Tarlow COVID-19 Update: President Trump Signs $484 Billion Coronavirus Relief Bill to Deliver Aid to Small Business and Hospitals and Expand Testing

Today, Friday, April 24, 2020, President Trump signed a $484 billion coronavirus relief package into law to provide aid to small businesses and hospitals and expand COVID-19 testing. The relief package allocates $370 billion to small businesses to help keep employees on payroll, $75 billion to aid hospitals struggling to cover costs during the crisis, and $25 billion to increase testing. The bill is Washington’s latest attempt to mitigate the devastating impact of the pandemic and rescue the economy and healthcare system.

The legislation includes:

  • $310 billion in new funds for the Paycheck Protection Program, which provides small business loans that can be forgiven if used for wages, benefits, rent, and utilities. $60 billion is set aside for small lenders.
  • $60 billion for Small Business Administration disaster assistance loans and grants.
  • $75 billion in grants to hospitals dealing with a tremendous number of patients.
  • $25 billion to increase coronavirus testing, a key element in reopening the economy.

The bill includes more than $320 billion for the Paycheck Protection Program (PPP), created by the CARES Act, which was passed late last month. The program that provides forgivable loans to small businesses that keep their employees on payroll quickly ran out of money due to heavy demand.

The bill passed the Senate earlier this week by voice vote and was approved by the House on Thursday, April 23, 2020, on a 388-5-1 bipartisan vote.

Tarlow is here to help!

Our Partners and staff members are here to provide coronavirus loan support and capital assistance and guide you through the Paycheck Protection Program (PPP) loan forgiveness process. To get started:

– For assistance with SBA loans, click here and complete and submit this form; and

– If you’ve already secured funding, for assistance with loan forgiveness planning, click here.

We are closely monitoring tax-related legislation and regulations and will continue to update you by sending communications about relevant news and changing guidelines. If you have any questions, please contact your Tarlow advisor.

After Receiving Your Paycheck Protection Program Loan Funds, What’s Next?

If you are a small business that applied for a Paycheck Protection Program (PPP) loan and received the PPP loan funds, that is good news; however, what should you do next? Now is the time to develop a plan to properly allocate the money and prepare what you will do after the loan money runs out eight weeks from now.

PPP funding needs to be primarily allocated to pay your employees. In fact, in order to qualify for forgiveness, you are required to spend 75% of the proceeds on payroll costs. It is important to note that if you use the loan for expenses outside the 75/25 ratio, the amount that is not forgiven will be rolled into an SBA two-year loan at 1%.

Some essential questions that need to be addressed:

  • What will the economy and business environment look like in the near future?
  • To what extent will your business be impacted?
  • How will you re-hire all, some, or none of the employees you laid off?
  • Should you bring furloughed staff back on active payroll?
  • Should you reinstate salaries that you reduced?
  • If you decide to only re-hire some of the furloughed or laid off employees, which ones do you bring back? How is this done while staying compliant with labor laws?
  • What happens if you fail to comply with the 75% payroll costs threshold?
  • If you carry some of the PPP loan proceeds over into a two-year note at 1%, how much should you carry over and how should you allocate it? Also, what is your ability to repay that money?

Every business is unique, has unprecedented challenges, and will have different answers to these questions. The common denominator is that every borrower needs to develop a well-thought-out and strategic financial plan.

The Survival Plan

Now it’s time to develop a strategic survival plan! Your plan should prioritize the immediate, near, and longer-term goals, along with Plans B and C, in case certain unpredicted obstacles arise. Most importantly, your plan must include metrics, especially future considerations, that will enable you, and other interested parties, such as your attorney and banker, to track performance and give everyone visibility into your business operations.

Any survival plan will involve many hard decisions. Be prepared to make them, as difficult as they may seem. Negotiations with lenders, vendors, and investors may be necessary; remember, they also want your business to survive.

Tarlow is here to help!

Our Partners and staff members are here to provide coronavirus loan support and capital assistance and guide you through the Paycheck Protection Program (PPP) loan forgiveness process. To get started:

– For assistance with SBA loans, click here and complete and submit this form; and

– If you’ve already secured funding, for assistance with loan forgiveness planning, click here.

