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Small business relief from the CARES Act

The Coronavirus Aid, Relief, and Economic Security (CARES) Act, the Paycheck Protection Program and Health Care Enhancement Act and the Paycheck Protection Program Flexibility Act of 2020 developed and/or appropriated funds for the Paycheck Protection Program (PPP) and the Economic Injury Disaster Loans (EIDLs), including the EIDL grant program. The latest Consolidated Appropriations Act, 2021, allocated $325 billion in funds for small business relief and replenished and updated the PPP and the EIDL programs.  We have outlined the two relief programs, both administered through the U.S. Small Business Administration (SBA).

This information is not intended as financial, accounting, legal, or tax advice. See Disclaimer. Readers should seek specific financial, accounting, legal, and/or tax advice from a qualified professional before acting with regard to the subjects mentioned herein.



 

Understanding the programs

 

February 2021 Updates:

  • Between February 24 and March 10, PPP loans will only be offered to businesses with fewer than 20 employees and sole proprietors.
  • PPP funding formula for independent contractors, self-employed individuals and sole proprietors will be revised to allow them to receive more financial support.  No further details have yet been released.
  • Student loan debt delinquency will no longer be a disqualifier to participating in the PPP.
  • Non-citizen small business owners who are lawful U.S. residents will have access to the PPP by using the Individual Taxpayer Identification Number (ITIN) to apply.

While your circumstances may affect your loan eligibility, we hope this informational resource helps you better understand these programs and we encourage you to seek personalized advice from your lender and qualified professionals.

See below for general details about the two programs – for more details, see the the Treasury’s PPP Guidance, Second Draw PPP Loan Guidance, and Treasury’s FAQ.

Economic Injury Disaster Loans ("EIDLs")

Get a $10,000 advance

The Economic Injury Disaster Loan (EIDL) is an emergency program intended to offer small business loans (with an interest of 3.75% and a repayment term up to 30 years) to cover ordinary and necessary business expenses during certain disasters and emergencies. It also included a grant up to $10,000 for eligible businesses (“Emergency EIDL Grant”).

Targeted EIDL Advance: Funds have been set aside for priority, targeted grants for small businesses (i) that have applied for an Emergency EIDL loan (including the Emergency EIDL Grant), (ii) with less than 300 employees, (iii) located in low-income communities and (iv) that suffered at least a 30% reduction in gross receipts during any 8-week period between March 2, 2020 and December 31, 2021 relative to a comparable 8-week period immediately preceding March 2, 2020, or during 2019.  Eligible businesses will receive $10,000, regardless of whether they are approved for an EDIL loan, they accept the EDIL loan, or they previously received an EDIL loan, provided, however, that eligible businesses that have already received an Emergency EIDL Grant will receive the difference between $10,000 and the amount of the previously received grant.

Paycheck Protection Program ("PPP")

Get up to 24 weeks of operating expenses back

The Paycheck Protection Program (PPP) offers approved business owners 100% federally guaranteed loans up to $10M for first-time borrowers (with a fixed, non-compounding interest rate capped at 1.00% and a repayment term of 5 years). The Consolidated Appropriations Act, 2021, permits certain eligible businesses to apply for a second draw PPP loan up to $2M.


The PPP forgives up to the amount spent (or incurred) on certain operating expenses1 during any period (determined by the borrower) ranging from 8 to 24 weeks following lender’s first disbursement of loan.  The amount of forgiveness is subject to reductions, if any (see Who's eligible?).
  
Loan proceeds must be used for eligible operating expenses, including interests on debt obligations incurred before February 15, 2020, EIDL loan refinancing, payroll costs2 and other covered expenses1. In order to receive full loan forgiveness, at least 60% of the loan proceeds must be spent on payroll costs2 and up to 40% may be spent on nonpayroll costs. The loans can be deferred until the date on which the SBA remits the borrower’s loan forgiveness amount to the lender (with interest accruing during deferment), which can occur up to 90 days after forgiveness amounts are determined, or notifies the lender that no loan forgiveness is allowed. If a borrower fails to apply for loan forgiveness within 10 months after the last day of the applicable forgiveness period, the borrower must begin to make payments of principal, interest, and fees on its loan after such 10-month period.  The repayment term of any loans made before June 5, 2020 is 2 years but borrowers and lenders may mutually agree to extend it to 5 years.     

