Yesterday, President Trump signed into law the "CARES Act" providing $2 Trillion in stimulus funding. You heard me.  $2 TRILLION.  I'm going to be sending a series of newsletters in the coming week to highlight the important parts of this but first I think it is important to understand the magnitude of this.  

$2 Trillion = $2,000 Billion  = $2,000,000 Million (not $1,000,000, duh)

If you stacked up $1 Million dollars in hundred dollar bills it is the height of a chair.   If you stacked up $2 Trillion dollars in hundred dollar bills it would be 1,262 Miles Tall.

I know, I've got too much time on my hands now that I'm working from home. I'll get back to the important stuff.

Small businesses (companies with 500 or fewer employees) can apply for the loan through banks that make the loans on behalf of the Small Business Administration (SBA), which administers the Paycheck Protection Loans program. Certain businesses with larger employee counts also qualify. You can check industries eligible for the higher thresholds at www.sba.gov/size-standards. Significant features of the loan program include:

1. Businesses must apply for the loan by June 30.
2. Waiver of affiliation rules for businesses in the accommodation and food service industries, franchises and businesses receiving financial assistance under the Small Business Investment Act.
3. Nonrecourse – SBA has no recourse against any business owner and there are no personal guarantees.
4. Interest not to exceed 4%.
5. No debt service payments for at least six months and not more than one year.

The loan amount cannot exceed $10 million and is the lesser of:

1. 2.5 (not 5 from original email) multiplied by the trailing twelve month average monthly payroll PLUS the amount outstanding under the SBA’s disaster loan program, or

2. For businesses not in existence during the period February 15, 2019, through June 30, 2019, 2.5 multiplied by the average monthly payroll for the period January 1 through February 29, 2020, PLUS the amount outstanding under the SBA’s disaster loan program.

Payroll costs include:
a.  Employee compensation that is:

1. Salary, wage, commission, or similar compensation;
2. Payment of cash tip or equivalent;
3. Payment for vacation, parental, family, medical, or sick leave;
4. Allowance for dismissal or separation;
5. Payment required for the provisions of group health care benefits, including insurance premiums;
6. Payment of any retirement benefit; or
7. Payment of state or local tax assessed on the compensation of employees.

Payroll does NOT include certain federal taxes, compensation of employees not resident in the U.S., individual employee compensation over $100,000 annualized, and sick leave and family leave credited under the Families First Coronavirus Response Act.

Borrowers must certify in good faith that (i) current economic conditions make the loan necessary to support ongoing operations, (ii) funds will be used to retain workers and maintain payroll or make mortgage payments, lease payments and utility payments, (iii) no other pending applications are duplicative of the covered loan request, and (iv) the recipient has not received amounts for the same purpose or duplicative amounts from February 15, 2020, through December 31, 2020.

Amounts expended by the borrower during the eight-week period following loan origination for payroll, interest on mortgages, rent and utilities are eligible for loan forgiveness. Such amounts must be substantiated to the lender. Amounts forgiven by the lender are not taxable to the borrower or business owner. The amount of loan forgiveness will be reduced if the business reduces headcount or salaries and wages. The reduction in loan forgiveness is calculated without regard to employees re-hired or salaries and wages restored by June 30, 2020.

To the extent a loan has a remaining balance after reduction for loan forgiveness, the remaining balance will continue to be guaranteed by SBA and the loan shall have a maximum maturity of 10 years from the date on which the borrower applies for loan forgiveness.

So, how do you prepare to apply?  

1.) Send your commercial banker an email (copy your accountant).  Remember, they are likely getting a tidal wave of phone calls.  BE PATIENT.  The Federal Government has 30 days to issue guidelines to the bank as to HOW this gets done.   Just let them know you are interested and they will put you on their list to call when they know more. (If you need a contact at your bank that you do business with just let us know.)

2.) Get your ducks in a row.  You're going to need a few things at a minimum.  
   a.) Get your last three tax returns in digital format.  
   b.) Get ready to do an interim financial statement (March 31st)
   c.) Make sure you have access to payroll data.  
   d.) Start to prepare your personal financial statement and debt schedules.  If you've never done this before we can help.

3.) Be Patient.  This is an unprecedented time and there will likely be a LONG list of businesses applying for these loans.  All you can do is make sure you have your documents in a clean neat format in hopes that your request will process much smoother as a result of that.  

Remember, we are here to help.  We will do everything we can to help our clients navigate this extremely difficult time.  

Now more than ever, thank you for your continued support.  We are grateful for you.


Tim