E&Q Tax - Accounting and Business Solutions

Need help?

201-488-4060

Need help?

201-488-4060 Monday-Friday: 9:00 am - 7:00 pm Saturday: 9:00 am - 4:00 pm

CORONAVIRUS EMERGENCY LOANS

1) Am I ELIGIBLE?

You are eligible if you are:

  • A small business with fewer than 500 employees
  • A small business that otherwise meets the SBA’s size standard
  • A 501(c)(3) with fewer than 500 employees
  • An individual who operates as a sole proprietor
  • An individual who operates as an independent contractor
  • An individual who is self-employed who regularly carries on any trade or business
  • A Tribal business concern that meets the SBA size standard
  • A 501(c)(19) Veterans Organization that meets the SBA size standard

In addition, some special rules may make you eligible:
  • If you are in the accommodation and food services sector (NAICS 72), the 500-employee rule is applied on a per physical location basis
  • If you are operating as a franchise or receive financial assistance from an approved Small Business Investment Company the normal affiliation rules do not apply

REMEMBER: The 500-employee threshold includes all employees: full-time, part-time, and any other status.

2) What will lenders be LOOKING FOR?

In evaluating eligibility, lenders are directed to consider whether the borrower was in operation before February 15, 2020 and had employees for whom they paid salaries and payroll taxes or paid independent contractors.
Lenders will also ask you for a good faith certification that:

  • The uncertainty of current economic conditions makes the loan request necessary to support ongoing operations
  • The borrower will use the loan proceeds to retain workers and maintain payroll or make mortgage, lease, and utility payments
  • Borrower does not have an application pending for a loan duplicative of the purpose and amounts applied for here
  • From Feb. 15, 2020 to Dec. 31, 2020, the borrower has not received a loan duplicative of the purpose and amounts applied for here (Note: There is an opportunity to fold emergency loans made between Jan. 31, 2020 and the date this loan program becomes available into a new loan)

If you are an independent contractor, sole proprietor, or self-employed individual, lenders will also be looking for certain documents (final requirements will be announced by the government) such as payroll tax filings, Forms 1099-MISC, and income and expenses from the sole proprietorship.

3) How much can I BORROW?

Loans can be up to 2.5 x the borrower’s average monthly payroll costs, not to exceed $10 million.

How do I calculate my average monthly PAYROLL COSTS??

Payroll
INCLUDED Payroll Cost:

For Employers: The sum of payments of any compensation with respect to employees that is a:


  • salary, wage, commission, or similar compensation;
  • payment of cash tip or equivalent;
  • payment for vacation, parental, family, medical, or sick leave
  • allowance for dismissal or separation
  • payment required for the provisions of group health care benefits, including insurance premiums
  • payment of any retirement benefit
  • payment of state or local tax assessed on the compensation of the employee
EXCLUDED Payroll Cost:

  • Compensation of an individual employee in excess of an annual salary of $100,000, as prorated for the period February 15, to June 30, 2020
  • Payroll taxes, railroad retirement taxes, and income taxes
  • Any compensation of an employee whose principal place of residence is outside of the United States
  • Qualified sick leave wages for which a credit is allowed under section 7001 of the Families First Coronavirus Response Act (Public Law 116– 5 127); or qualified family leave wages for which a credit is allowed under section 7003 of the Families First Coronavirus Response Act

4) Will this loan be FORGIVEN?

Borrowers are eligible to have their loans forgiven.

How Much?

A borrower is eligible for loan forgiveness equal to the amount the borrower spent on the following items during the 8-week period beginning on the date of the origination of the loan:


  • Payroll costs (using the same definition of payroll costs used to determine loan eligibility)
  • Interest on the mortgage obligation incurred in the ordinary course of business
  • Rent on a leasing agreement
  • Payments on utilities (electricity, gas, water, transportation, telephone, or internet)
  • For borrowers with tipped employees, additional wages paid to those employees

The loan forgiveness cannot exceed the principal.

How could the forgiveness be reduced?

