Business Loans & Benefits

SBA Stimulus Loans

The CARES Act includes $349 million for the Small Business Administration to guarantee loans through its existing 7(a) loan program. The SBA will also be offering an Economic Injury Disaster Loan. Please note that the loan that offers forgiveness of the principal (SBA 7(a) loan) is not the loan you can apply online for (the Economic Injury Disaster Loan). To apply for the SBA 7(a) loan that does provide principal forgiveness, you must use an SBA lender.

Paycheck Protection Program

Economic Injury Disaster Loan

Additional Employer Benefits


Paycheck Protection Program (PPP) Loan

Note: As of 6/17/2020, the second round of PPP funding is still available and the SBA is still processing and approving loans.

On 6/5/2020, the Paycheck Protection Flexibility Act was signed into law. The following changes were implemented (information below has been updated to reflect these items):

  • Updated loan application form.
  • Updated loan forgiveness application (not yet available).
  • Application for loan forgiveness pushed back to December 31, 2020
  • Covered period extend from eight weeks after loan disbursement to twenty-four weeks after loan disbursement.
    • Borrowers can opt to use the eight-week period if the loan has already been received
  • Loan proceeds usage requirements for forgiveness were adjusted as follows:
    • Payroll costs reduced from a minimum of 75% of loan amount to 60%.
    • Mortgage interest, rent, utilities increased from a maximum of 25% of loan amount to 40%.
  • To avoid potential reductions in loan forgiveness, full-time equivalent employee levels do not need to match pre-pandemic levels until December 31, 2020 (previously June 30, 2020).
    • Additional exceptions were added for reductions in employees where previously the only exception was that an employer documented in writing that attempts were made to rehire an employee who rejected their offer. The new exceptions are:
      • Inability to rehire an individual who was an employee of the business on or before February 15, 2020;
      • Demonstrate an inability to hire similarly qualified employees on or before December 31, 2020; or
      • Demonstrate an inability to return to the same level of business activity as the business was operating at prior to February 15, 2020.
    • Repayment period for loans not forgiven and accrued interest increase from two years to five years.
    • PPP loan recipients can now continue to defer Social Security taxes through the end of 2020 (previously required to stop deferring once the PPP loan was forgiven).

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We will prepare the PPP Loan at no direct cost to you (at your request).

The 7(a) program is the SBA’s primary loan program for providing financial assistance to small businesses. The CARES Act PPP has increased the maximum 7(a) loan from $5 to $10 million and expanded the loans to include payroll support (which includes paid sick leave or medical leave), employee wages, mortgage/rent payments and utilities in place as of February 15, 2020.

The loan period will retroactively cover the period beginning on February 15, 2020. The full covered period will include the twenty-four weeks following your receipt of loan funds. The goal of the loan is to help small businesses retain workers while the economy is mostly shut down, in turn allowing businesses to quickly reopen and keeping employees financially stable.

Eligibility and Terms

  • The business must employ fewer than 500 people.
  • Have been in operation on February 15, 2020 (meaning it’s too late to set a business up now to qualify).
  • Must have paid salaries and payroll taxes.
  • The business must have been financially impacted by COVID-19.
  • Loan amounts are based on previous payroll and covered cost amounts (the lesser of: 2.5 times the company’s average monthly payroll costs for 2019 or the 12 months preceding the loan origination date or, $10,000,000). This is the most important pieces of information for the loan application process as this is how you maximize your loan amount.
    • For this calculation, payroll costs are defined as: salary, wages, commission, cash tips or equivalent, allowance for dismissal or separation, health care benefits including insurance premiums, payment of retirement benefits, or the payment of any State or local tax assessed on the compensation of employees.
      • Gross wages that exceed $100,000 for one employee in one year are not included. Benefits such as health insurance that exceed the $100,000 limit for employees are included as this limitation is on wages only.
    • Seasonal employers may have different maximum loan payroll calculation periods. These include businesses such as: ski resorts, landscapers, snow removal/winter maintenance, certain construction businesses, outdoor activity venues, etc.
    • The interest rate is 1%.

