Idea Helps – Small Business Relief

March 20, 2020

Idea Helps – Small Business Relief
From the desk of the CEO
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Last updated on 6/15/2020 with:

As our nation continues to come to terms with the consequences of COVID-19, we at Idea Financial hold true to our values and to our belief that there is a symbiosis that connects us all. Therefore, we will not only work together with our clients, partners and employees, but also try to provide relevant information to help everyone navigate through these trying times. Below you will find information about business and employee relief efforts, which we hope alleviates the adverse effects of COVID-19 and its implications for all.

Over the coming days we will be updating the information below, as well as featuring, in our social media channels and blog, how fellow business owners are adapting to this situation.

For customer assistance contact us at (855) 900-7838 or email help@ideafinancial.com.

National Relief for Businesses

In order to slow the spread of Coronavirus, many states opted to cancel school, gatherings and events of all sizes. Small businesses and individuals have followed suit, creating an absenteeism that increases financial strains.  President Trump instructed the Small Business Administration to extend relief loans to help small businesses overcome temporary economic disruptions.

A national emergency was declared in order to introduce billions into the economy and help affected businesses.  More relief efforts are on the table and/or pending legislative and executive approval. Some of these efforts include the following, check back for more updates daily:

SBA

SBA economic loans for businesses statewide will provide working capital loans of up to $2 million under the Economic Injury Disaster Loans (EIDL) program. If your business is suffering a drop in sales, lack enough funds to cover business expenses like payroll, fixed debts or accounts payable, this an option that can help your business keep afloat.

CARES Act

The Senate passed a $2 trillion aid package to address the COVID-19 situation. Notable provisions include a $1,200 check for most Americans, higher unemployment insurance payouts, and the “Paycheck Protection Program”, which allocates up to $10 million per small business to cover payroll, rent and utilities.

Tax Payment Deferrals

Income tax payment deferment is another financial relief benefit for both businesses and individuals. Sole proprietors, single-member LLCs and Corporations have their business tax return deadline on April 15. The Treasury Department and IRS extended such deadline for businesses negatively impacted by the Coronavirus, penalty free, for 90 days. For more info, visit the IRS Coronavirus Tax Relief page.

Payroll Tax Credits

Payroll tax credits were passed in a bill proposing federally mandated paid sick leave and benefits passed in the House and is now in the Senate; it would require employers to provide paid sick leave to eligible employees for 14 days. To counter this financial strain on small businesses, the House approved a business tax credit for the same amount incurred during this time.

Employees

As Coronavirus affects more businesses, it affects the employees who make up those businesses. The federal government has also prepared legislation to relieve employees during this difficult time. Find information in the following links:

Student Loans

CARES Act includes and automatic suspension on student loan payments until September 30, 2020. Find our more here.

Also find the section of the CARES Act that talks about the student loans here: Sec. 3513 Temporary Relief For Federal Student Loan Borrowers.

If your business has a benefit program where you pay from student loans, there is a provision in the CARES Act that makes such payments tax deductible until January 1, 2021: Sec. 2206 Exclusion For Certain Employer Payments Of Student Loans>

Center for Disease Control

As we all learn what are our options to cope during these difficult times, it is important to have in mind that our individual actions affect everything around us too. We would like to promote information from the professionals at the forefront of this pandemic and share the following link to the Center for Disease Control and Prevention: CDC

US Chamber of Commerce Re-opening Guide

Here you can find and follow the reopening schedule for each state as well as sector specific guide on how to reopen your business: US Chamber of Commerce Guide

Ask not for a lighter burden, but for broader shoulders.

Frequently Asked Questions

Here are some some FAQs to summarize the major relief programs we have today. For a full set of FAQs and to apply for the Payment Protection Program, visit our Paycheck Protection Program page.

What is the Paycheck Protection Program?

The PPP is a relief program managed by the SBA and created by the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The program aims to help small businesses affected by the COVID-19 crisis with relief funds by way of federally guaranteed loans. The SBA delegated authority to private lenders so that there is no separate SBA approval, which should result in faster application processing and approvals.

These loans were created to help small businesses retain employees and cover operational costs. It is important to apply soon as there is high demand and relief funds are limited.

Paycheck Protection Program Flexibility Act

President Trump signed the Paycheck Protection Program Flexibility act on June 5, 2020. In order to better help small business owners respond the disruption cause by the pandemic, rules to the PPP where eased to help businesses keep afloat. Due to the lack of understanding of certain rules, millions of dollars remained untapped by business owners. Meaning, if you need funding there are still funds available as of this update 06/05/2020.

The main changes are the following:

  • Allowing forgiveness for expenses beyond the 8-week covered period to 24 weeks and extending the rehiring deadline;
  • Increasing the current limitation on non-payroll expenses (such as rent, utility payments and mortgage interest) for loan forgiveness from 25 to 40 percent;
  • Extending the program from June 30 to December 31, 2020;
  • Extending loan terms from 2 to 5 years; and
  • Ensuring full access to payroll tax deferment for businesses that take PPP loans.

