Tag: SBA

Update: Paycheck Protection Program

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The SBA established The Paycheck Protection Program (PPP) to provide funds to small businesses that have been negatively affected by the Coronavirus pandemic. Small businesses must meet certain criteria, as the loans are granted for uses such as rent, utilities, mortgage interest and payroll costs, and may be forgiven if they are used in accordance with PPP terms and conditions. However, due to the SBA’s initiative to disperse money in a timely fashion to small businesses, it has left multiple requirements of the program to be ambiguous, therefore needing the SBA to provide additional guidance of the program.

Here’s the latest:

On April 28, the SBA released an update to its FAQ document that can be found here: https://home.treasury.gov/system/files/136/Paycheck-Protection-Program-Frequently-Asked-Questions.pdf

On April 28th, the SBA also provided guidance for:

Treasury Secretary, Steve Mnuchin, announced on April 28th that all companies receiving over $2 million in PPP loans will be reviewed and audited by the SBA before there is loan forgiveness which may result in investigations for fraud, abuse, and other unethical violations.

Key Considerations:

  • If a business receives loan funding and later determines that it does not comply with the terms and conditions of the PPP, then the entire loan must be repaid by May 7, 2020.
  • If a business has been granted the PPP loan, it is required to keep detailed documentation of its eligibility, how the funds are being used, and compliance with the forgiveness terms of the program.
  • Businesses that do not adhere to the PPP’s terms and conditions or are later found to be ineligible will be subject to legal or regulatory consequences.

As we expect additional guidance from the SBA, we advise that all PPP loan applicants and recipients visit: www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program and home.treasury.gov for ongoing updates.

If you have any questions, please contact your Urish Popeck advisor.

What The SBA Payment Protection Program Means For Natural Resources

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On March 27, President Trump signed the Coronavirus Aid, Relief and Economic Security Act (CARES Act), a $2 trillion stimulus package intended to help mitigate the economic impact felt by businesses and individuals from the novel coronavirus (COVID-19).

The stimulus is good news for natural resources companies, many of which have been struggling with low oil prices, which the pandemic has further exacerbated. The legislation’s Small Business Administration (SBA) Paycheck Protection Program (PPP), which provides loans to small businesses and organizations to assist in retaining employees, make mortgage and/or lease payments and utility payments, could be particularly useful to the industry.

Under the program, $350 billion has been set aside for small businesses, to be administered by SBA-approved lenders. President Trump is currently seeking an additional $250 billion for this program.  Loan amounts for this provision may only be primarily payroll cost including health insurance and other related costs but can also be used on a limited basis for rent, utility payments, and mortgage interest. To qualify for a loan under this program, your company must employ 500 employees  or fewer (both full-time and part-time), or it must meet the industry size standard set forth by the SBA . Many natural resources companies are larger than 500 employees but meet the industry size standard set forth by the SBA. The SBA’s size standard for crude petroleum extraction companies, for example, is 1,250 employees. You can view a full breakdown of size standards by NAICS codes here.  
 
The maximum amount for these loans is 2.5 times the average total monthly payroll costs for the year prior to applying for the loan, or up to $10 million. The interest rate may not exceed 1%. Businesses can also defer payment of the principal, interest and fees for between six months to two years.
 
One of the biggest appeals of the SBA Paycheck Protection Program is that the loans are forgivable, assuming certain conditions are met. If the borrower retains its employees and salary up to a certain level, the SBA can grant forgiveness for payments made during the 8-week period after the loan is taken out for:

  • Payroll costs
  • Mortgage interest
  • Rent payments
  • Utility payments


The Treasury Department anticipates that no more than 25% of the forgiven amount may be for the non-payroll costs.

For organizations that do not maintain payroll because employees were let go, loan forgiveness is prorated—but the CARES Act provides an exemption to the reduction if the eligible entity re-hires employees and/or eliminates the reduction in salaries by June 30, 2020.

Additionally, organizations do not need to report forgiven amounts as taxable income.

To complete the application, available through the Treasury Department’s website or banks that are lending- qualifying organizations will need to complete the PPP loan application with payroll information included and submit it to an approved lender by June 30, 2020.

Small businesses, nonprofits and sole proprietorships were able to apply for and receive loans to cover their payroll and other certain expenses through existing SBA lenders starting April 3, 2020. Independent contractors and self-employed individuals can apply as of April 10, 2020

Why This Small Business Advisor Gives The Small Business Loan Program a C- Grade

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Watch the Interview

David Dodson, small business advisor and professor of management at Stanford University, joins “Squawk Alley” to discuss the federal small business loan program as Congress works to approve more funds. Senate Democrats on Thursday blocked a Republican push to unanimously pass a bill to put $250 billion more into a loan program for small businesses devastated by the coronavirus pandemic. With only a few senators in the Capitol, Senate Majority Leader Mitch McConnell tried to approve the measure by a unanimous vote. Sen. Ben Cardin, D-Md., objected to the request, stalling the legislation. Speaking on the Senate floor, McConnell said he was not “talking about changing any policy language” the parties negotiated last month as part of an unprecedented $2 trillion emergency spending package. He urged Democrats not to “block emergency aid you do not even oppose just because you want something more” — tweaks to the small business aid program and more emergency funding for hospitals and states, a proposal Democratic leaders outlined Wednesday. After Cardin rejected the measure, he called McConnell’s move to pass the funding a “political stunt.” He pushed for provisions including money for Small Business Administration disaster assistance grants so that people who do not already have a banking relationship can receive the aid.

CNBC Squawk Alley. “Why This Small Business Advisor Gives The Small Business Loan Program a C- Grade” YouTube, uploaded by CNBC Television, 9 April 2020, https://www.youtube.com/watch?v=aitQhlnrIh4, All rights reserved.