April 16, 2020
There’s no good news today coming from two government subsidized programs designed to help small business owners. Both the Small Business Association’s Economic Injury Disaster Loan (EIDL) and the Paycheck Protection Program (PPP) are no longer taking applications.
But there are some things you need to know as we negotiate these troubled times.
First, let’s address the Economic Injury Disaster Loan- (EIDL):
This was the program that offered an up to $10,000 advance (the grant portion of the loan) and an opportunity to apply for the full EIDL. This application should have been submitted through the SBA.gov website and if you submitted you would have received an application number. Anyone who received an application number is in que to be processed. You will receive either a phone call, an e-mail (or both) requesting additional information. Once the additional information is submitted you can chose to either stop at the $10,000 grant or complete the entire process for qualification based on the SBA’s algorithm.
This algorithm requires:
- A copy of the owner(s) driver’s license
- That you turn in your 2018 tax returns
- 2019 profit and loss and balance sheets
- A personal financial statement for all owners with more than 20% ownership in the business
- A personal financial statement for each owner
- A list of business debt obligations
- The documents you turn in will allow SBA to determine a history of previous sales versus what you are doing now. This will help them determine your ability to pay back the EIDL loan.
If you did not make it in the application que you will need to gather your documents and be ready for the next funding round. As we’ve seen, acting quickly is important as these dollars run out.
Second, lets discuss the Paycheck Protection Program (PPP):
If you applied, this loan would cover your payroll costs for up to 8 weeks. This loan must be applied for via a bank or credit union. Or one of the SBA’s 4000 lenders listed on their website.
If you applied and turned in all of your paperwork your lending institution should have reviewed your paperwork and submitted your loan to be assigned a reservation number by the SBA.
If your bank has not told you that you have a reservation number, you should call and ask that question. If the answer to that question is no, then you are not included in the first round of $349 Billion in funding and should ask your banker to verify if you have everything ready to be submitted for the second round of funding.
Here is the list of documents you should have ready for the second round of funding:
- A copy of the owner’s driver’s license
- A completed PPP application Form, SBA Form 2483
- 2018 Tax Returns
- 2019 Profit and Loss and Balance Sheet, if you have not filed a 2019 tax return
- The 940 and 941 Tax return for 2019. Copies of payroll tax reports filed with the IRS (including Forms 941, 940, state income and unemployment tax filing reports) for the entire year of 2019 and 1st quarter of 2020 (if available).
- Documentation of all retirement plan funding by the employer for the entire year of 2019 and 1st quarter of 2020 (if available). Copies of workpapers, schedules and remittances to the retirement plan administrator should be enough.
- A summary of costs that you incurred related to Health Insurance benefits
- Report or summary of payroll fees associated with processing of payroll checks.
You are eligible for a loan if you are a small business that employs 500 employees or fewer, or if your business is in an industry that has an employee-based size standard through SBA that is higher than 500 employees
The amount any small business is eligible to borrow is 250% of their average monthly payroll expenses, up to a total of $10 million. This amount is intended to cover 8 weeks of payroll expenses and any additional amounts for making payments towards debt obligations. This eight-week period may be applied to any time frame between February 15, 2020 and June 30, 2020. Seasonal business expenses will be measured using a 12-week period beginning February 15, 2019, or March 1, 2019, whichever the seasonal employer chooses.
Please note that this loan is completely forgivable if you use it only to cover your payroll costs that meet or exceed your loan amount. However, up to 25% of the PPP loan granted can be used to cover overhead expenses, but that portion of the loan will not be forgiven and at the end of the 8 week cycle it will convert to a loan which is payable over 12 to 18 months depending on your lending institution.
Commissioner Dr. Barbara Sharief MSN, APRN, DNP
Broward County Commissioner District 8