SBA Issues Loan Necessity Questionnaire
Nov 03, 2020
The Small Business Administration (SBA) has issued new loan necessity questionnaires which all businesses with PPP loans greater than $2 million will be required to complete. These questionnaires are intended to help the SBA determine whether the Borrower’s certification of economic uncertainty made the loan request necessary to support ongoing operations was appropriate. SBA has developed two distinct versions of the loan necessity questionnaire: one for for-profit borrowers, and one for non-profit borrowers.
- Form 3509 Loan Necessity Questionnaire (For-Profit Borrowers)
- Form 3510 Loan Necessity Questionnaire (Non-Profit Borrower)
To refresh, during the initial PPP Loan application, borrowers had to certify that “current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” However, at no point did the SBA provide any material guidance as to what this certification meant, leaving many borrowers anxious. The limited guidance during the loan application phase only stated borrowers must take into account their current business activity and their ability to access other sources of liquidity.
Please note, at this time these forms are not available on the SBA or Treasury website. It is anticipated these questionnaires will come directly from the lender and/or servicer. Lenders who have submitted loan forgiveness on behalf of impacted borrowers will receive a request from the SBA for completion of the form. While the instructions indicate the receipt of the questionnaire does not necessarily mean the SBA is challenging the good-faith certification, impacted borrowers are required to submit the completed forms within 10 business days of receipt from the lender.
Given the short turn-around time, we recommend that all borrowers with aggregated PPP loans of $2 million or more familiarize themselves with these forms now, and begin to gather related documentation
We encourage impacted PPP borrowers to reach out to their WVC advisor for assistance with the completion of the form, as detailed financial information is required.
Categories: COVID-19
Looking for Additional COVID-19 Relief Funds?
Nov 02, 2020
Main Street Lending Program
On Friday, October 30, the Federal Reserve Board adjusted the terms of the Main Street Lending Program to better support smaller businesses that employ millions of workers and are facing continued revenue shortfalls as a result of the pandemic. The program supports lending to small and medium-sized for-profit businesses and nonprofit organizations that were in sound financial condition before the COVID-19 pandemic but lack access to credit on reasonable terms.
Yet so far the program has made just 400 loans for a total of $3.7 billion — far below the $600 billion in total funding that the Fed has said it is willing to lend. In an effort to boost participation in the program, the Federal Reserve Board made the following changes to ease lending stipulations along with waiving fees.
- Minimum loan amount lowered – The minimum loan size for three Main Street facilities available to for-profit and non-profit borrowers has been reduced from $250,000 to $100,000 and the fees have been adjusted to encourage the provision of these smaller loans.
- Prior loan assistance rules modified – The Fed also tweaked rules about the degree to which prior loan help from the federal government (PPP loans) can be counted in a company’s application, with an eye toward trying to make the Main Street lending program more accessible to small and midsized businesses.
Additional detail about this program can be found at https://www.federalreserve.gov/monetarypolicy/mainstreetlending.htm
For assistance with considering your options under the Main Street Lending Program or with finding a participating lender, contact your WVC advisor.
Economic Injury Disaster Loan (EIDL) – Request a Loan or Increase to Your Existing Loan
When the COVID-19 related EIDL loans were announced, they were capped at $2 million. The SBA was quickly inundated with EIDL applications and capped the loan amount to $150,000. Additionally, the SBA stopped accepted applications for all but agricultural businesses for several months.
EIDL applications were re-opened in June 2020.
Additionally, since EIDL loans are no longer capped at $150,000, you may request an increase to your existing COVID-19 EIDL. To request an increase to your EIDL, log into your EIDL account or send an email that states your need for an increase to the loan amount to pdcrecons@sba.gov with the word “INCREASE” in the subject line. Include any additional information that may assist the SBA in considering an increase in your application such as:
- Your most recent Federal income tax return for your business along with a signed IRS Form 4506-T, and /or
- Updated financials (Gross Revenue, Cost of Goods Sold, cost of operation, or other sources of compensation) submitted on SBA Form 3502, and
- An explanation of how COVID-19 has negatively impacted your business and why the additional funds are necessary.
For additional information on how EIDL loan terms and how the funds can be used, view our WVC Short on the topic.
Categories: COVID-19
New Ohio Relief Programs Approved To Help Families, Small Businesses & Restaurants/Bars
Oct 26, 2020
On Friday, October 23, Ohio Governor Mike DeWine approved several new programs aimed to provide much-needed relief to small businesses, restaurants/bars, and low-income families negatively impacted by COVID-19. These programs include:
Small Business Relief Grant – This program will designate up to $125 million of funding received by the State of Ohio from the federal CARES Act to provide $10,000 grants to small businesses with no more than 25 employees to help them through the current crisis. The program will be administered by the Ohio Development Services Agency. If you are a small business with no more than 25 employees, you can apply for one of the first-come, first-serve grants starting on November 2, 2020. Businesses can use the grants to pay for various expenses including mortgages, rent, utilities, salaries, health care premiums, business supplies, and other related operational costs. Click here to review the terms & conditions of the program. Ineligible businesses include, but are not limited to nonprofits, private schools, clubs, etc.
The Bar and Restaurant Assistance Fund – This program is designed to assist Ohio’s on-premise liquor permit holders. Governor Mike DeWine has designated $37.5 million of funding received by the State of Ohio from the federal CARES Act to provide $2,500 assistance payments to on-premise liquor permit holders to help them through the financial difficulties experienced during the COVID-19 pandemic. These permit holders have not been able to fully use their liquor permit and it’s had an impact on their business. The program, which will begin accepting applications on November 2, 2020, will be administered by the Ohio Development Services Agency. Click here for more information on how to apply.