 

We are closely monitoring tax-related legislation and regulations and will continue to update you by sending communications about relevant news and changing guidelines. If you have any questions, please contact your Tarlow advisor.

COVID-19 Update: Congress Reaches Deal on Coronavirus Relief Bill and President Trump is Expected to Sign

On April 21, 2020, Lawmakers and the White House reached a bipartisan agreement on a nearly half-trillion-dollar coronavirus relief bill. This deal is a new round of coronavirus aid, which would deliver $484 billion to small businesses and hospitals, and for testing. The legislation includes money for small businesses, $75 billion for hospitals, and $25 billion for coronavirus testing; however, it does not include additional funding for state and local governments. Democrats and governors across the country had pushed for the additional funding, but Republicans opposed it.

The bill includes more than $320 billion for the Paycheck Protection Program, which was created by the coronavirus stimulus package passed late last month and provides forgivable loans to small businesses that keep their employees on payroll. About $60 billion of that additional funding would be set aside for “underbanked” business, a priority for Democrats, who were concerned that businesses in rural and minority areas were having trouble accessing the loans. It also replenishes the empty small business fund set up by the last coronavirus stimulus bill for companies with fewer than 500 employees to keep afloat and maintain their payrolls. The fund ran out of money last week, its $349 billion almost instantly committed to existing bank customers given the first opportunity at applying.

The deal marks the fourth major bill for pandemic relief. As of this writing, the Senate could approve the bill this afternoon, if all 100 senators agree; the House is expected to approve it later this week. The interim coronavirus legislation could be on President Trump’s desk by the end of the week and Trump suggested that if the bill is passed, he will sign it into law.

Tarlow is here to provide coronavirus loan support and capital assistance and guide you through the Paycheck Protection Program (PPP) loan forgiveness process. To get started:

We are closely monitoring tax-related legislation and regulations and will continue to update you by sending communications about relevant news and changing guidelines. If you have any questions, please contact your Tarlow advisor.

Tarlow Update: Save Small Business Fund Created by the U.S. Chamber of Commerce to Help Small Businesses Struggling During the COVID-19 Pandemic

The U.S. Chamber of Commerce established the Save Small Business Fund, a grantmaking initiative offering short-term relief for small employers in the United States and its territories. The Fund provides short-term relief grants of $5,000 to companies employing 3-20 people. The application to apply for these grants will be available online beginning at 3:00 pm EDT on Monday, April 20, 2020. The application is brief and should only take approximately ten minutes to complete, and all that is needed is your business’s W-9 form.

In order to qualify for the Save Small Business Fund, businesses must meet the following requirements:

  • The business must employ 3-20 people;
  • The business must be located in an economically vulnerable community; and
  • The business must have been harmed financially by the COVID-19 pandemic.

The short-term grants, which do not have to be repaid, are being funded by corporate and philanthropic partners. Grants will be awarded on a weekly basis until all funds have been used and you only need to apply one time to be eligible for funding. Once the grantee has been notified and submitted payment information that meets compliance checks, it will take 3-5 days to process the payment. The number of grants awarded will be scaled in proportion to the demand and available funds.

Tarlow is Here to Help — Contact Us with Questions

At Tarlow, our Partners and staff members are closely monitoring tax-related legislation and regulations. We will continue to update you by sending communications about relevant news and changing guidelines.  If you have any questions, please contact your Tarlow advisor.

COVID-19 Webinar on Monday, April 20, at 3 PM (ET) – How to Plan for PPP Loan Forgiveness

Tarlow Invites You: COVID-19 Webinar
How to Plan for PPP Loan Forgiveness

On Monday, April 20, 2020, at 3:00 PM – 4:00 PM (ET), our CPA channel affiliate partner, Aprio, will host a complimentary webinar on how to effectively plan for Paycheck Protection Program (PPP) loan forgiveness. With PPP loan payments starting to be disbursed to approved borrowers, now is the time to begin planning how you will spend the funds, and document that spending over the next eight weeks to ensure you receive the full loan forgiveness you are entitled to.

