COVID-19 Business Impact Resources
Important Updates as of 5/15/2020
PPP – The SBA has made some important updates to the rules around the PPP, specifically around seasonal businesses and partnerships where partner income was not included in the original application. You can see the updates in our FAQ document.
EIDL – The SBA is processing the loan applications and contacting applicants, little by little. If you’ve gotten a confirmation number that starts with a 3, you’re in the queue. If your confirmation starts with a 2, reach out to the Rhode Island Small Business Development Center at firstname.lastname@example.org. They can connect you to the SBA to reapply.
Reopening RI – The State of RI has put together a lot of information, guidance, and resources around its reopening plan and rules for business. The website is: https://www.reopeningri.com/ Note in particular that the state is requiring all businesses reopening to complete a control plan (template here).
Free PPE – The state is also offering free PPE to businesses that submit this plan through their local chamber of commerce (See the Greater Newport Chamber and the Central RI Chamber applications here, as examples. You are not required to be a chamber member.)
“Paycheck Protection Program” Loans (PPP Loans) and “Economic Injury Disaster Loans” (EIDLs)
On Friday, March 27, 2020, the House of Representatives passed and President Trump signed the CARES Act, an approximately $2 trillion relief measure to address the COVID-19 outbreak and economic fallout.The law includes approximately $350 billion for “Paycheck Protection Program” loans (PPP Loans) to support businesses in making payroll and other essential payments during the crisis. PPP Loans are separate from Economic Injury Disaster Loans (EIDLs) made by the Small Business Administration (SBA).
We 've provided a high-level summary of PPP Loans and EIDLs.
- The interest rate is 1% fixed rate. All payments are deferred for at least 10 months, though interest will accrue during this period. The loan is to be repaid in a maximum of 5 years, with no prepayment penalties. You will not need to pledge any collateral to receive this loan.
- Payroll costs including benefits
- Salary, wages, commissions, and tips (capped at $100,000 per employee)
- Employee benefits including costs for vacation, parental, family, medical, or sick leave. Sick and family leave that utilized the Families First Coronavirus Response Act does not qualify.
- 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 with no other employees: Schedule C, Line 31 will reflect the owner’s salary (capped at $100,000)
- Interest on a mortgage or on rent
- Utility payments
- Interest payments on any debt obligations that were incurred before February 15, 2020
- Refinancing on SBA EIDL loan (made between 01/31/2020 – 04/03/2020)
- Covered Operations Expenditures which includes software for business operations such as payroll, billing, accounting, and others.
- Covered property damage costs related to disturbances of 2020 not covered by insurance
- Covered supplier costs that supplied goods during the covered period and that had a contract, order, or agreement in effect prior to the covered period.
- Covered worker protection expenditures that facilitate the adaptation of the business activities to comply with required guidelines established by federal or state organizations. These include expenses related to employee and customer safety and include expenditures such as drive-through window installation, air filter or ventilation, physical barriers, and more.
Yes, PPP Loans will be forgiven to the extent they are used for permitted purposes (see above) during the eightweek period after the loan is made and will not be taxed as cancellation of indebtedness income. However, the amount of a PPP Loan that will be forgiven may be reduced in the following circumstances (with the amount of the reduction determined based on formulas set forth in the statute):
- If the borrower reduces its average number of monthly FTE employees during the eight-week period following the making of the loan as compared to either (i) the period between February 15 and June 30, 2019, or (ii) at borrower’s election, the period between January 1 and February 29, 2020.
- If the borrower reduces salaries of employees making less than $100K by more than 25%. This test is on an employee by employee basis.
- If the PPP Loan is used to pay employee salaries in excess of $100K (on an annualized basis).
You must be in operation as of February 15, 2020, and either had employees for whom you paid salaries and payroll taxes or paid independent contractors, as reported on a Form 1099-MISC or you were an eligible self-employed individual, independent contractor, or sole proprietorship with no employees. Eligible organizations include:
- A small business, as defined by the SBA, with 500 or fewer employees
- Sole proprietors, the self-employed, and independent contractors
- Certain nonprofits, housing cooperatives, and news organizations also qualify
You 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, Schedule C or F, income, and expenses from a sole proprietorship, or bank records.
Calculate your maximum borrow level. Remember to include yourself in the payroll and employee count! You will be asked to submit documentation to establish eligibility. Once the loan is distributed, you cannot revise the calculation.
