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NITTY GRITTY Where’s the Money? U.S. Small Business Administration P.L. 116-136 – Sec. 15010/15011 Plan for Use of Covered Funds If you feel like you’re floating out to sea, lost in a fog with money worries, and Covid-based nightmares, there are lifelines available, both financial and advisory, for small businesses. But with so many different platforms, and deadlines, and red tape, it can be challenging to know what opportunities are right for you and your business. Here is a breakdown of the various funding options, offered by the Small Business Administration (SBA). WHAT’S AN EIDL? An EIDL stands for Economic Injury Disaster Loan. On June 15, the Small Business Administration resumed accepting new EIDL applications from all eligible small businesses. EIDL proceeds can be used to cover a wide array of working capital and normal operating expenses, such as continuation to health care benefits, rent, utilities, and fixed debt payments. Small business owners and qualified agricultural businesses in all U.S. states and territories are currently eligible to apply for a low-interest loan due to Coronavirus (COVID-19). The SBA EIDL direct loan program is administered by SBA’s Office of Disaster Assistance (ODA), and offers long-term, low-interest loans to eligible small businesses, private non-profit organizations, and agricultural businesses that have suffered substantial economic injury as a result of a declared disaster. SBA has issued COVID-19 disaster declarations for all U.S. states and territories. Eligible applicants must apply directly to SBA using the online SBA COVID-19 EIDL portal (available at sba.gov/funding-programs/disasterassistance/coronavirus-covid-19). For the COVID-19 disaster, Section 1110 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) (P.L. 116-136) authorized SBA to provide advances of up to $10,000 to applicants that applied for COVID-19 EIDL loans and self-certified as to eligibility, while the applicants await processing of their EIDL loan applications. The COVID-19 EIDL advance is a grant that must be used for general business purposes. When SBA disburses an EIDL advance or an EIDL loan to an applicant or borrower, all proceeds are deposited ONLY into the verified Financial Institution account belonging to the eligible applicant or borrower. For purposes of the EIDL program, a verified Financial Institution account is a depository institution account using the Employer Identification Number (EIN) or Social Security Number (SSN) entered by the applicant or borrower in the EIDL loan application. No third-party service provider is authorized by SBA to receive EIDL advance or EIDL loan funds on behalf of an applicant or borrower. As of August 24, 2020, 3,573,856 loans have been approved have been approved across the United States totaling $188,022,021,024. Each applicant must review and check all the following (If Applicant is unable to check all of the following, applicant is not an eligible entity): ✔ Applicant is not engaged in any illegal activity (as defined by Federal guidelines). ✔ No principal of the Applicant with a 50 percent or greater ownership interest is more than sixty (60) days delinquent on child support obligations. ✔ Applicant does not present live performances of a prurient sexual nature or derive directly or indirectly more than de minimis gross revenue through the sale of products or services, or the presentation of any depictions or displays, of a prurient sexual nature. U.S. SMALL BUSINESS ADMINISTRATION P.L. 116-136 – SEC. 15010/15011 PLAN FOR USE OF COVERED FUNDS SBA Program Economic Injury Disaster Loan Emergency Advance (EIDL) Grants P.L. 116-136, Sec 1107, Sec 1110 P.L 116-139, Division B Title II Entrepreneurial Assistance - Small Business Development Centers P.L. 116-136, Sec 1103, Sec 1107 Entrepreneurial Assistance - Women's Business Ownership Assistance P.L. 116-136, Sec 1103, Sec 1107 Entrepreneurial Assistance - Centralized HUB FOR COVID-19 P.L. 116-136, Sec 1103, Sec 1107 Subsidy for Paycheck Protection Program P.L. 116-136, Sec 1102, Sec 1106, Sec 1107 P.L 116-139, Sec 101(a) CARES Act Debt Relief P.L. 116-136, Sec 1107, Sec 1112 Subsidy for Coronavirus Disaster Assistance Loans P.L 116-139, Division B Title II Salaries and Expenses Administrative Funding P.L. 116-136, Sec 1107 P.L. 116-139, Division B Title II Disaster Administrative Funding P.L. 116-123, Title II P.L. 116-136, Title V Office of the Inspector General P.L. 116-136, Sec 1107 Covered Fund (in Millions) Type of program $20,000 Grant program $192 Grant program $48 Grant program $25 Grant program ✔ Applicant does not derive more than one-third of gross annual revenue from legal gambling activities. ✔ Applicant is not in the business of lobbying. ✔ Applicant cannot be a state, local, or municipal government entity and cannot be a member of Congress. Purpose and Use of Covered Funds In response to the Coronavirus (COVID-19) pandemic, small business owners in all US states, Washington, DC and territories are eligible to apply for an Economic Injury Disaster Loan Advance of up