Regulations continue to evolve and be published. During this webinar, we will cover the latest developments including:

  • Allowable expenditures under the PPP loan;
  • Strategies for allocating funds to boost your balance sheet and cash flow;
  • Documentation of best practices; and
  • Third-party verification to ensure spending meets PPP loan forgiveness requirements.

Speakers on the panel include:

  • Tommy Lee, Partner-In-Charge of Retail, Franchise, and Hospitality at Aprio
  • Matt Wise, Partner-In-Charge of Assurance Services at Aprio
  • Jonathan Crumly, Principal with Taylor English Duma

Register Today

Webinar on Friday, April 17, 2020, at 1 PM (ET): Unpacking the Main Street Lending Program for Mid-Sized Businesses

Who Benefits from the Fed’s $600 Billion Direct-Lending Program?

On April 9, 2020, the Federal Reserve announced the creation of a new lending program to help mid-sized businesses access capital due to disruptions caused by the coronavirus pandemic. The Fed will make up to $600 billion in loans available through the Main Street Lending Program (MSLP), which consists of two different emergency-lending facilities, the Main Street New Loan Facility (MSNLF) and the Main Street Expanded Loan Facility (MSELF). On Friday, April 17, at 1:00 p.m. (ET), our CPA channel affiliate partner, Aprio, will host a webinar to unpack the central bank’s direct-lending program for mid-market companies. Register here.

To break down what we know so far, we spoke with Bill Dupee, SBA and CARES Act expert with Aprio.

Who is the program designed to assist?

The program is designed for businesses with as many as 10,000 employees or as much as $2.5 billion in 2019 revenues.

Do businesses apply directly to the government for loans?

No, similar to the Paycheck Protection Program (PPP), businesses will work through banks to obtain loans. Please note this program is not yet operational as the Fed is accepting comments on the program through April 16. We will provide more information on the program as available.

How is this program different from the Paycheck Protection Program?

The PPP provides forgivable loans for businesses with fewer than 500 employees.  The MSLP was created to provide assistance to mid-sized businesses up to 10,000 employees.

If you qualify for PPP, can you also qualify for MSLP?

Yes. Based on current guidance from the Fed as of April 9, 2020, you may be able to qualify for both the MSLP and the PPP.

What are the specifics of the loan facilities?

The MSLP provides two facilities that offer four-year, unsecured, amortizing loans, limited up to 4-6x 2019 EBITDA (based on applicable facility). Unlike the PPP, the loans are not available for forgiveness. Loans will be priced using the adjustable Secured Overnight Financing Rate (SOFR) plus 2.5 to 4 percentage points, and there is also an upfront origination fee of 1 percentage point. Loans can be paid off early without a penalty.

Main Street New Loan Facility Main Street Expanded Loan Facility
Origination On or after April 8, 2020 Before April 8, 2020
Interest rate Adjustable rate of SOFR + 250–400 basis points Adjustable rate of SOFR + 250–400 basis points
Term 4 years with 3-year amortization 4 years with 3-year amortization
Security Unsecured Pari passu basis with original loan.
Minimum loan size $1 million $1 million
Maximum loan size The lesser of $25 million or 4x 2019 EBITDA and subject to amount of current credit facilities The lesser of $150 million or 6x 2019 EBITDA and subject to amount of current credit facilities
Prepayment Permitted without penalty Permitted without penalty

When will we know more details about this program?

The Fed has an open comment period through April 16 at which time we will have more details.

We will provide current guidance during our webinar on Friday April 17 at 1 p.m. EST.

For further questions, please contact us.

The Federal Reserve Will Backstop the SBA’s Emergency Loan Program

The Federal Reserve will backstop the Small Business Administration’s emergency loan program, as lenders continue to work through logistical challenges in disbursing money to Main Street amid the coronavirus shutdown.