Loan Forgiveness Provision

Borrowers can become eligible for loan forgiveness (loan principal only – not interest) on an amount equal to the amount spent by the borrower during a twenty-four week period that falls within the covered period (February 15, 2020 through December 31, 2020) upon loan origination on the following items:

  • Payroll costs (including salaries, paid sick leave, employee health and retirement benefits).
    • Employer portions of payroll taxes (Social Security and Medicare) do not qualify.
    • You must track hours worked by employee as full-time equivalent employee calculations will be required to determine if you are subject to loan forgiveness reductions.
  • Interest payment on any mortgage incurred prior to February 15, 2020 (which shall not include any prepayment of or payment of principal on a covered mortgage obligation).
  • Payment of rent on any lease in force prior to February 15, 2020.
  • Payment on any utility for which service began before February 15, 2020.

The SBA has reduced their initial requirement that 75% of the loan must be used for payroll costs in order to be forgiven. The new requirement states that a minimum of 60% of the loan proceeds must be used for payroll costs.

The amount forgiven would be reduced in proportion to any reduction of full-time equivalent employees (FTE) (an employee that works 35 hours or more is 1 FTE. The aggregate hours of employees working under 35 hours a week that equal 35 are considered 1 FTE. You will need the number of hours worked for this calculation) retained compared to the prior year and to the reduction in pay of any employee beyond 25% of their prior year compensation. Borrowers that rehire workers previously laid off or restore reduced wages by December 31, 2020 will not be penalized for having reduced payroll at the beginning of the period. This applies to staff or wage changes that occurred between February 15, 2020 and April 26, 2020.

Additional exceptions to the full-time equivalent employee requirements have been added in the Paycheck Protection Program Flexibility Act (June 5, 2020). The following will allow you to avoid potential reductions in loan forgiveness:

  • Inability to rehire an individual who was an employee of the business on or before February 15, 2020;
  • Demonstrate an inability to hire similarly qualified employees on or before December 31, 2020; or
  • Demonstrate an inability to return to the same level of business activity as the business was operating at prior to February 15, 2020.

For calculation of the loan forgiveness provision you will need to know gross hours worked by employee per month from 2/15/2019 through 2/29/2020.

We have provided examples of the loan forgiveness reduction calculation for your information.

A request must be made to the lender to be eligible for loan forgiveness and from that period, the lender has 60 days to review and approve the request. You must provide proof of payment of mortgages, rent, utilities, and payroll tax filings to be eligible for loan forgiveness. Proof of payment can be in the form of bank statements or canceled checks. Other documentation may also be necessary as requested by your lender.

We recommend that when the loan funds are received that you pay the following items first, as these expenses are included in the potential principal loan forgiveness provision:

  • Payroll costs, including benefits
  • Mortgage interest only (even if your bank is deferring it) (mortgages originating prior to 2/15/2020)
  • Rent, under lease agreements in force before 2/15/2020
  • Utilities, for which service began before 2/15/2020

The loan amount (2.5 times your monthly payroll cost [defined as: gross salary, wages, commission, cash tips or equivalent, allowance for dismissal or separation, health care benefits including insurance premiums, payment of retirement benefits, or the payment of any State or local tax assessed on the compensation of employees]) is intended to be used to help cover a portion of the twenty-four weeks of payroll following loan disbursment in addition to the above expenses, which are all eligible under the loan forgiveness provision. Using the loan funds for any other expenses will disallow those amounts from being forgiven.

While debt forgiveness is usually treated as income for tax purposes, principal on 7(a) loans forgiven under this provision will not be considered income.

