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.
The Treasury Department and Small business Administration’s (SBA) Latest Guidance, Loan Forgiveness Application and the WVC Forgiveness Calculator
May 26, 2020
On May 15, the SBA released its Loan Forgiveness Application for the Paycheck Protection Program. The application outlines the computation for debt forgiveness. While there are still many questions that need to be addressed, the guidance helped clarify some larger items:
- The first day of the Covered Period for your PPP loan must be the same as the PPP Loan Disbursement Date and extends over the 56-day Covered Period. Borrowers with biweekly or more frequent payroll periods may elect to use the Alternative Payroll Covered Period that begins on the first day of their first pay period following the date when you receive the loan proceeds.
- Payroll costs that have either been paid or incurred in the 56-day Covered Period are both eligible for forgiveness. If a cost is incurred and paid in the Covered Period, it will only be counted one time toward the forgiveness calculation.
- Eligible Nonpayroll for forgiveness consist of:
- covered mortgage obligations: payments of interest (not including any prepayment or payment of principal) on any business mortgage obligation on real or personal property incurred before February 15, 2020 (“business mortgage interest payments”);
- covered rent obligations: business rent or lease payments pursuant to lease agreements for real or personal property in force before February 15, 2020 (“business rent or lease payments”); and
- covered utility payments: business payments for a service for the distribution of electricity, gas, water, transportation, telephone, or internet access for which service began before February 15, 2020 (“business utility payments”).
- Under the SBA’s guidance, the total amount of cash compensation eligible for forgiveness for each individual employee cannot exceed an annual salary of $100,000, as prorated for the Covered Period; that is, it cannot exceed $15,385.
All guidance on the Loan Forgiveness Application can be found here. While we are expecting more guidance from the SBA, we advise our clients to keep careful and detailed records and documentation throughout this process to maximize forgiveness.
William Vaughan Company is working diligently to update our Forgiveness Calculator to meet the latest SBA guidance. We will be sending you the latest version as soon as possible. Keep an eye out for our email. If you do not already receive our timely communications, please subscribe to WVC Insights here.
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Mar 23, 2020
Monday, March 23, 2020
The Federal Reserve announced today an unlimited expansion of bond purchasing programs to help the U.S. economy due to the near-total shutdown to fight the coronavirus.
Treasury Secretary Steven Mnuchin said is he working closely with the Fed to ensure small businesses get the money they need quickly to survive. The bill in Congress would enable small businesses with 500 or fewer employees to get an SBA-backed grant to cover approximately two months’ payroll and some overhead expenses. Methods to distribute the money quickly are being debated, including an option to route the funds through payroll companies. About 40% of all U.S. businesses use a payroll service to process their employees’ payroll.
Businesses in all U.S. states and territories are currently eligible to apply.
The SBA’s Economic Injury Disaster Loan program (in addition to the potential grant) provides small businesses with working capital loans of up to $2 million to provide economic support to small businesses to help overcome the temporary loss of revenue they are experiencing.
The Fed also announced Monday it will buy certain corporate bonds and said it will “soon” announce a Main Street Business Lending Program. These programs are meant to provide ample availability of loans to small and large businesses on top of any efforts Congress does.
Many businesses have business interruption insurance although there is debate on whether a pandemic would be considered since it is not an act of God. Now is the time to contact your insurance agent to review your policy to understand precisely what you are and are not covered for in the event of an extended incident.
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