April 27, 2020
Additional SBA Disaster Relief Funding Approved - DO NOT DELAY!

On Friday, Apirl 24th President Trump signed the Paycheck Protection Program and Health Care Enhancement Act, which is being referred to as COVID 3.5. The Act includes additional funding for two small business loan programs and more money for hospitals and COVID testing.  There are not tax provisions in this Act.  If you are a small business owner or are self-employed and your business has been negatively impacted by the COVID-19 pandemic, these programs apply to you so please take the time to read this message.  The focus of this email will be to provide NEW information related to these SBA programs, primarily the Paycheck Protection Program.  For a general descripton of these programs, see our original communcication dated April 1, 2020 that can be found on our website by clicking on this link.

SBA Paycheck Protection Program (PPP)

  • Additional $310 billion in funding approved
  • The SBA will begin accepting PPP applications for round 2 funding today.
  • The $349 billion in round 1 funding was depleted in 12 days.  Funds in round 2 are expected to go quicky as well so apply with an SBA approved lender now!
  • $60 billion has been set aside for community/regional banks and credit unions.  This was in response to complaints that large businesses working with national banks quickly depleted the PPP funds in round 1.
  • According to reports in the media, there were complaints that many lenders, especially the large national banks, did not process PPP applications in the order in which they were received as is required by the law.  Instead, large customers were said to receive preferrential treatment.
  • It is our understanding that if you have submitted a PPP application that was not funded in round 1, you should be in the front of your lender's queue for submission to the SBA in round 2.
  • Until you have received an 'SBA application number', your PPP application is still sitting in the lender's internal queue.
  • While we do not endorse any specific lenders, we are aware that clients did recieve PPP funds from the following local banks in round 1:
    • Enterprise Bank
    • TD Bank
    • Middlesex Saving Bank
  • We are not aware of any busineses without W-2 employees that recieved PPP funds in round 1.  This is likely due to the fact that the self-employed had to wait a full week after other business to apply for a PPP loan in round 1.  That is not the case for round 2 and we are optimistic that the self-employed/sole proprietor will receive PPP funding in round 2.
  • We are not aware of any client that successfully received PPP funding from Bank of America in round 1.
  • Clarification regarding maximum PPP loan amount for the self-employed - The SBA has recently provided additional guidance as to what constitues eligible compensation for the self-employed.  For the self-employed, eligible compensation is now defined to consist solely of 2019 Schedule C - Profit or Loss from Business, line 31 - Net Profit.  Note that like W-2 wages for PPP purposes, the Schedule C annual net profit is also capped at $100K.  The self-employed are NOT allowed to include health insurance or retirement contribuitons for the business owner in compensation.  If you have already submitted a PPP application that included these amounts, we suggest that you modify your PPP application so as to prevent a rejection or delay in processing. 
  • Change in calculation of PPP loan forgiveness calculation for the self-employed - The SBA concluded that it is appropriate to limit the forgivenes of owner compensation replacement for individuals with self-employment income who file a Schedule C to 8 weeks' worth (8/52) of 2019 net profit.  Thus, the PPP loan forgiveness amount for a self-employed individual may be less than than the full eligible PPP loan amount.
  • The purpose of PPP is to keep employees on payroll; therefore you CANNOT receive a forgiveable PPP loan AND collect unemployment.  No double dipping.  A taxpayer should evaluate which program is best for his/her particular circumstances.

 SBA Economic Injury Disaster Loans (EIDL) and Loan Advances

  • Additional $10 billion in funding approved
  • Program rules regarding the $10K forgiveable EIDL advance/grant were changed by the SBA and applied to round 1 funding - The EIDL advance that does NOT need to be repaid is now calculated at $1K/employee up to a maximum of $10K.  It is believed that the self-employed without any W-2 employees will be eliglbe for a $1K EIDL advance.
  • As of today, we are only aware of 1 client that has received an EIDL advance - This client has employees, applied on April 2nd and funds were depositing in the business bank account 22 days later without any notice.

If you have questions about these programs or need assistance gathering the necessary documentation for the loan applications, please contact a member of our team.