Greetings!
So many members of our community are reeling from economic hardship and the impact that the coronavirus has had on their businesses, their lives, and the lives of their dental team members. We’ve received many email and phone inquiries asking for help and information about the Cares Act, about cash flow options, and about human resource/staffing options as related to provisions associated with the recently signed Cares Act legislation. While we are unable to advise specifically on these topics, as they are outside the scope of our expertise, we will continue to share information that we collect from reliable sources.
The ADA and several dental CPA’s have been hosting webinars to review the CARES ACT/SBA loan landscape and we are providing links to those webinars below (bottom of this message). In brief there are different relief packages available (
be sure to consult your CPA and/or attorney as to which program is best for your situation
):
A.
The Coronavirus Aid, Relief, and Economic Security Act (
CARES Act
) became law on March 27, 2020. Among its benefits for small businesses and 501(c)(3) nonprofits, it:
- 1. creates a temporary $349 billion Paycheck Protection Program (PPP) that delegates loan decisions to the existing network of lenders that participate in the popular Section 7(a) business loan guarantee program of the Small Business Administration (SBA);
- 2. adds a new unemployment compensation program for independent contractors and the self-employed, and a refundable payroll tax credit of up to $5,000 for each employee on the payroll (provided that the nonprofit or small business experiences a drop in revenue of at least 50 percent in Q1 of 2020 as compared to the Q1 of 2019); and
- 3. expands SBA’s Emergency Economic Injury Disaster Loan (EIDL) program in response to COVID-19 (including an “emergency grant,” or “advance,” of up to $10,000 to applicants that must be distributed by the SBA within 3 days and need not be repaid). To access the $10,000 advance, you first apply for an EIDL and then request the advance.
B.
The 7(a)
PPP
loan program
will launch as soon as the SBA issues formal guidance
. Visit the
SBA webpage
.
Subject to that guidance,
key components should include:
- 1. Loans are available to all small businesses and 501(c)(3) nonprofits that employ up to 500 employees, regardless of annual receipts, subject to certain additional criteria.
- 2. Covered period is the “period beginning on February 15, 2020 and ending on June 30, 2020” (for purposes of determining loan maximum, loan forgiveness, and other criteria).
- 3. Maximum loan amounts up to $10 million are available for permissible uses, including:
- Payroll support (employee compensation; vacation, family, or medical leave; severance; insurance payments; retirement benefits; state & local taxes on employee compensation).
- Mortgage/rent and utility payments.
- Interest on any debt obligations incurred before the covered period.
- 4. Many standard loan requirements are waived- This means, among other things:
- No borrower and lender fees.
- No “credit elsewhere test.”
- No collateral or personal guarantee requirements.
- 5. Maximum interest rate is 4% on the PPP.
- 6. Maximum PPP loan maturity is 10 years.
C.
The CARES Act allows borrowers to convert an SBA
EIDL
loan (related to COVID-19) to a
PPP
loan. PPP applications likely will exceed those for EIDL/COVID-19 because EIDL loans require repayment (except for the $10,000 EIDL grant) while
all or most of a PPP loan might be forgiven
as noted below.
D.
Part/all of a
PPP
loan is eligible for
loan forgiveness
equal to the amount spent by the borrower, during an 8-week period following loan origination, for: certain payroll costs (including compensation, per employee, up to $100,000 in wages);
mortgage interest payments
(not principal) on debt incurred before February 15, 2020;
rental payments
on leases in force before February 15, 2020; and
utility payments
on utility services that began before February 15, 2020.
- 1. “Forgiveness on a covered loan is equal to the sum of the following payroll costs incurred during the covered 8-week period compared to the previous year or time period, proportionate to maintaining employees and wages.” (Note: This provision is to help ensure that, in most cases, for payroll costs, the 8-week period from last year is comparable to the 8-week period from this year, for purposes of documentation and to limit fraud and abuse.)
- 2. Borrowers that re-hire workers previously laid off will not be penalized for having a reduced payroll at the beginning of the period.
E.
SBA Small Business Debt Relief Program
: This program will provide immediate relief to small businesses with non-disaster SBA loans, in particular 7(a), 504, and microloans. Under it, SBA will cover all loan payments on these SBA loans, including principal, interest, and fees, for six months. This relief will also be available to new borrowers who take out loans within six months of the President signing the bill into law.
F.
Payroll Tax Deferrals:
Businesses may defer payment of employer payroll taxes imposed between the enactment of this law through December 31, 2020 with half of the deferred taxes due by December 31, 2021 and the rest due by December 31, 2022. This is unrelated to the dollar-for-dollar payroll tax credit that can be taken for FFCRA leaves.