The amount of loan forgiveness calculated above is reduced if there is a reduction in the number of employees or a reduction of greater than 25% in wages paid to employees. Specifically:


  • Reduction based on reduction of number of employees
Payroll
  • Reduction based on reduction in salaries
Payroll

What if I bring back employees or restore wages?

Reductions in employment or wages that occur during the period beginning on February 15, 2020, and ending 30 days after enactment of the CARES Act, (as compared to February 15, 2020) shall not reduce the amount of loan forgiveness IF by June 30, 2020 the borrower eliminates the reduction in employees or reduction in wages.


A SPECIALIST IS HERE TO HELP

Agent

(201) 488-4060

We are available: Monday-Friday 10:00 am - 5:00 pm
Hablamos Español!
EIDL PPP
Who is the lender?
The SBA A Bank that is already an SBA lender or any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. Other regulated lenders will be available to make these loans once they are approved and enrolled in the program.
When can I apply?
Now
  • April 3, 2020 for small businesses and sole proprietorships
  • April 10, 2020 for independent contractors and self-employed individuals
  • Other regulated lenders will be available to make these loans as soon as they are approved and enrolled in the program.
  • Who can apply?
  • A business with not more than 500 employees
  • An individual who operates under a sole proprietorship, with or without employees, or as an independent contractor
  • A cooperative with not more than 500 employees.
  • A tribal small business concern, as described in 15 U.S.C. 657a(b)(2)(C), with not more than 500 employees.
  • A business, including an agricultural cooperative, aquaculture enterprise, nursery, or producer cooperative, that is small under SBA Size Standards found at https://www.sba.gov/size-standards
  • Businesses and entities that were in operation on February 15, 2020.
  • Small businesses, 501(c)(3) nonprofit organizations, 501(c)(19) veterans organization, or Tribal businesses that have fewer than 500 employees, or the applicable size standard in number of employees for the North American Industry Classification System (NAICS) industry as provided by SBA, if higher
  • Individuals who operate a sole proprietorship or as an independent contractor and eligible self-employed individuals
  • Any business concern that employs not more than 500 employees per physical location of the business concern and that is assigned a NAICS code beginning with 72 (Hotels and Restaurants), for which the affiliation rules are waived
  • Affiliation rules are also waived for any business concern operating as a franchise that is assigned a franchise identifier code by the Administration, and company that receives funding through a Small Business Investment Company
  • What are the affiliation rules?
    Affiliation rules become important when SBA is deciding whether a business’s affiliations preclude them from being considered “small.” Generally, affiliation exists when one business controls or has the power to control another or when a third party (or parties) controls or has the power to control both businesses. Affiliation rules become important when SBA is deciding whether a business’s affiliations preclude them from being considered “small.” Generally, affiliation exists when one business controls or has the power to control another or when a third party (or parties) controls or has the power to control both businesses
    What is the maximum amount of the loan?
    The maximum loan size is $2 million. Applicants who apply for this loan may request an advance of up to $10,000 from the SBA. The advance will be distributed within 3 days. Applicants are not required to repay this advance. The maximum loan size is $10 million. The calculation is as follows:

  • If you were in business February 15, 2019 – June 30, 2019, the max loan is equal to 2.5x the average monthly payroll costs of the 12 months prior to your application. If your business employs seasonal workers, you can opt to choose March 1, 2019 as your time period start date
  • If you were not in business between February 15, 2019 – June 30, 2019, the max loan is equal to 2.5x the average monthly payroll costs between January 1, 2020 and February 29, 2020
  • If you took out an EIDL between February 15, 2020 and June 30, 2020 and you want to refinance that loan into a PPP loan, you would add the outstanding loan amount to the payroll sum.
  • Payroll includes:

  • Compensation (salary, wage, commission, or similar compensation, payment of cash tip or equivalent)
  • Payment for vacation, parental, family, medical, or sick leave
  • Allowance for dismissal or separation
  • Group health care benefits, including insurance premiums
  • Retirement benefits
  • State or local tax assessed on the compensation of employees
  • Payroll excludes:

  • Employee/owner compensation in excess of $100,000
  • Taxes imposed or withheld under chapters 21, 22, and 24 of the IRS code
  • Compensation of employees whose principal place of residence is outside of the U.S.
  • Qualified sick and family leave for which a credit is allowed under sections 7001 and 7003 of the Families First Coronavirus Response Act
  • What is the annual interest rate?
    3.75% for businesses, 2.75% for non-profits 1%
    What is the term of the loan?
    Up to 30 years 2 years
    When is the first loan payment due?
    One year after the loan origination date (interest is accrued during the deferment) At least six months after the loan origination date (interest is accrued during the deferment)
    What can we use the loan for?
    Financial obligations and operating expenses that could have been met had the disaster not occurred Permitted costs which are:

  • Employee salaries, commissions, or similar compensations (see exclusions above)
  • Health insurance premiums and costs related to the continuation of group health care benefits during periods of paid sick, medical, or family leave
  • Payments of interest on any mortgage obligation but excluding any prepayments or payments of principal
  • Rent (including rent under a lease agreement)
  • Utilities
  • Interest on any other debt obligations that were incurred before the Covered Period (as defined below)
  • Is there a loan forgiveness program?
    No Yes – calculated as the amount spent on Permitted costs by the borrower during an 8-week period (the “Covered Period”) after the origination date of the loan
    What reduces the forgiveness?
    N/A The amount forgiven is reduced based on failure to maintain the average number of full-time equivalent employees versus the period from either February 15, 2019, through June 30, 2019, or January 1, 2020, through February 29, 2020, as selected by the borrower. The amount forgiven is also reduced to the extent that compensation for any individual making less than $100,000 per year is reduced by more than 25% measured against the most recent full quarter. Reductions in the number of employees or compensation occurring between February 15, 2020, and 30 days after enactment of the CARES Act will generally be ignored to the extent that reductions are reversed by June 30, 2020. Forgiven amounts will not constitute cancellation of indebtedness income for federal tax purposes.
    How do I get forgiveness?
    N/A You must apply through your lender for forgiveness on your loan. In this application, you must include:

  • Documentation verifying the number of employees on payroll and pay rates, including IRS payroll tax filings and State income, payroll and unemployment insurance filings
  • Documentation verifying payments on covered mortgage obligations, lease obligations, and utilities
  • Certification from an officer of your business or organization that is authorized to certify that the documentation provided is true and that the amount that is being forgiven was used in accordance with the program’s guidelines for use.
  • What collateral is required?
    The SBA will place a UCC lien against the assets of the business No collateral is required from either the business or its owners
    Is a personal guarantee required?
    Yes, for loans > $200,000, owners of > 20% of the business, managing members of LLCs, managing partners of LPs. However, no liens will be taken against real estate owned by the guarantor No.
    Do I need to have filed my 2019 Taxes to apply?
    No, 2019 Taxes do not have to be filed prior to applying for the loan. However, businesses will be asked to submit IRS form 4506T, which provides the SBA with access to historical tax returns Will depend on the lender
    NOTES
    (1) Loan proceeds used for the eligible expenditures listed above for an 8-week period beginning on the date the loan is received are eligible for 100% forgiveness. Amounts eligible for forgiveness will be proportionately reduced to the extent there is a year-over-year reduction in retained workers, although qualifying small businesses will be allowed to rehire previously terminated personnel without penalty.
    (2) Eligibility under Paycheck Protection Program have exceptions for accommodation and food service industry, affiliated groups and certain businesses in SBA-designated industries. Eligibility under Economic Injury Disaster Loans certain SBA designated business industries may also be eligible despite headcount in excess of 500 employees.
    (3) Payroll Costs up to $100,000 in annual compensation (pro-rated from February 15, 2020 - June 30, 2020) include: Salary, wages, commissions or similar compensation, including cash tips; Vacation, parental leave, family leave medical or sick leave; Severance payments; Group health care payments; Retirement benefits; and State or local tax assessed on the compensation of employees
    (4) Special rules exist for businesses that were not in existence from February 15, 2019 – June 30, 2019.
    (5) There would be no borrower and/or lender fees and collateral and/or personal guarantees would not be necessary.
    (6) Although applicants will not necessarily be rejected strictly for lack of collateral.
    (7) Potentially for 6 to 12 months payments can be deferred