There are two set-asides (1) for small businesses with 10 or fewer employees and (2) for loans up to $250,000 to businesses located in low- to moderate-income (LMI) areas:
      • $15 billion set-aside for initial PPP loans
      • $25 billion set-aside for second draw PPP loans
1 (i) payroll costs (including compensation to furloughed employees, bonuses and hazard pay, in each case, up to $100K on an annualized basis), (ii) owner compensation replacement, (iii) rent obligations on real and personal property pursuant to agreements effective before 2/15/2020, (iv) utilities for services that began before 2/15/2020, and (v) interests on mortgage obligations on real or personal property incurred before 2/15/2020.

The Consolidated Appropriations Act, 2021, expanded the covered expenses to include the following and allows any PPP loans (whether made before or after the enactment of the Act (i.e., 12/27/2020)) to be eligible to utilize the expanded forgivable expenses, except the following items (2) through (5) may not apply to loans to which the borrower has already received loan forgiveness: (1) payroll costs now includes group life, disability, vision, and dental insurance benefits, (2) operations expenditures (e.g., payment for any software, cloud computing, and other human resources and accounting needs), (3) property damage costs (e.g., costs related to property damage due to public disturbances that occurred during 2020 that are not covered by insurance), (4) supplier costs (i.e., expenditures to a supplier pursuant to a contract, purchase order, or order for goods in effect prior to taking out the loan that are essential to the recipient’s operations at the time at which the expenditure was made, except supplier costs of perishable goods can be made before or during the life of the loan) and (5) worker protection expenditure (i.e., personal protective equipment (PPE) and adaptive investments to help a loan recipient comply with federal health and safety guidelines or any equivalent State and local guidance related to COVID-19 during the period between March 1, 2020, and the end of the national emergency declaration).

(See SBA’s PPP website for application forms and instructions for PPP loans and loan forgiveness.)




Grants for Shuttered Venue Operators

The Consolidated Appropriations Act, 2021, allocated $15 billion for the SBA to make grants to each eligible live venue operator or promoter, theatrical producer, live performing arts organization operator, museum operator, motion picture theatre operator, or talent representative that was fully operational on February 29, 2020 and who demonstrates at least a 25% reduction in gross earned revenues during at least one quarter of 2020 relative to the same 2019 quarter.

A business is ineligible (a) if it is a publicly traded company or is controlled by a publicly traded company, (b) received more than 10% of its gross revenue in 2019 from Federal funding (other than under the Robert T. Stafford Disaster Relief and Emergency Assistance Act) or (c) if it (or its majority owner) meets all three characteristics: (i) owns or operates venues in more than one country; (ii) owns or operates venues in more than 10 states; and (iii) employs more than 500 full-time employees (working 30 or more hours per week) as of February 29, 2020.

The SBA may make an initial grant of up to $10 million to an eligible applicant and a supplemental grant that is equal to 50% of the initial grant, provided the aggregate of the initial and supplemental grants may not exceed $10 million.

These grants must be used for specified expenses incurred between March 1, 2020, and December 31, 2021 (with an extended period for supplemental grants), such as payroll costs, rent, utilities, and personal protective equipment (PPE).  Funds that are not used within one year of disbursement must be returned to the SBA.

During the initial 14-day period of implementation, grants will be awarded to eligible applicants with revenue losses of at least 90%, and in the following 14-day period, grants will be offered to eligible applicants with at least 70% revenue loss, in each case, in the period between 4/1/2020 and 12/31/2020 relative to the same period in 2019. After these two periods, grants will be awarded to all other eligible entities.

If you receive this grant you may not apply for a new PPP loan.


 

Tax Specific FAQs

Information relating to business tax provisions, social security tax deferral and employee retention credit considerations under the CARES Act and Consolidated Appropriations Act, 2021, can be accessed here.