to $10,000. This advance will provide economic relief to businesses that are currently experiencing a temporary loss of revenue. To provide management counseling, training, and technical assistance to the small business community through a network of Small Business Development Centers (SBDCs). To fund private, nonprofit organizations to assist, through training and counseling, small business concerns owned and controlled by women, and to remove, in so far as possible, the discriminatory barriers that are encountered by women in accessing capital and promoting their businesses. To establish an online platform that provides small businesses with access to a consolidation of COVID-19 related information and resources from multiple federal agencies that incorporates an online training program to educate SBA’s Resource Partners. U.S. Small Business Administration $670,000 Guarantee The Paycheck Protection Program was established by the P.L. 116-136 – Sec. 15010/15011 Loan program CARES Act. The Paycheck Protection Program is a loan Plan for Use of Covered designed Funds to provide a direct incentive for small businesses to keep their workers on the payroll. The effective period is any from covered February mortgage 15 to June obligation, 30, 2020. any The payment program on any is implemented covered rent obligation, by the Small or Business any covered Administration utility payment. with support from the Department of the Treasury. This program PPP lending provides authority small at businesses the current with subsidy funds rate to is pay $652 payroll billion and costs excludes including 7(a) benefits. program Funds authority can also also be included used to pay in the interest CARES on Act. mortgages, rent, and utilities. $17,000 Loan During As part the of the period coronavirus beginning debt on relief February efforts, 15, 2020, the SBA and pays payments ending 6 months on of December principal, 31, interest, 2020, the and amount any associated of loan fees forgiveness that borrowers under owe this for section all current will be 7(a), determined 504, and without regard Microloans to a proportional in regular servicing reduction status in the as well number as new of fulltime 7(a), 504, and equivalent Microloans employees disbursed if an prior eligible to September recipient, in 27, good faith, 2020. is able to document the inability to rehire or return to the same level of business activity as prior to February $50,000 Direct Loan SBA is offering disaster designated states and territories 15, 2020 due to safety requirements related to COVID-19. program low-interest federal disaster loans for working capital to SBA will forgive loans if employees are kept on the payroll small businesses suffering substantial economic injury as a for 24 weeks after the date of origination, and the money result of the Coronavirus (COVID-19). is used for payroll for at least 60 percent of the covered $2,775 Administrative loan To provide amount support for payroll for the costs, administrative and may use expenses up to 40 of the percent Small Business of such Administration amount for any (SBA) payment headquarters of interest and on field offices operations for CARES Act program 1 implementation, as well as to prevent, prepare for, and respond to coronavirus. $582 Administrative To provide support for the administrative expenses to carry out the Economic Injury Disaster Loan program in response to coronavirus. $25 Administrative To perform the necessary audit oversight of CARES Act related loans and activities. 2 SBA ANNOUNCES NEW REDUCED 504 LOAN DEBENTURE RATES The U.S. Small Business Administration announced the updated interest rates for the 504 Loan Program offered by Certified Development Companies (CDC). Small businesses can now apply for the lowest interest rates since July 2018 as the program is now 10 | AUTO DETAILING NEWS | VOL. 5, NO. 3 • FALL 2020
Got Questions? We have answers! Accounting expert Pat Shannon answers questions on everything from PPP loans to tax forms to revenue numbers. In the hazy maze of this financial quagmire thanks to Covid-19, many business owners are left with questions. The Small Business Administration (sba) is offering help, but unless you’re an expert in the field of economics, there are opportunities for confusion and frustration. Thankfully, Pat Shannon fits the bill for the aforementioned qualifications. Shannon is a car wash owner, the President of the Heartland Carwash Association and an expert in small business accounting, payroll, personal and business tax preparation. The following are answers to questions posted to carwashforum.com. Why doesn’t an S-corp qualify for the PPP loan? PAT SHANNON: Being an S-Corp does not disqualify you from receiving a PPP Loan and if you do not receive a PPP loan you should explore the employee retention credit. If your business is taxed as an S corporation, your owner draws are known as shareholder distributions. It’s important to realize that these distributions are non-taxable, which means there are some pretty strict requirements in place to prevent owners from taking advantage. As