Other Information on the Paycheck Protection Program

  • Corporate officers’ compensation should be analyzed (not to exceed $100,000) to maximize the amount of the loan you can receive and potentially have forgiven. We recommend that if you are not receiving a paycheck form your business, to begin taking one effective immediately (our recommendation is not to exceed $1,800 per week).
  • Nonprofits are eligible unless they are receiving Medicaid reimbursements.
  • Sole proprietors, independent contractors and other self-employed individuals are eligible.
  • Receiving a 7(a) loan does not make the borrower ineligible to receive the SBA Economic Injury Disaster Loan, however, the funds cannot be used for the same expenses.
  • Borrowers are required to make a good faith certification that they have been affected by COVID-19 and will use the loan funds to keep workers employed and pay payroll and/or other debt obligations.
  • Borrower and lender fees for 7(a) loans will be waived.
  • Government guarantee of 7(a) loans would be increased to 100% through December 31, 2020. After that date, guarantee percentages would return to the traditional figures of 75% for loans exceeding $150,000 and 85% for loans equal to or less than $150,000.
  • Loan repayments will be deferred initially for six months and lenders can elect to defer the loan for a total of 12 months.
  • Collateral and personal guarantee requirements would be waived during this period.
  • Providing proof to the SBA that credit is not available elsewhere does not apply to this loan.

Applying for the SBA 7(a) Loan

As the personal guarantee, collateral and proof of inability to receive a loan elsewhere have been waived, many documents previously required by the SBA such as personal financial statements, business profit and loss statements and projected financial statements are not required.

You will need the following information for the application:

  • SBA Paycheck Protection Program (SBA Form 2483) application
  • Contact information for banks that you have existing relationships with, including names, email addresses, and phone numbers
    • If you have a preferred banker you’d specifically like to work with, please let us know.
  • Your preferred bank’s separate loan application, if applicable
  • Payroll documentation including (please note that we have been able to put acceptable loan packages together even when missing some of the below documentation):
    • CARES Act payroll reports from your payroll provider (1/1/19 – 12/31/19 and 1/1/20 – most recent payroll date) (if applicable)
    • 2019 Form 940
    • 2019 Forms 941 for all four quarters and the first quarter of 2020 (if available)
    • 2019 Forms NYS 45 or other state payroll returns for all four quarters and the first quarter of 2020 (if available)
    • 2019 Form W-3
    • All 2019 Form W-2s to verify/demonstrate wages below/exceeding $100,000 per employee
    • Detailed reports specifically documenting pay rate, hours worked and gross wages from January 1, 2019 through the date of the application. Your payroll provider should have these reports available.
  • Retirement contributions made (by employer) for 2019 for each employee (not to include employee amounts paid by wage deferral).
  • Health insurance benefits paid (by employer) for 2019.
  • Dependent care benefits paid (by employer) for 2019.
  • HSA and other benefits paid (by employer) for 2019.
  • Any other forms of compensation paid for 2019.
  • For seasonal businesses, the applicant may elect to instead use average monthly payroll for the time period between February 15, 2019 (or March 1, 2019, at their option) and June 30, 2019, excluding costs over $100,000 on an annualized basis for each employee. The above documentation will be required for these periods.
  • For new businesses, average monthly payroll may be calculated using the time period from January 1, 2020 to February 29, 2020, excluding costs over $100,000 on an annualized basis for each employee. The above documentation will be required for these periods.

Once the application is completed and supporting documentation is collected, Conlon & Company can act as your agent and help you process the application with your preferred banker, or help you choose a lender, if necessary.

As your agent, Conlon & Company would be modestly compensated by the lending bank (that is compensated by the SBA for originating a borrower's loan). There is no cost to the borrower in obtaining this loan.


Economic Injury Disaster Loan (EIDL)

In addition to the Paycheck Protection Program Loan, the CARES Act also introduced changes to the SBA’s Economic Injury Disaster Loan (EIDL). The EIDL saw an equally rocky launch as businesses flooded their application systems trying to secure a $10,000 grant advance that was yours to keep and didn’t need to be paid back whether you were approved for the loan or not. After realizing that the SBA couldn’t offer up $10,000 to every business, the grant advance was rewritten to offer $1,000 per employee, up to a maximum of $10,000.

We are recommending that all eligible businesses apply for the EIDL to receive their maximum grant. Initial confusion as to whether you could apply for both the EIDL and the SBA 7(a) Paycheck Protection Program Loan (PPP) was clarified, stating that as long as the funds from the EIDL are not used for expenses covered by the PPP loan, businesses could claim the benefits of both.