Business Tax Provisions FAQs

Social Security Tax Deferral FAQs
(6/5/2020 Update: Borrowers are eligible for both the payroll tax deferral and PPP loan forgiveness – the CARES Act has been amended to remove the prior restrictions on benefiting from both.)

Employee Retention Credit FAQs | IRS Summary and FAQs

Update Re Consolidated Appropriations Act, 2021:

Employee Retention Tax Credit (ERTC)

  • Beginning on January 1, 2021, and continuing through June 30, 2021, the credit will: (i) be available to offset 70% of each employee’s qualified wages (up from 50%); (ii) offset qualified wages up to  $10,000 per employee per quarter (up from $10,000 per year); and (iii) allow group health plan expenses to be considered qualified wages, even when no other wages are paid to an employee.
  • In effect, the maximum amount of ERTC available per employee is $14,000 ([$10,000 for Q1 + $10,000 for Q2] x 70%).
  • Previously, employers who receive a PPP loan were not eligible for the ERTC. This has been changed such that employers can take advantage of both the PPP loan and the ERTC in 2020 and 2021 as long as the PPP loan and the ERTC do not cover the same payroll expenses.

Tax Deductions

  • Overturning IRS’s previous determination, the Consolidated Appropriations Act, 2021, established that gross income does not include emergency EIDL grants and any amount that would otherwise arise from the forgiveness of a PPP loan. Deductions are allowed for otherwise deductible expenses paid with the proceeds of emergency EIDL grants or a PPP loan that is forgiven, and the tax basis and other attributes of the borrower’s assets will not be reduced as a result of the grant or loan forgiveness. This is effective as of 3/27/2020. Targeted EIDL Advances, Grants for Shuttered Venue Operators and Second Draw PPP loans are treated similarly, effective for tax years ending after 12/27/2020.

 


 

SBA Loan Guidance and Resources

Visit The Small Business Administration (SBA) for updated guidance on COVID-19 resources.

You can find your local SBA District Office or local SBA partners for assistance and also search for a Small Business Development Center (SBDC) in your area. SBDCs are able to answer your questions, provide no-cost business consulting, and offer low-cost business training in partnership with the SBA. 

Additional SBA links:

View other Coronavirus relief options

View the SBA Lender Match

View map of lenders near you

 


 

Main Street Lending Program

The Federal Reserve has established a Main Street Lending Program (MSLP) to support lending to small and medium-sized businesses that were in sound financial condition before the onset of the COVID-19 pandemic. The MSLP will operate through five facilities, including the Main Street New Loan Facility (MSNLF), the Main Street Priority Loan Facility (MSPLF), and the Main Street Expanded Loan Facility (MSELF).

Structure. Under the MSLP, eligible lenders will make loans to eligible borrowers (that is not forgivable), and the Federal Reserve will purchase a 95% participation in each loan from lenders (up to $600 billion in the aggregate). Loans issued under the MSLP will have a five-year maturity with an interest rate of LIBOR +3%, deferral of principal payments for two years, and deferral of interest payments for one year. The MSLP will be administered by the Federal Reserve Bank of Boston.

Eligibility. As detailed further in the term sheets, U.S. businesses established before March 13, 2020 may be eligible for loans if the business either: (1) has 15,000 employees or fewer; or (2) had 2019 revenues of $5 billion or less. (Certain restrictions may apply if a borrower has affiliates or outside investors.) Paycheck Protection Program borrowers are eligible for the MSLP as well.

Details. See a summary of each facility and see here for the term sheets and FAQs providing more information regarding eligibility and conditions. Further details and forms can be found on the Federal Reserve Bank of Boston’s website. Contact your bank/lender for details and advice (including whether your lender is participating, and about your eligibility and application process).


 

Business Resources by State

See a list of state, local and private resources available to small businesses. 

View Resources

 


 

Webinar: Financial Relief Opportunities for Small Businesses

Brookfield Properties and Covington hosted an informational call to help our tenants better understand the federal relief provided for small businesses pursuant to the CARES Act.

This call provides initial, specific information about how to potentially access these loan programs, the criteria for eligibility, and addresses other key questions.

Listen to Webinar Recording

 



 

If you have additional questions, please reach out to your Brookfield Properties contact.

 

 

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