The Fed released a two-sentence statement on Monday committing the central bank to provide financing to lenders processing the $350 billion Paycheck Protection Program signed into law to mitigate the economic impact of the coronavirus.

“To facilitate lending to small businesses via the Small Business Administration’s Paycheck Protection Program (PPP), the Federal Reserve will establish a facility to provide term financing backed by PPP loans,” the statement read. “Additional details will be announced this week.”
Through term financing, the Fed could take on PPP loans originated by banks concerned about the cost of servicing the loans.

Tarlow Coronavirus Loan & Capital Assistance – Helping small business owners impacted by the spread of Coronavirus

Tarlow’s Coronavirus Disaster loan and Capital Assistance team is committed to serving small business owners who are being impacted by the public policy measures to contain the spread of the Coronavirus.  Learn more.

Tarlow is Here to Help – Contact Us with Questions 
At Tarlow, our Partners and staff members are closely monitoring these developments and will continue to update you by sending communications about relevant news and changing guidelines. If you have any questions, please contact your Tarlow advisor.

Tarlow Update: Small Business Administration Issues Interim Final Rule for the Paycheck Protection Program

On the evening of April 2, 2020, the Small Business Administration (SBA) released an Interim Final Rule (IFR) implementing the Paycheck Protection Program (PPP) provisions of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which will run from April 3, 2020, through June 30, 2020.

The release of the IFR follows the March 31, 2020, issuance of the informal U.S. Department of the Treasury (the Treasury) guidance on PPP and the enactment of the CARES Act on March 27, 2020. The IFR Rule provides further guidance to lenders and borrowers regarding the PPP application, loan terms, and loan forgiveness provisions.

The rule also provides clarification regarding the SBA’s interpretation of several aspects of the PPP, including the following:

  • While the CARES Act allowed a maximum interest rate of 4%, initial guidance from the Treasury guidance provided for 0.5%. The Treasury and the SBA have raised the interest rate slightly to 1%.
  • Independent contractors may themselves apply for their own PPP loan and therefore do not count as employees of a business applicant for purposes of the PPP
  • Borrowers may only apply for one PPP loan between now and June 30, 2020.  The IFR encourages borrowers to consider applying for the maximum amount for which they are eligible.
  • The CARES Act authorizes payment of principal and interest to be deferred for up to one year. The SBA and the Treasury have determined a six-month deferral is more appropriate due to the 1% interest rate and loan forgiveness provisions of the CARES Act.
  • The SBA and the Treasury have confirmed that no more than 25% of the loan forgiveness amount may be attributable to non-payroll costs although not required by the CARES ACT
  • Applicants must submit SBA Form 2483 (Paycheck Protection Program Application Form) and supporting payroll documentation described in the Interim Final Rule directly to their lender.
  • E-signatures and e-consents may be used for completing the application.
  • Lenders must submit SBA Form 2484 (Paycheck Protection Program Lender’s Application for 7(a) Loan Guaranty) electronically to the SBA and maintain the forms and supporting documentation provided by the borrower in its files.
  • While the maximum maturity for PPP loans under the CARES Act is 10 years from the date the borrower applies for loan forgiveness, the SBA and the Treasury have determined that a two-year loan term is appropriate.
  • Borrowers who received a loan through the SBA Economic Injury Disaster Loan (EIDL) program from January 31, 2020, through April 3, 2020, are eligible to apply for a PPP loan.
    • If the EIDL loan was not used for payroll costs, it does not affect eligibility for PPP.
    • If the EIDL loan was used for payroll costs, the PPP loan must be used to refinance the EIDL loan.
    • Proceeds from any advance of up to $10,000 on the EIDL loan will not also be eligible for forgiveness under the PPP.
  • Lenders do not need to conduct any independent verification of the documentation and attestation provided by borrowers in support of their requests for loan forgiveness.

Tarlow Coronavirus Loan & Capital Assistance – Helping small business owners impacted by the spread of Coronavirus

Tarlow’s Coronavirus Disaster Loan and Capital Assistance team is committed to serving small business owners who are being impacted by the public policy measures to contain the spread of the Coronavirus. Learn more.