Home Relief Grant – Also accepting applications starting November 2, 2020, is the Home Relief Grant Program which will help eligible Ohioans who are behind on rent, mortgage, and water and/or sewer utility bills catch up on past payments back to April 1, 2020, and provide additional assistance through December 30, 2020. Ohioans can apply for assistance through their local Community Action Agency. Click here for more information on how to apply.
As always, we are here to provide assistance. If you have immediate questions or concerns, please reach out to your William Vaughan Company advisor today or call us at 419.891.1040
Categories: COVID-19, Other Resources
Additional PPP Loan Guidance Issued
Oct 12, 2020
The last week-and-a-half saw a flurry of new Paycheck Protection Program (PPP) guidance. Here is an update on what changes were made:
A Streamlined process for loans of $50,000 or less
While this change does not go as far as was originally proposed – providing automatic forgiveness for loans up to $150,000 – it will still help a significant number of Borrowers. A new forgiveness application, Form 3508S, has been released for loans of $50,000 or less.
While forgiveness is still not automatic for these Borrowers, the confusing and administratively burdensome portions have been removed. These Borrowers do not need to compute or reduce their forgiveness amount by 1.) reductions in compensation or 2.) full-time equivalent employees. The result? Borrowers of loans of $50,000 or less will not be penalized for any reductions in wages or employees.
For those who are keeping track, there are now three different application forms for forgiveness:
- Form 3508 – Standard form for those who do not meet criteria for one of the other forms (form instructions here)
- Form 3508EZ – Can be used for loans of any size where there is no reduction in wages or full-time equivalent employees (with certain exceptions) (Form instructions here)
- Form 3508S – For all loans $50,000 and under regardless of any reductions in wages or full-time equivalent employees (form instructions here)
PPP and sales of businesses
Guidance related to the requirements of Borrowers who are selling their business or business assets was also released. For most cases of sales of businesses or business assets, the Borrower will need to complete the following before the closing of the sale:
- Notify their PPP lender of the planned transaction and provide copies of the proposed agreements
- Submit their forgiveness application along with all required supporting documentation
- Deposit funds in the amount of outstanding PPP loan balance into an escrow account with their PPP lender
Also, in certain cases, the SBA must approve the proposed transaction before it is executed.
10-month deferral period
When the PPP was created, payments on the loan were deferred for six months. This deferral period was later extended to 10 months from the end of the Borrower’s covered period. The latest guidance clarifies that loan documents executed prior to the extension to the 10-month deferral are automatically modified to the 10-month deferral and do not need to be re-written and re-signed.
What changes might still be coming to the PPP?
We could still see a change with respect to the tax-deductibility of expenses related to forgiveness. Currently, such expenses are not tax-deductible, and therefore create a taxable event.
There continues to be support for a second PPP. Most recently, Federal Reserve Chairman Jerome Powell commented on the need for additional support for small businesses. A second round of stimulus would likely be much more targeted.
If you have questions about how these new changes may impact your business, please reach out to your WVC Advisor or our WVC PPP Loan Task Force leader, Kate Matz at kate.matz@wvco.com or 419.891.1040.
Categories: COVID-19, Other Resources
Update on the State of the PPP
Oct 01, 2020
As the pace of changes to the Paycheck Protection Program (PPP) has relaxed, many are wondering about the current status and potential changes yet to come. We wanted to share with you some of the discussions occurring at the federal level about possible next steps. While there appears to be strong bipartisan support for these additional actions in concept, the specific details will likely change throughout the process.
What is the status of PPP and forgiveness?
- $525 billion was lent to 5.2 million businesses.
- Most lenders are now accepting forgiveness applications.
- As of 9/24, the SBA had received 96k forgiveness applications but had not completed the processing of any of them.
What is the latest guidance related to PPP forgiveness?
On 8/24, additional guidance was released regarding the following:
- C or S Corporation owners with less than 5% ownership are not subject to the compensation caps
- Expenses attributable to a tenant are not eligible for forgiveness.
- Rent payments to a related party are capped at the amount of mortgage interest owed on the property.
- Related party mortgage interest is not eligible for forgiveness.
What changes might still be coming to the PPP?
- There continues to be bipartisan support in Congress for blanket forgiveness of “small” loans – typically discussed as $150,000. The exact terms and dollar amount still need to be negotiated.
- There continues to be some bipartisan support for tax-deductibility of expenses related to forgiveness.
- Congress has been slow to act, and it is likely we will not see movement on these items until after the election.
Will there be a second PPP?
Maybe. Again, this is a topic that Congress continues to discuss. Eligible businesses would likely be much more targeted in this round. We are likely to see a lower cap on the size of business (as measured by the number of employees) and it is likely that businesses will need to demonstrate they have been significantly negatively impacted.
What should I be doing now?
- Continue to monitor our WVC COVID-19 Resource Center.
- Calculate your loan forgiveness amount using a tool such as our forgiveness calculator.
- Understand your lender’s process and timeline for forgiveness applications.
- In most cases, it makes sense to sit tight and wait for the final changes to work their way through Congress. Your forgiveness application is due 10 months after the end of your Covered Period, so you have time.
- Reach out to your WVC Advisor or our WVC PPP Loan Task Force leader, Kate Matz to discuss the above and plan for your specific situation.
Connect with the author:
Kate Matz, CPA, CEPA, CVGA, CGMA
Value Growth Practice Leader, William Vaughan Company
kate.matz@wvco.com | 419.891.1040
Categories: COVID-19, Other Resources