COVID Relief: Get Ready to Apply Now

With 85% of small business owners in need of financial relief, there is likely to be a mad scramble similar to what we witnessed in US during CARES ACT Round One last April - where available funding ran out quickly.  And in some cases the application process will be open as early as this coming Monday January 11th - Starting ONLY with Community Financial Institutions.  Then shortly thereafter with other financial institutions.  

Note: The majority of this information is for US business owners, however, Canadian business owners we did compile information for you which you can find if you scroll down a bit.  

Accordingly, if you are based in the US and plan to apply for any of the programs being funded as part of Round 3, get as far out ahead of the process as possible by following these tips.

• Review Round 3 programs and requirements with your accountant and / or lawyer to determine which of the programs you should apply for.  Note: there may be multiple programs you can apply for but in some cases applying for one eliminates your ability to apply for others. 

• Review and complete the PPP application from Round 2 to make sure you have all of the required information on hand.   We'll add a link to the new application as soon as it becomes available.  
  

• Review EIDL Grant Application form from to make sure you have all of the required information on hand:

• Reach out to your local bank to understand their process and determine what you can do to get your materials to them in advance of applications being submitted.  

Program Details

We found a great summary of the program details here on the Journal of Accountancy website.  Below are some of the highlights from their post.  

For businesses who received past PPP loans: 

Second-draw PPP loans

(Available starting Wednesday January 13th - via community financial Institutions only) 

Borrowers are eligible for a second-draw PPP loan of up to $2 million, provided they have:

• 300 or fewer employees.
• Used or will use the full amount of their first PPP loan on or before the expected date for the second PPP loan to be disbursed to the borrower. The IFR also clarifies that the borrower must have spent the full amount of the first PPP loan on eligible expenses.
• Experienced a revenue reduction of 25% or more in all or part of 2020 compared with all or part of 2019. This is calculated by comparing gross receipts in any 2020 quarter with an applicable quarter in 2019, or, in a provision added in the IFR, a borrower that was in operation for all four quarters of 2019 can submit copies of its annual tax forms that show a reduction in annual receipts of 25% or greater in 2020 compared with 2019.

PPP applicants must submit documentation sufficient to establish eligibility and to demonstrate the qualifying payroll amount, which may include, as applicable, payroll records; payroll tax filings; Form 1099-MISC, Miscellaneous Income; Form 1040, Schedule C, Profit or Loss From Business, or Schedule F, Profit or Loss From Farming; income and expenses from a sole proprietorship; or bank records.

For businesses who have not received prior PPP loans:

First-draw PPP loans

(Available starting Monday, January 11th via community financial Institutions only)

The Economic Aid Act makes first-draw PPP loans available to borrowers that were in operation on Feb. 15, 2020, and come from one of the following groups:

• Businesses with 500 or fewer employees that are eligible for other SBA 7(a) loans.
• Sole proprietors, independent contractors, and eligible self-employed individuals.
• Not-for-profits, including churches.
• Accommodation and food services operations (those with North American Industry Classification System (NAICS) codes starting with 72) with fewer than 500 employees per physical location.
• Sec. 501(c)(6) business leagues, such as chambers of commerce, visitors’ bureaus, etc., and “destination marketing organizations” that have 300 or fewer employees and do not receive more than 15% of receipts from lobbying. The lobbying activities must comprise no more than 15% of the organization’s total activities and have cost no more than $1 million during the most recent tax year that ended prior to Feb. 15. 2020. Sports leagues are not eligible.
• News organizations that are majority-owned or controlled by an NAICS code 511110 or 5151 business or not-for-profit public broadcasting entities with a trade or business under NAICS code 511110 or 5151. The size limit for this category is no more than 500 employees per location.

PPP applicants must submit documentation sufficient to establish eligibility and to demonstrate the qualifying payroll amount, which may include, as applicable, payroll records; payroll tax filings; Form 1099-MISC, Miscellaneous Income; Form 1040, Schedule C, Profit or Loss From Business, or Schedule F, Profit or Loss From Farming; income and expenses from a sole proprietorship; or bank records.