 

Tarlow is Here to Help — Contact Us with Questions

At Tarlow, our Partners and staff members are closely monitoring tax-related legislation and regulations. We will continue to update you by sending communications about relevant news and changing guidelines.  If you have any questions, please contact your Tarlow advisor.

COVID-19 Update: Paycheck Protection Program – Initial Guidance Issued

On Tuesday evening, March 31, 2020, the U.S. Treasury and Small Business Administration (“SBA”) released their initial Information Sheet (“Fact Sheet”) as well as the Application Form for the Paycheck Protection Program (the “PPP”).   As mentioned in previous email alerts, the PPP is part of The CARES Act, which appropriated $349 billion to enable eligible businesses to apply for loans from approved lenders, which are guaranteed by the SBA.  Proceeds from these loans are intended to be used to cover operational costs such as payroll, benefits, rent, utilities, and mortgage interest payments.

The Fact Sheet provides important guidance for the PPP, including the dates that applicants can begin to apply for PPP loans through participating SBA Lenders:

  • Business and sole proprietors as soon as April 3, 2020; and
  • Independent contractors and self-employed individuals as soon as April 10, 2020.

The guidance issued and the Fact Sheet are similar to the provisions in the CARES Act; however, there are some important differences to the initial guidance issued, which we have highlighted below.  We should note that it is still possible the SBA issues additional rules and regulations regarding the PPP, and we will keep you informed immediately if that occurs.

Maximum Loan Amount 

The CARES Act provides that the maximum PPP loan a borrower can receive is equal to the lesser of (i) 2.5x TTM average monthly payroll costs and (ii) $10 million.   The sample application indicates that (non-seasonal) business applicants will use the average monthly payroll for 2019 (rather than include January or February 2020 in the calculation).

Loan Forgiveness

The CARES Act provided that loans will be eligible for forgiveness in an amount not to exceed the sum of payments for permitted payroll costs, interest payments on mortgages, rent, and utilities paid within 8 weeks from the origination of the PPP Loan.  The Fact Sheet indicates that “due to likely high subscription, it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs.” This factor needs to be considered if you were planning on applying for PPP loans to cover non-approved costs as a portion of such costs may not be subject to loan forgiveness.

Payroll Costs

In addition to employee compensation, certain paid vacation and leave, cash tips, severance payments, group healthcare benefits, retirement benefits, and payroll taxes, the CARES Act also seemed to define “payroll costs” to include payments to independent contractors as noted in our previous correspondences.  The description of payroll costs in the Fact Sheet suggests that compensation to independent contractors will be considered “payroll costs” (i.e., for purposes of calculating PPP loan size and loan forgiveness amounts) if the applicant is the independent contractor.  This could imply that businesses that pay independent contractors will not be able to include such compensation in the calculation of payroll costs.  We will be reviewing this in-depth to get additional guidance for you.

 

Interest Rate, Maturity Date and Payment Deferral Provisions

Initial guidance was that the interest rate on the PPP loans would be set at 4% and have a 10-year term.  Additionally, it was widely believed there would be no payments on PPP loans due for one year from origination.  Based on the Fact sheet, the interest rate will be set at 0.5%, and the term of the loan will be 2 years from maturity. Additionally, payments will be deferred for six months from origination; however, interest will accrue during these six months.

Foreign Ownership

It was widely believed that foreign ownership would not be an issue for eligibility for a PPP loan.  The application form indicates that if any 20% or greater owner answers no to whether or not they are “a U.S. Citizen” OR “have Lawful Permanent Resident status, “the application will be denied indicating that businesses with foreign ownership may be ineligible for the PPP loan.” We are still reviewing this and will have additional guidance shortly.

The application also makes it clear that for businesses seeking PPP loans each greater than 20% owner will need to complete an application and make certain certifications including: (i) that current economic uncertainty makes the loan request necessary to support the ongoing operations of the applicant business; and (ii) that the loan proceeds will be used to retain workers and maintain payroll or make mortgage payments, lease payments, and utility payments.