For Businesses with Employees:
- Step 1: Aggregate payroll costs from 2019 or 2020 for employees whose principal place of residence is the United States. Don’t forget to include your own pay if you take an owner’s draw.
- Step 2: Subtract any compensation paid to an employee in excess of an annual salary of $100,000
- Step 3: Calculate average monthly payroll costs (divide the amount from Step 2 by 12).
- Step 4: Multiply the average monthly payroll costs from Step 3 by 2.5.
- Step 5: Add the outstanding amount of an Economic Injury Disaster Loan (EIDL) made between January 31, 2020 – April 3, 2020, that you seek to refinance. Do not include the amount of any EIDL Advance (because it does not have to be repaid).
- You must provide tax documentation with your loan application to substantiate the loan.
For Businesses with No Employees:
- Step 1: Find your 2019 or 2020 IRS Form 1040 Schedule C Line 31 net profit amount. If this
amount is over $100,000, reduce it to $100,000. If this amount is zero or less,
you are not eligible for a PPP loan.
- Step 2: Calculate the average monthly net profit amount (divide the amount from
Step 1 by 12).
- Step 3: Multiply the average monthly net profit amount from Step 2 by 2.5.
- Step 4: Add the outstanding amount of any Economic Injury Disaster Loan
(EIDL) made between January 31, 2020 and April 3, 2020 that you seek to
refinance, less the amount of any advance under an EIDL COVID-19 loan
(because it does not have to be repaid).
- You must provide tax documentation with your loan application to substantiate the loan.
Seasonal businesses and farmers have the option to calculate their payroll differently. Contact your SBDC advisor for more information.
NOTE: Application deadlines are: March 31, 20201
- Contact an SBA lender in your area or whom you may have an existing relationship. To find a SBA lender match: https://www.sba.gov/funding-programs/loans/lender-match).
- Consider what consents will be required to obtain a PPP Loan, including from any existing lenders.
- The application can be found here.
Forgiveness is based on:
- At least 60% of the funds need to be spent on payroll. The other 40% must be spent on allowable expenses (see above)
- Number of Staff: Businesses must restore staff or salary levels that were previously reduced. Companies that document their inability to rehire workers and their inability to find similarly qualified workers maintain forgiveness amounts.
- Level of Payroll: Your loan forgiveness will also be reduced if you decrease salaries and wages by more than 25% for any employee.
The second draw of the PPP is for borrowers that previously received the first round of the PPP loan and have used or will use the full amount of their initial loan for authorized purchases on or before the expected date of disbursement of the second draw. Like the first loan, no less than 60% of the loan needs to be used toward payroll with the remaining amount being spent on eligible expenses. For full details on the second draw, visit the SBA site here.
Who is eligible? Those who received a first PPP draw, who have not permanently closed may be eligible if the organization has:
- Used or will use the full amount of their original PPP Loan on or before the expected date of the second draw.
- Used or will use the full amount of original PPP Loan on eligible expenses
- 300 or fewer employees
- Experienced a 25% or greater revenue reduction, calculated by comparing quarterly gross receipts for one quarter in 2020 to the corresponding quarter of 2019. Any amount of forgiveness on the first draw of PPP received in 2020 is excluded from a borrower’s gross receipts.
You cannot receive both PPP and the Shuttered Venues Grant. You must submit tax documentation to establish eligibility.
Economic Injury Disaster Loans
- EIDLs will be capped at $2 million with an interest rate capped at 3.75%.
- Long-term repayment will be permitted (up to 30 years).
- Loans over $200K will require collateral and may require personal guarantees from principals.
- Applicants may request an emergency EIDL grant (up to $10,000), which the SBA is required to distribute within three days.
To be eligible for an EIDL, a business must qualify as a “small business concern” under existing SBA guidelines based on their NAICS code number (see link). The SBA affiliation rules discussed above in the context of PPP Loans also apply to EIDL. The waiver of affiliation rules for certain businesses described above does not apply to EIDLs. Any business requesting an emergency EIDL grant must self-certify that it is otherwise eligible under applicable SBA guidelines.
As with PPP Loans, applicants for EIDL will need to consider what consents will be required to obtain an EIDL, including from any existing lenders.
Student Loans (Coronavirus and Forbearance Information)
Unemployment (includes information on each state’s unemployment program as well as a COVID FAQ)