an owner of an S-Corp, you are required to pay yourself a reasonable salary through payroll, meaning that you are remitting payroll taxes on that amount. You are allowed to take distributions in addition to this salary, but it’s best practice to have a combination of the two rather than distributions alone. We purchased our business about two years ago from the owner on a land contract and we have about a year left to pay it off. We updated our equipment and rehabbed the building using a home equity loan. Our LLC is a partnership between my dad and me. I have noticed that sole proprietors and LLCs are specifically mentioned in the stimulus package. From what I have gathered so far it seems like we may be able to get some assistance based on the numbers that we show as profit. Is this true? The help you can receive depends on the program that you are applying for. For EIDL loans (applied for directly on the Small Business Administration website) they are revenue based. For PPP loans to sole proprietors and LLCs that file taxes on Schedule C they are profit based. You stated you were a partnership, so your 1065 and K-1s would drive your eligibility. The 1065 would document formal payroll and the K-1s would document owner draws or distributions. The last day to apply for a PPP loan is August 8th, so see your banker right away. Here we are with all of the overhead of a small business without the payroll. Are there any benefits available for those who have been affected by COVID-19? Utilities, mortgage payments and equipment loans are the same as any other business with payroll…so, what is available and how do we apply? The time to take cookies is when cookies are being passed around. That was the advice that I gave Heartland Carwash Association members back on April 4, 2020, when I laid out all the programs available to help business owners. Now, four months later, many of the programs are closed or out of money. You have until Aug 8, 202,0 to get a PPP loan, get to your banker ASAP for details. Otherwise the Employee Retention Credit and the Employer Tax Deferral programs will still be available to you. I recently got this email: “You are receiving this message as a notification that your Economic Injury Disaster Loan (EIDL) application is currently being processed in the order it was received. You will receive an email notification when there is a change to your application status” and then I found $1000 in my account. It doesn’t say anything about it being an advance. Should I assume that’s what it is? Yes, EIDL Advances were deposited without notice or explanation. Be happy that you got the advance, as that program quickly ran out of funds and has not been refunded leaving the SBA owing advances to many businesses and no additional funds look to be forthcoming. The Paycheck Protection Plan loan includes the self employed, so long as you have paid taxes as a self employed business owner. Therefore, you should be good for 2.5 times the monthly “payroll” as I understand this so far. Is this true? Yes, depending on the tax form being filed and a few other details. SBA’s plan for use of funds provided through public laws The Small Business Administration’s plan for use of funds provided through public laws: Coronavirus Aid, Relief, and Economic Security Act (CARES Act), the Paycheck Protection Program and Health Care Enhancement Act, and Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020. allowing 20 and 25-year interest rates at 2.214% and 2.269%, respectively. “These are very encouraging terms and very supportive of our nation’s goal to bounce-back from COVID-19,” said William Manger, SBA Chief of Staff and Associate Administrator for the Office of Capital Access. “CDCs” are the driving force behind the 504 Loan Program. The longer terms and low interest rates support and encourage entrepreneurs to step outside of the box and look at real investments. We are pleased that the 504 Loan Program continues to show double-digit year-over-year growth, especially in these extraordinary times.” Small businesses looking for information on how to expand their business’s real estate or improve their working capital should visit: https://www.sba. gov/brand/assets/sba/sba-lenders/504- Loan-Fact-Sheet-Borrower-Version.pdf The 504 Loan Program is an SBA business loan program authorized under Title V of the Small Business Investment Act of 1958, 15 U.S.C. 695 et seq. The core mission of the 504 Loan Program is to provide long-term financing to small businesses for the purchase or improvement of land, buildings, and major equipment, to facilitate the creation or retention of jobs and to support local economic development. Under the 504 Loan Program, loans are made in conjunction with private sector lenders to small businesses by CDCs, which are certified and regulated by the SBA to promote economic development within their community. For questions about the 504 Loan Program, please contact: Linda Reilly, Chief, 504 Loan Program 202-205-9949Linda.reilly@sba.gov VOL. 5, NO.3 • FALL 2020 | AUTO DETAILING NEWS | 11
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