Minority, underserved, veteran, and women-owned businesses

The Economic Aid Act provided set-asides for new and smaller borrowers, for borrowers in low- and moderate-income communities, and for community and smaller lenders. The set-asides include:

• $15 billion across first- and second-draw PPP loans for lending by community financial institutions;
• $15 billion across first- and second-draw PPP loans for lending by insured depository institutions, credit unions, and Farm Credit System institutions with consolidated assets of less than $10 billion;
• $35 billion for new first-draw PPP borrowers; and
• $15 billion and $25 billion for first-draw and second-draw PPP loans, respectively, for borrowers with a maximum of 10 employees or for loans of less than $250,000 to borrowers in low- or moderate-income neighborhoods. The SBA has determined that at least 25% of each of those set-asides will go to each one of the groups: loans to borrowers with a maximum of 10 employees and loans of less than $250,000 to borrowers in low- or moderate-income neighborhoods.

The SBA announced in its three-page guidance that it would take a number of steps to ensure increased access to the PPP for minority, underserved, veteran, and women-owned business concerns. Most notably, the SBA said it will accept PPP loan applications only from community financial institutions for at least the first two days when the PPP loan portal reopens. In addition, the SBA said it would:

Eligible costs

PPP borrowers can have their first- and second-draw loans forgiven if the funds are used on eligible costs. As with the first round of the PPP, the costs eligible for loan forgiveness in the revised PPP include payroll, rent, covered mortgage interest, and utilities. In addition, the following costs are now eligible:

• Covered worker protection and facility modification expenditures, including personal protective equipment, to comply with COVID-19 federal health and safety guidelines.
• Covered property damage costs related to property damage and vandalism or looting due to public disturbances in 2020 that were not covered by insurance or other compensation.
• Expenditures to suppliers that are essential at the time of purchase to the recipient’s current operations.
• Covered operating expenditures, which refer to payments for any business software or cloud computing service that facilitates business operations; product or service delivery; the processing, payment, or tracking of payroll expenses; human resources; sales and billing functions; or accounting or tracking of supplies, inventory, records, and expenses.

To be eligible for full loan forgiveness, PPP borrowers will have to spend no less than 60% of the funds on payroll over a covered period between eight or 24 weeks.

Simplified forgiveness

Borrowers that receive a PPP loan of $150,000 or less shall receive forgiveness if the borrower signs and submits to the lender a certification that is not more than one page in length, includes a description of the number of employees the borrower was able to retain because of the loan, the estimated total amount of the loan spent on payroll costs, and the total loan amount. The SBA has yet to create the simplified application form but must do so by Jan. 20. The form may not require additional materials unless necessary to substantiate revenue loss requirements or satisfy relevant statutory or regulatory requirements. Borrowers are required to retain relevant records related to employment for four years and other records for three years, as the SBA may review and audit these loans to check for fraud.

Tips on Picking a Financial Institution to work with: 

• in Round 1 many business owners found much greater success working with local banks, regional banks, credit unions and online providers than the major money center banks who used the opportunity to enrich themselves and their bigger clients rather than taking care of their small business clients. 
  
• Having an existing relationship has proven valuable in past funding rounds.  This isn’t limited to just your financial institution for example both Intuit Quickbooks, PayPal and Square were approved as online Fintech providers in past rounds.  

• Minority, underserved, veteran, and women-owned businesses have special carveouts within the new legislation and many of the financial institutions serving these communities will have 2-day advance processing on loans.  So ask your local financial institution if they are in the approved list.  

• You can find a complete listing by state of approved lenders on the SBA website here
  

Please Beware of Scammers!

The vast amount of money concerns, time sensitivity, and dire situation many business owners are facing have also resulted in scams. Be sure to check the lenders against the approved list before engaging with someone about a loan. Learn more about PPP Scams here.  

Don’t Overlook State Run Programs:

Many states have their own small business support programs in place. A quick Google search typically turns up some great resources.  Here is one I did for my home state of MA:

Canadian Business Support Programs

And for our friends to the north.  The Canadian Government as well as individual provinces have established COVID support programs.

National Level Support: information can be found here

And again don’t forget to look at the programmes being run in your province!  

Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Northwest Territories, Nova Scotia, Nunavut, Ontario, Prince Edward Island, Quebec, Saskatchewan, and Yukon. 

Want COVID relief support and advice from business owners like you? Join the COVID Relief Support Group.