Nov 03, 2020
The Small Business Association (SBA) issued a report back in July 2020 stating ‘serious concerns’ of potential fraud related to the EIDL Program. The SBA’s inspector general raised red flags about more than $78 billion in aid approved for businesses under the agency’s program — about 37% percent of the total amount distributed — and warned billions might have been fraudulently obtained by individuals taking out loans on behalf of companies.
WVC has received reports of this happening in Northwest Ohio. Fraudsters have taken loans out on behalf of companies and it isn’t until those companies apply for a legitimate new loan or go through a bank review are the fraudulent EIDL loans discovered.
As of today, the Federal Trade Commission has calculated $170 million in fraud losses related to COVID-19 of which roughly $2 million has occurred in Ohio and $3 million in Michigan. Cybercriminals began capitalizing on the ever-changing pandemic from the moment it began. It is unfortunate to hear, but a reality of the world we live in today.
As fraudsters exploit the ongoing pandemic, we wanted to share with you the suggested steps our in-house Risk Services Leader, Tiffany Pollard, recommends should you find yourself in a similar position:
- Work directly with the banking institution which experienced the fraudulent EIDL transaction and inquire if they will provide coverage for credit monitoring; and,
- Review the FTC website with recommendations on what to do when your personally identifiable data has been compromised:
To prevent such fraud, here are some recommendations you can do now:
- Activate credit monitoring at the three credit bureaus for your business and personal credit.
- Work with your banking institution to ensure you are using the available financial transaction monitoring available to detect fraud.
- Ensure you have cybersecurity and identity theft expense reimbursement insurance. Cybersecurity and identity theft insurance can help you pay for expenses associated with resulting losses and provide tools to reduce the risk of additional fraud.
- Complete a Security Assessment by an independent cybersecurity team. This evaluates current information technology systems to identify vulnerabilities and review the dark web for possible user name and password loss. Completing a preventative assessment can give you peace-of-mind knowing you have mitigated vulnerabilities within your network.
Having plans in place before such an issue occurs will enable your business to confidently manage such a tense situation. If you have any questions, please reach out to your WVC Advisor to Tiffany Pollard directly. WVC is here to help you.
Tiffany Pollard, CISA
Risk Services Practice Leader, William Vaughan Company
Tiffany.firstname.lastname@example.org | 419.891.1040
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 email@example.com 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.
Jun 18, 2020
Interim SBA Ruling
On Tuesday, June 16 the SBA filed its 19th Interim Final Rule (IFR) focused on revisions made from Paycheck Protection Program Flexibility Act (Flexibility Act) signed into law on June 5th.
Notable provisions in the unpublished document include:
- The newest guidance shows how to calculate owner compensation. For Borrowers using a 24-week Covered Period, this amount is capped at $20,833 (the 2.5-month equivalent of $100,000 per year) for each individual or the 2.5-month equivalent of their applicable compensation in 2019, whichever is lower. For Borrowers using an 8-week Covered Period, this amount is capped at $15,385 (the eight-week equivalent of $100,000 per year) for each individual or the eight-week equivalent of their applicable compensation in 2019, whichever is lower. While the guidance is somewhat unclear, this cap appears to apply to owners of all entity types, and at any level of ownership.
- The payroll requirement was reduced from 75% to 60%.
- Lastly, the loan forgiveness amounts for non-payroll expenses have also been extended to 24 weeks, making it much easier to meet loan forgiveness thresholds.
EZ Version Loan Application
In addition, the SBA also released two new applications: a revised full-loan application and the new EZ Forgiveness Application. The agency says the EZ version “requires fewer calculations and less documentation” and reduces the burden for smaller recipients, like self-employed individuals and sole proprietors. This new EZ application applies to borrowers that:
- Are self-employed and have no employees; OR
- Did not reduce the salaries or wages of their employees by more than 25%, and did not reduce the number or hours of their employees; OR
- Experienced reductions in business activity as a result of health directives related to COVID-19, and did not reduce the salaries or wages of their employees by more than 25%”.