Even if you are not approved for the loan, the advance does not need to be paid back as long as it’s used for maintaining payroll, paid leave, increased costs due to supply chain disruption, mortgage or lease payments, or repaying obligations that cannot be met due to revenue loss. You do not need to accept this loan if approved but the grant is yours to keep. If you are approved for and accept the Economic Injury Disaster Loan, the loan proceeds received beyond the grant are not forgivable.

If you obtain this loan, you cannot use proceeds from the 7(a) loan for the same expenses. The EIDL advance will be used to reduce the loan forgiveness on the PPP Loan.

Eligibility and Terms

Rate: 3.75%

Term: Not to exceed 30 years

Maximum Loan: Up to $2 million

Repayment term to be determined on the business’ ability to repay the loan.

Other Information

  • Businesses may receive an immediate advance of $1,000 per employee, up to $10,000. This grant as described above, does not need to be repaid as long as its used for qualifying business expenses.

Applying for the Economic Injury Disaster Loan

The Chamber of Commerce has provided a walkthrough of the application process here: https://www.uschamber.com/co/start/strategy/applying-for-sba-disaster-relief-loan.

You can apply for EIDL at the following website: https://covid19relief.sba.gov/#/


Additional Business Benefits

In addition to the above loans, the CARES Act has also provided businesses with additional tax breaks. The breaks include:

  • Delayed Payment of Employer Payroll Taxes
    • Employers and self-employed individuals are able to defer payment of the employer’s share of the 6.2% Social Security tax. Deferred taxes would be required to be paid over the next two years, with half due by December 31, 2021 and the other half by December 31, 2022.
  • Employee Retention Credit
    • Employers may be eligible for a refundable payroll tax credit for 50% of wages paid to employees during the COVID-19 pandemic, up to $10,000 ($5,000 credit) per employee. The credit is available to employers whose operations were fully or partially suspended due to COVID-19 related shut-down order, or gross receipts declined by more than 50% when compared to the same quarter in the previous year. The credit is based on qualified wages paid to employees with qualified wages being defined as:
      • 100 or more full-time equivalent employees (FTE) (an employee that works 30 hours or more is 1 FTE. The aggregate hours of employees working under 30 hours a week that equal 30 are considered 1 FTE. You will need the number of hours worked for this calculation) – Qualified wages are wages paid to employees when they are not working due to the COVID-19 circumstances referenced above.
      • 100 or fewer full-time equivalent employees (FTE) (an employee that works 30 hours or more is 1 FTE. The aggregate hours of employees working under 30 hours a week that equal 30 are considered 1 FTE. You will need the number of hours worked for this calculation) – Qualified wages include all employee wages, whether the employees are working or not working.

The credit would be provided for the first $10,000 of compensation, including health benefits, paid to an eligible employee. The credit would be provided for wages paid or incurred from March 13, 2020 through December 31, 2020.

Eligible employers will report their total qualified wages and the related health insurance costs for each quarter on their quarterly employment tax returns or Form 941 beginning with the second quarter. If the employer’s employment tax deposits for their employees’ portion of taxes are not sufficient to cover the credit, the employer may receive an advance payment from the IRS by submitting Form 7200, Advance Payment of Employer Credits Due to COVID-19. We believe this credit can be applied against employee Social Security, employee Medicare and Federal employer unemployment insurance.

  • Employers can contribute up to $5,250 to employee’s student loan payments that the employee does not have to recognize as income.
  • Increase to the net operating loss (NOL) carryback period to five years for NOLs arising in 2018, 2019, or 2020 for individuals and C corporations.
  • For tax years beginning in 2019 or 2020, NOLs are no longer subject to the 80% of taxable income limitation for individual and C corporations that was introduced in the Tax Cuts and Jobs Act of 2018.
  • Retroactive technical correction to the 2017 Tax Cuts and Jobs Act to correct an error that prevented businesses, particularly those in the hospitality industry, from immediately writing off the cost of certain improvements to qualified improvement property and instead required those costs to be depreciated over 39 years.

Disclaimer: This information is based on our interpretation of the new law and is subject to change. Please contact us with any questions related to your situation.