These changes to the law addresses many of the concerns that borrowers had and ease some of the worries surrounding full loan forgiveness.

Please follow this link for more news about the changes here.

What benefits do small businesses receive from the Paycheck Protection Program?

The amount you will receive will be approximately 2.5 times your average total monthly payroll costs (up to $10 million), plus:

  • Fixed interest rate of 1%
  • Repayment terms of 5 years
  • Payments will be deferred for 6 months, but interest will continue to accrue during that period - some borrowers may qualify for a 12 month deferral

Loans proceeds are forgiven if used during the 24 week period after the the date the loan was made and for the following purposes:

  • Payroll costs (capped at $100,000 per year per employee)
  • Group healthcare benefits
  • Rent payments
  • Utilities
  • Mortgage interest
  • Interest on debt incurred prior to February, 15 2020

Is my business eligible for the PPP?

The CARES Act deems eligible any SBA qualified small business, tribal business, nonprofit organization or veteran organizations that employ 500 or fewer people. Other qualifications include being current on other SBA loans (if any), the business or owner is not suspended or deemed ineligible by any Federal department, the owner is subject to an indictment, and the owner has not had a felony in the past 5 years.

When can I apply for the PPP?

You can apply now, applications started on April 3, 2020 for LLCs, S Corporations and Sole Proprietors. Independent Contractors and Self-Employed individuals started applying on April 10, 2020. You may apply here. Applications re open until August 8, 2020. $367 billion were available in the first wave of funding.

The total amount of funds available will be exhausted before the deadline, so applying early increases your chances of getting a PPP loan.

As of April 23, 2020, the government passed a new resolution releasing another $310 billion.

How can I prepare for the new wave of relief funds?

If you were denied funding due to a lack of funds from the PPP or you were not able to hand in the documentation in time, you may apply again here.

We are working with trusted partners that will connect you with SBA 7(a) approved lenders. Many never stopped receiving applications and are processing them right now. You will be helped by professionals that know the application process, requirements and have already funded billions of dollars to small businesses.

Where can I apply for relief funds?

You can apply for a PPP loan here.

Idea Financial is not an authorized lender for the U.S. Small Business Administration’s (SBA) Paycheck Protection Program at this time. Idea Financial will connect you with SBA approved lenders. Your loan agreement will identify your lender prior to your signature. Any loan made under SBA’s Paycheck Protection Program must also be submitted to and approved by the SBA.

What does payroll cost include?

  • Salary, wages, commissions, or tips (capped at $100,000 on an annualized basis for each employee)
  • Employee benefits including costs for vacation, parental, family, medical, or sick leave; allowance for separation or dismissal; payments required for the provisions of group health care benefits including insurance premiums; and payment of any retirement benefit
  • State and local taxes assessed on compensation
  • For a sole proprietor or independent contractor: wages, commissions, income, or net earnings from self-employment, capped at $100,000 on an annualized basis for each employee

What are the rehire requirements?

As per the original PPP requirements, borrowers had to rehire the same number of full-time employees or equivalent by December 31, 2020. The exception to the rule was the employer would have in writing by that the ex-employee rejected the offer.

The PPFA states that business can still receive forgiveness on payroll amounts if:

  • The rehire deadline was extended from June 30, to December 31, 2020.
  • The business is unable to rehire an ex-employee of the who was eligible on or prior to February 15, 2020.
  • The employer is unable to hire a similarly qualified candidate and can demonstrate it.
  • Can demonstrate that it is not possible to hire because business activity cannot return to February 15, 2020 level or prior.

There are still some questions with regards to demonstrating ability to rehire similar qualified candidates.

Can the PPP loan be used for other purposes than non-payroll cost?

Yes, however, your loan forgiveness is calculated so that 75% of your expenses most go to payroll-costs and the remaining 25% for nor non-payroll cost expenses.

Subsequently the SBA and approved lenders will provide more guidelines for the category of each expense.

What information do I need to provide in my PPP application?

In your loan application you will need to provide:

  • Driver License or other government issued identification
  • Payroll Register for 2019 and any available from 2020, and unemployment insurance filings
  • If you have employees, 2019 IRS 941 forms and 2019 IRS 944 forms
  • If you are self-employed, 2019 IRS 1040 schedule C and 1099-MISC for each owner
  • Good faith certification stating the loan will be used to support your business operations

How can I request loan forgiveness?

Submit a request to your lender that is servicing the loan. The request should include documents for forgivable expenses that verify:

  • Number employees and payroll and benefit rates
  • Mortgage interest payments
  • Lease payments
  • Utility payments

With respect to approving such expenses, your lender may ask for additional information such as:

  • Certification that the amount requested to be forgiven was used in accordance to SBA guidelines.
  • Verification of employee payroll and pay rates, IRS payroll tax filings, state income, payroll and unemployment filings.
  • Documentation that verifies lease obligations and utility payments
  • Documents verifying mortgage and other debt interest obligations

Your SBA lender must make a decision within 60 days of the your loan forgiveness request.