Economic Injury Disaster Loan (EIDL) Re-opened
The SBA recently re-opened the Economic Injury Disaster Loan (EIDL) and EIDL Advance program portal to all eligible applicants experiencing economic impacts due to COVID-19. Businesses with 500 or fewer employees are generally eligible. The loan process is streamlined and is completed online directly through the SBA. Loan amounts are determined by the SBA and can be up to $2 million with repayment terms up to 30 years and an interest rate of 3.75% (2.75% for non-profits). Additionally, you can request an advance on the loan, which will be awarded as $1,000 per employee, up to a total of $10,000.
As always, should you have questions or concerns about your specific situation, please contact your William Vaughan Company advisor. Additional resources can be found on our WVC COVID-19 Resource Center. Finally, stay tuned for an updated version of our WVC PPP Loan Forgiveness calculator which will reflect this updated guidance.
Jun 05, 2020
Today, President Trump signed the Paycheck Protection Program Flexibility Act (the PPP Flexibility Act). This Act provides much-needed relief by relaxing the stringent guidelines for businesses to receive loan forgiveness under the Paycheck Protection Program.
Key provisions include:
- The original 8-week period in which borrowers needed to spend the PPP Loan proceeds received can now be extended to 24 weeks. This extension provides additional time and opportunity for businesses to make the qualified expenditures necessary to have the loan proceeds forgiven. However, it is advisable if all loan proceeds have already been spent, businesses elect to apply for the original 8-week period (which is permissible) and expedite their forgiveness assuming the full-time equivalents (FTEs) have been restored.
- Previous regulations required a minimum of 75% of the loan proceeds forgiven must be spent on payroll expenses, health insurance, and/or retirement plans. If not met, loan recipients would forfeit a portion of their forgiveness. Thankfully, that hurdle has been dramatically reduced to 60% which allows businesses to now allocate up to 40% of the potentially forgivable loan proceeds to rent, utilities, and interest on secured debt. However, it does appear upon reading this is a “cliff rule”. Meaning if you only spend 59% on payroll, potentially ZERO dollars will be forgiven.
- Before H.R. 7010, PPP loan forgiveness rules indicated the amount forgiven would be reduced proportionately to the reduction of a recipient’s workforce during the original 8-week window if that same number of employees were not brought back by June 30th. According to updated legislation, this window has been modified to use the new 24-week window mentioned above with the amnesty rehire date being pushed back to December 31, 2020. For example, take an employer with 80 employees pre-pandemic who reduced its workforce to 40 employees during the 24 weeks. Assuming they spend the loan proceeds on qualified expenses during said 24 weeks, the employer will receive complete forgiveness so long as they’ve brought the workforce back to 80 by December 31st.
- Whether due to government restrictions still in place, a lack of qualified individuals, or even individuals choosing not to return to work as a result of the current federal unemployment subsidy, an exception to the rehire rule has been enacted. To qualify for this exception, the borrower must establish they have been unable to restore previous FTE levels due to one or more of the aforementioned scenarios. Unfortunately, this exception is still largely a gray area and we are hopeful that additional guidance is imminent aucasinosonline.com.
- The repayment period for loan proceeds still owed after reductions for forgiveness and EIDL grants (up to $10,000) has been extended from 2 years to 5 years with the interest rate remaining unchanged at 1%. Additionally, payments on the amounts still owed can be deferred up to the date on which the SBA makes the loan forgiveness determination.
Many loan recipients were hopeful for some clarification and additional guidance as it pertains to the deductibility of expenses for which the PPP loan proceeds were used. However, this still remains unanswered.
William Vaughan Company continues to keep a careful watch on additional legislation and is committed to sharing with you our insights and perspectives as regulations develop aucasinosonline.com/nz. To ensure you are staying up-to-date, we encourage you to sign-up for our WVC Insights emails here.