We are duplicating the letter sent out by the ADA and ADCPA last night. If you have not already read it, please do. Please stay tuned for more Eblasts from us today.
As of March 27, the Senate and House have passed the CARES Act and it was signed by the President. There will be additional details issued in regulations and guidance over the coming weeks.
There are multiple Small Business Administration (SBA) loan options available for employers. There has been a lot of confusion about not being eligible for the new Paycheck Protection Loan of 7(a) if you already have an EIDL 7(b) loan; that is not correct, you can apply for both and have both, or possibly roll the 7(b) into the 7(a), but cannot use the proceeds for the same purpose.
Below is a quick recap of the loans affected by the CARES act:
Economic Injury Disaster Loan (EIDL) - Section 7(b) of SBA
·
We encourage you to apply for this ASAP.
·
It is ONLY available through the SBA website. We encourage you to print a paper
application using the link below and upload the application to avoid website traffic
issues.
·
If you apply for this loan, you can request an emergency grant of up to $10,000 which
the SBA must provide within 3 business days of grant request. This grant will not have
to be repaid even if you are not approved for the loan. If you apply for the loan before
the grant is available, you will need to go back and request the grant but will not have
to reapply. At this time, there is no guidance on how this is done, but we expect more
information will be released.
·
Terms: 3.75% interest, up to 30-year repayment, 12 months no payments.
·
Credit score of applicant is the primary factor in approval.
·
$
10 billion is set aside for the grant program, and the grants are to be given out
First
Come First Served.
·
The SBA will determine the amount of an EIDL Loan and the loan is available to pay
for expenses that could have been met had the disaster not occurred, including payroll
and other operating expenses.
·
For any loan made under this program, no personal guarantee will be required on loans
up to $200,000.
·
It is important that this loan is applied for
BEFORE
the section 7(a) loan discussed
below if you wish to participate in both programs.
·
If you receive EIDL money and you intend to also apply for the Payroll Protection
money of 7(a), please consult with your tax advisor to develop an efficient plan for the
use of the loan proceeds.
Paycheck Protection Loan - Section 7(a) of SBA
·
This loan is not currently available as of 3/28/20.
·
This loan will be provided by SBA approved banks. We encourage you to contact your
business banker for additional information.
·
Terms: 4% interest, up to 10-year repayment, 6 - 12 months no payments.
·
Loan proceeds are limited to 2.5x average monthly payroll costs (wages, health
insurance, PTO, retirement benefits and state or local payroll taxes assessed on
compensation of employees) not to include federal payroll taxes. This does not include
1099 subcontractors or Employee/Owner Compensation over $100,000.
·
Self-employed (1099) individuals are eligible for their own 7(a) loan and loan
forgiveness.
·
There will be an amount eligible for forgiveness - this amount must be calculated and
cannot exceed the sum of the payroll costs, mortgage interest, rent and certain utility
payments in the 8-week period following funding. Loan Forgiveness is contingent on
having 75% of the number of employees on payroll Feb 15, 2020 by June 30, 2020.
·
To
seek forgiveness, documentation will be provided to the lender that includes the
qualified expenses during the 8-week period subsequent to loan closing.
·
Our current understanding is the loan proceeds must be spent by June 30, 2020 even if
the 8 weeks extends beyond that date.
·
There is potential for refinancing your EIDL loan into the section 7(a) loan to also make
it eligible for forgiveness. Even if you are unable to refinance the EIDL into this loan,
you are not prohibited from obtaining both loans.
Anticipated Timeline for you to take into consideration
There have been many questions on the timing of SBA funds and actions to be taken by employers. Below is our hopeful timeline related to the Paycheck Protection Program, 7(a) loans:
·
CARES Act signed into law - March 27
·
Banks receive SBA guidance - By April 11
·
Initial loans processed and being funded – Early May
The ADA greatly appreciates its partnership with the Academy of Dental CPAs, which has allowed us to bring you the latest and best information available to make your practice decisions. We know and understand the concerns you have, not only financially but also the related health concerns created by the current epidemic. Please understand the ADA and the ADCPA will continue to assess matters, as they progress, and if we feel there is a need for an update to this correspondence, we will certainly will take that into consideration.
Please stay safe and healthy!
COLEMAN, UREDA, ALFORD & KAUCHER, PA