In mid May, the SBA released the PPP Loan Forgiveness Application, please find it here: PPP LFA

When do I need to start paying interest on my PPP loan?

Right away. All payments for a PPP loan are deferred for 6 months; however interest will continue to accrue over this period.

Can I pay my loan earlier than 5 years?

Yes, there are no pre-payment penalties.

Does the PPP loan require collateral or personal guarantee?

No, lenders may not require collateral or a personal guarantee.

How fast can I get a PPP loan?

The time table for you to receive you funds depends on your specific business and how fast your lender can process the documentation submitted. The application process may take several days. Once approved, your lender should give you a date for when you will receive your funds.

The standards that the legislation put forth are designed for fast approval, but keep in mind the high demand and that funds are limited.

We suggest you contact your loan officer if you have not received an email or some sort of communication after your initial application.

Will business be audited if I take a PPP loan?

If your business accepted a PPP loan for over $2 million dollars, you most likely will be audited to make sure funds were used properly. It is not clear if borrowers that took money under $2 millions will face audits.

After the PPFA was approved, the guidelines with regards what business will be audited remains at the discretion of the SBA administration. You can find the Interim Final Rules here: IFR

What is the difference between the PPP and an Economic Injury Disaster Loan (EIDL)?

The PPP enables organizations to obtain up to $10 million in loans that are 100% forgivable if they meet the criteria outlined above.

The Economic Injury Disaster Loan Program (EIDL) is a disaster relief loan which includes a grant up to $10,000 that businesses do not need to pay back. The EIDL loan caps out at $2 million and it is not forgivable, but may cover other expenses that the PPP does not include.

Aside from the basic specifications of each, these programs have different application processes, terms, interest rates, and eligibility requirements. For more info on EIDL, click here.

We recommend that businesses apply for both an EIDL and a PPP loan.

SBA Q&A

The SBA revised and published their latest Q&A with regards to the PPP on May 13. You can find it here: SBA Q&A

What is an SBA Economic Injury Disaster Loan?

An Economic Injury Disaster Loan or EIDL is the long-standing SBA loan program that helps businesses that have been affected by some sort of natural or economic disaster. Known for having strict requirements, such as having the county the business is in declared an affected area, many requirements have been loosened thanks to the CARES Act.

What benefits do small businesses receive from the EIDL?

In general, EIDLs have:

  • Up to $2 million in funding
  • 3.75% interest (2.75% for non-profits)
  • Long repayment terms of up to 30 years

In addition to the benefits above, due to the COVID-19 crisis, an EIDL-COVID-19 relief loan includes a short-term forgivable advance of up to $10,000.

Do I qualify for an EIDL loan?

Small businesses that can demonstrate that they suffered severe economic hardship because of natural or economic disaster. As all states have declared a state of emergency during the COVID-19 crisis, small businesses anywhere that match the criteria below can apply for EIDLs.

  • Small business with fewer than 500 employees
  • Operate as a Sole proprietor or independent contract during the covered period: January 31, 2020 and December 31, 2020.
  • Are 501(c), 501 (d) or 501(e) private non-profits
  • Prove substantial economic injury caused by COVID-19

How can I apply for an EIDL?

To apply for an EIDL-COVID-19 assistance loan, visit the SBA disaster relief page here.

To apply for an EIDL relief loan unrelated to COVID-19, visit the SBA disaster relief page here.

What information do I need to provide in the EIDL application?

  • Gross revenues
  • Costs of goods sold
  • Lost rents (for rental property owners)
  • Costs of Operating Expenses (for nonprofits)
  • Other reimbursement will receive (i.e. business interruption insurance)
  • Persona Financial Statement (SBA Form 413)
  • Schedule of Liabilities (SBA form 2202)
  • Tax Information Authorization (IRS 4506T)
  • Federal Income Tax returns with schedules
  • Current year to date profit and loss statement

Are there other organizations that are offering relief to small business due to the Coronavirus pandemic?

Yes, there are different organizations and companies at the national, state and even county and city level.

One option is to contact your local chamber of commerce as they have business that may be affected by the pandemic.

You may need to become a member to have access to their services. Find your local chamber: Chamber of Commerce Directory and also the Coronavirus Small Business Guide from the Chamber.

Here are some links to local and corporate relief programs:

Alabama

Arkansas

California

Colorado

Connecticut

Florida

Illinois

Iowa

Louisiana

Kansas

Maine

Maryland

Massachusetts

Michigan

Nebraska

New Hampshire

New Jersey

New York

North Carolina

North Dakota

New Mexico

Oregon

Pennsylvania

Texas

Utah

Washington

Wisconsin

Wyoming

These are just some initiatives taken by local governments. Each individual state will most likely create their own plan to specifically address the situation based on their needs. A list of all the state governors websites links can be can be found here.

Other relief sources

General

Service industry

Inormative Links:

The Idea Financial team will keep updating and adding information as it becomes available. Please contact the SBA if you have further questions with regards to the Economic Injury Disaster Loans program through their page here.

Ask not for an easier path, but for stronger feet.
Javier Contreras
March 20, 2020