info@incorpherated.com Everything You Need to Know About the Coronavirus Relief for Small Business Owners From the Incorp[HER]ated team TABLE OF CONTENTS Coronavirus Relief for Small Business Owners: The PPP & EIDL What is a PPP? What is an EIDL? What’s the Difference between PPP and EIDL? Need Help with Applying for a PPP or EIDL? More Grant Programs for Small Businesses 1 2 5 8 9 10 1 CORONAVIRUS RELIEF FOR SMALL BUSINESS OWNERS: THE PPP & EIDL We’re nearly a year into the COVID-19 pandemic, and there’s no denying all areas of our lives have undoubtedly been impacted. Not only is this a health crisis, it’s an economic crisis, as well. Small business owners across the United States have been hit especially hard, but there is aid available. On December 27, 2020, the government passed a new COVID relief bill with a stimulus package containing programs to support small business, sole proprietors, and self-employed workers under the Coronavirus Aid, Relief, and Economic Security ACT (CARES Act). That bill includes updates to two of the biggest loan programs administered by the Small Business Administration (SBA): the PPP and EIDL. If you’re a small business owner, you may be eligible to receive both the PPP and EIDL because they’re meant for different purposes. Not sure of what they are or where to begin? Continue reading for a breakdown of each one based on the new legislation. Keep in mind that this information is subject to change once the SBA shares updated outlines for these programs in mid-January. Make sure to stay tuned to SBA.gov – and be sure to act fast and apply as soon as you can! info@incorpherated.com 2 info@incorpherated.com 2 WHAT IS A PPP? Is my business eligible for a PPP loan? The PPP, Paycheck Protection Program, is a federal relief program created to support small business owners and their employees who have been affected by the COVID-19 pandemic with forgivable loans. Through the bill, congress has allocated $284 billion, for what is the third round of funding, for eligible business owners’ payroll expenses and some non-payroll expenses. You can apply for a loan if you are either a first-time or second-time borrower. If you’ve already received two PPP loans, you won’t be able to qualify for a third. You may be eligible if: There are a few additional rules that are different for first-time and second-time borrowers. If you’re a first-time borrower, you must also have fewer than 500 employees. If you’re a second-time borrower: You can see the full PPP eligibility rules here. • You have been in business before February 15, 2020 ▷ Some lenders may require you to have had a business banking account prior to then, too • Your business is categorized under “accommodation or food services,” is a tribal business, an independently-owned franchise, or non-profit OR • If you are a sole proprietor, self-employed or freelancer, or gig worker • You must have 300 or fewer employees • You must have used, or will use, all of your first PPP loan • Your income must have declined by 25% or more in any quarter of 2020 3 info@incorpherated.com Do I have to pay my loan back? You might not have to pay back all or part of your PPP loan if you are approved for loan forgiveness. You’d be able to apply through your lender once you’ve used all of the funds (and at least 60% on payroll expenses) up to 10 months after your coverage period ends. Under the new legislation, forgiven PPP loans won’t be taxable to you, the borrower, and you’d be able to deduct your payroll and other qualifying expenses. If you don’t apply for forgiveness within 10 months after your coverage period, you’ll have to start repaying your loan on or before your loan maturity date. You’ll have a 1% fixed annual rate, which starts accruing on the day you receive the funds. Get more info on the complete and updated terms of loan forgiveness here. How much can I get? You can apply for the lower of 2.5 times your average monthly payroll (excluding payroll costs over $100,000) or maximum of $10 million if you’re a first-time borrower. For second-timers, that maximum is $2 million. Calculate your average monthly payroll and maximum loan amount here. These funds should be used to cover payroll expenses, but there is an exception under the new bill. For first-time borrowers and second-time borrowers who haven’t applied for forgiveness, remaining funds that aren’t used for payroll may be spent on four types of non-payroll expenses: operation expenditures, supplier costs, property damage, and COVID-19 worker protection. Where can I apply? You can apply for a PPP loan through any existing SBA 7(a) lender, federally- insured depository institution or credit union, or Farm Credit System institution that’s participating in the program. Other regulated lenders may also participate in the program if they’re approved by the SBA. You should ask your bank ASAP whether they’re participating this round. You can also check SBA.gov for a list of 4 info@incorpherated.com participating lenders in your state. You’ll be able to apply for forgiveness once the application is