for the period 3/13/20-12/31/20
- Payroll tax deferred, payments to be spread over 2 years
- Net operating losses (NOLs) modification: NOLs arising in FY’s ‘18, ‘19, and ‘20 can be carried back 5 years
- AMT credits available as refundable credits through 2021 can be claimed as a refund now
- Allowable deductible interest expenses are increased from 30% to 50% for 2019 and 2020.
The bill provides massive resources for economic stabilization primarily through the Department of the Treasury and the Federal Reserve.
- $500 billion for the Treasury Exchange Stabilization fund for loans, loan guarantees and other investments, including: $25 billion for air passenger carriers, $4 billion for air cargo; $17 billion for business important to national security; $454 billion for the Federal Reserve’s lending facilities to eligible businesses, states and municipalities
- Eligible entities must: have no alternative financing available, loans must be secured, loan terms must be less than 5 years, loan cannot be forgiven, no buy backs or dividend payments until the loan is repaid or 1 year from loan origination; must maintain 90% of 3/24/20 workforce until 9/30/20
- Any Federal Reserve lending must be broad-based, verification borrow is not insolvent, no other financing available, and loans cannot be forgiven.
Coronavirus Relief Fund
An injection of funding for states, tribes and local governments to combat the spread and aftermath of COVID-19
Provides a $150 billion grant fund for states, to be distributed proportional to population size, with a minimum of $1.25 billion for states with the smallest populations.
Funding is for state, local and tribal governments to use in response to COVID-19 crisis.
Federal and state government entities and nonprofits are working together to control the spread of the coronavirus and to support the businesses and individuals impacted by the virus and/or the protective measures being taken.