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COVID-19 RESOURCES & NEWS
CARES Act provides help to businesses - Here's how to see if it works for you

Programs from The CARES ACT can help your small business
Learn about two options to help fund your company during the pandemic

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President Trump signed into law last week the 2.2 Trillion dollar Coronavirus Aid Relief and Security Act (CARES) which provides government assistance for businesses and individuals facing financial hardship from the COVID-19 Pandemic. 

The assistance for small businesses largely comes in two forms:

  • Approximately 350 billion for the Paycheck Protection Program (PPP) which provides 100% federally guaranteed loans to small businesses and;

  • Emergency Grants under the Economic Industry Disaster Loan Program (EIDL).


The first program provides loans of up to $10 million per employer based upon historic payroll numbers.  The program is available to corporations and independent contractors, sole proprietors and the self-employed.  The funds can be used to fund payroll costs for 8 weeks after loan origination as well as leases, mortgage interest, and utilities.  The entire loan can be forgiven if used for the above approved purposes in accordance with the requirements set forth by the SBA.

The second program provides low interest  loans of up to $2 million dollars, up to $10,000 of which can be requested as an advance.  Advance monies are not required to be repaid.

The government is planning to release information and clarifications on program details to banks who administer the PPP program.  The first applications for corporations are open Friday, April 3rd, and there are still many questions to be answered.  Carnivalwarehouse takes a look at what is known and what is still in question below as we try to provide our readers with the answers they need to make decisions on funding.

    

PART I — PAYROLL PROTECTION PROGRAM (PPP)

The Payroll Protection Program is the most talked about aspect of the CARES Act for businesses.  The program is open to businesses with less than 500 employees as well as independent contractors, self employed individuals and sole proprietors.  

The program is not administered directly through the SBA, but through SBA-approved 7(A) lenders such as banks.  A list of approved lenders can be found on the SBA website at SBA.gov.  Carnivalwarehouse is not aware of any lenders or finance companies that typically work in the outdoor amusement industry that are approved for the program so those interested must contact a bank or approved lender and receive an application.

Who is eligible?
  • Businesses with less than 500 employees
  • Individuals who operate as a sole proprietor
  • 501c(3)s with less than 500 employees
  • Independent contractors
  • The self-employed
  • Businesses are required to have been in operation as of Feb. 15, 2020
  • No personal guarantees are needed
  • The SBA has waived the “credit elsewhere” requirement so you do not have to use the SBA as a last resort
How Can You Apply?
  • Contact your approved lender — A list can be found at SBA.gov
  • Gather the required documents required by the lender — Payroll information, 1099 MISC Forms, tax filings etc. 
  • Businesses are allowed to apply beginning April 3rd, and sole proprietors, independent contractors and the self-employed are allowed to apply beginning April 10th

How Much Can I Borrow?

  • The amount you can borrow is based upon a formula, taking 2.5 x your average monthly payroll during a defined period of time, excluding portions of compensation above $100,000 for those earning more than that amount.
     
  • For Seasonal Employers: 2.5 x average total monthly payments for payroll costs for the 12-week period beginning February 15, 2019 or March 1, 2019 and ending June 30, 2019
     
  • The total amount requested cannot exceed $10,000,000
     
  • Initial reports said that payroll to H2B workers was excluded from the forgiveness because their principle place of residence was outside the US, but industry organizations are working to include the workers since they pay taxes in the US.  No final directive has been given from the government yet.
How Much of the Loan Will Be Forgiven?  

Up to 100% of the loan can be forgiven if used for the approved purposes outlined in the Act which include:
  • Payroll costs for the eight weeks following the origination of the loan

  • Rent on lease agreements

  • Mortgage Interest

  • Payments on utilities

  • The loan forgiveness can be reduced if there is a reduction in the number of employees or a reduction of greater than 25% in wages paid to employees.

  • If your average number of Full Time Equivalent Employees (FTE) is less than the average you had from Feb. 15, 2019 to June 30, 2019 OR if the average number per month is less than Jan. 1 , 2020 to Feb. 29, 2020

  • For seasonal employers, it is compared to the average number of FTEs from Feb. 15, 2019 to June 30, 2019.

    • For example, if you had 10 FTE equivalent employees during the comparison period and only employed 5 FTE employees during the eight weeks following the loan, your forgiveness will be reduced by 5 / 10 = .5 x Payroll Cost of loan amount.

  • If you pay an employee more than 25% less than he received in the most recent full quarter, then that deficit will be deducted from the loan forgiveness portion.

  • Reductions in number of employees or wages shall not reduce the amount of loan forgiveness IF by June 30, 2020 the borrower eliminates the reduction in employees or reduction in wages.  If the reductions are remedied by June 30, 2020 the reductions can be eliminated.

What Happens If I Borrow More Than I Pay Out For Employees And Approved Expenses?

  • You can apply for loan forgiveness through your lender using payroll forms and approved documents

  • If the amount of your loan forgiveness and approved expenses does not equal the full loan amount requested, the amount due becomes a loan.  The loan carries an interest rate of only 1% and is payable over 2 years.  Payments on the loan are automatically deferred for 6 months from the date of origination but interest will continue to accrue.

PART II — Emergency Injury Disaster Loans and Grants (EIDL)

These loans are more like traditional SBA disaster loans but with a few new and improved twists including advances on the loan that do not need to be repaid.

Who Is Eligible?
  • Small businesses, non-profits, independent contractors, sole proprietors and self-employed that have suffered substantial economic injury as a result of COVID-19

What are the program Details?

  • Low interest loans of up to $2,000,000

  • Personal guarantees are waived on loans up to $200,000

  • “Credit elsewhere” provision is waived

  • Principle and interest deferment for up to 4 years

  • Up to $10,000 of the loan may be requested in advance, which the SBA must decide upon within three days

    • Whether or not the loan is approved, the $10,000 grant is not required to be repaid.

    • Grants may be used to provide paid sick leave to employees, fund payroll, or pay business obligations, including debts, rent and mortgage payments.

  • Businesses applying for the grant must have been in operation on January 31, 2020.

How do I apply?

  • You can apply online at: https://covid19relief.sba.gov/#/

  • There is no double dipping on the options, you can either take the Paycheck Protection Plan option OR the EIDL option.  EIDL loans can be converted to the PPP program but the grant under those circumstances, must be repaid.
     

WHICH OPTION IS BEST FOR YOU?

In general, if you have substantial payroll and expenses, paperwork to back up your claims and the your payroll reimbursement periods work in your favor, the PPP option will be best for the majority of businesses.  If you have little payroll obligations, will have a hard time documenting earnings and forms, or are just a smaller business that needs a small grant to get over the hump, the EIDL Grant/Loan with up to $10,000 might be the best option.

 
Some of the considerations for the outdoor amusement industry in the program such as H-2B wage foregiveness, whether insurances such as worker's compensation, 1099 employees, per diem expenses or debt payments are allowed under PPP, will need to be addresses when the rules are clarified by the government.  A document released late Thursday, April 2nd to banks eased some bank concerns but as of Friday morning, some institutions were waiting on further clarification before processing any program loans.
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