back open in mid- January. You can download the application, which you’ll have to submit to your lender or bank, here. What do I need for my application? Quarterly income amounts for 2019 and 2020 Cost of payroll for your employees per month – this should include: Benefits Payroll reports Payroll tax filings (like an IRS Form 941) that you have reported or will be reporting State quarterly business and individual employee wage reporting and unemployment insurance tax filings that you have reported or will be reporting 2019 IRS Form 1040 Schedule C or F, if you filed one 2019 IRS Schedule K-1 (Form 1065) if you have or will file one Verification of employer contributions to employee health insurance and retirement plans, if applicable Proof of number of employees Any information that was used for previous PPP loans if you’ve applied before Proof of non-payroll expenses: Mortgage statement or lease agreement Utility bills Here’s a checklist of everything you should prepare before you apply: If you plan to apply for loan forgiveness once you’ve been approved, make sure to: Save all your documents, such as bank statements, tax forms, payment receipts, rent or lease receipts and any other business-related expenses Maintain great communication with your lender for later assistance on the forgiveness application Check SBA.gov for the one-page application in February Apply within 10 months after the last day of your covered period 5 info@incorpherated.com 5 WHAT IS AN EIDL? The COVID-19 EIDL, Economic Injury Disaster Loan, Program is a federal relief program created to provide economic support for small businesses experiencing a temporary loss of revenue due to the pandemic. Intended to help owners cover operating expenses, there are two types of assistance available through the program: loans and grants, also referred to as advances. The new bill contains provisions to the existing EIDL program, including $20 billion to fund grants specifically for businesses in low-income communities. Is my business eligible for an EIDL? If your business has suffered working capital losses due to the pandemic, you may qualify for an EIDL. You may be eligible if: If your business is located in a low-income community, you can also qualify for an additional grant, the EIDL Advance. You may be eligible if: • You started your business before January 31, 2020 • You have fewer than 500 employees • Your business is considered small by SBA’s standards, is an agricultural business, non-profit, cooperative, or faith-based organization • See if you meet SBA’s small business size standards here • Or if you are a sole proprietor, self-employed or freelancer, or gig worker • Your business has been directly affected by the COVID-19 pandemic • You applied before and either received a partial grant, or no funds at all • You have fewer than 300 employees • You suffered at least a 30% loss of revenue during any eight-week period in 2020 compared to the same period in 2019 • Your business is located in a low-income community • If you’re not sure, access the FFIEC Geocode Map here 1. Enter your address into the search bar 2. Click “Census Demographic Data” 6 info@incorpherated.com 3. Click the “Income” tab You can see the full EIDL eligibility rules here. How much funding can I get? The EIDL Program offers two forms of assistance, both of which must be used for working capital and normal operating expenses (like rent, utilities, and healthcare benefits). You’ll have to apply for the loan in order to qualify for the advance – but you don’t have to accept the loan. The loan The advance • Is available for up to six months of your working capital • Requires collateral for loans over $25,000 • Must be paid back at a rate of 3.75% (2.75% for a non-profit) over 30 years • Can have deferred payments for 1 year – but interest will still accrue • Is a grant that you wouldn’t have to pay back • Is designated for businesses located in low-income communities • Offers $1,000 per employee up to $10,000 • Doesn’t require being approved for the loan (but you still have to apply for it) • Would be subtracted from your qualified loan amount and wouldn’t be taxable Do I have to pay my loan back? If you are approved for and accept the EIDL Program loan, you’ll have to pay back those funds. The terms are 3.75% APR for businesses and 2.75% for non-profits, over 30 years. Unlike the PPP loan, this loan is not forgivable, though you can defer payments by 1 year. Interest will still accrue during that deferral period. If you are approved for and accept the EIDL advance, you do not have to pay it back since it’s considered to be a grant. Additionally, if you receive a PPP loan and apply for PPP loan forgiveness, your EIDL advance can’t be deducted from your approved forgiveness amount like it was in the past. 7 info@incorpherated.com Where can I apply? You can apply for a loan now until December 31, 2021, directly through the SBA site here. What do I need for my application? Business name, address, and EIN Revenue and/or value of goods sold for 12 months prior to January 31, 2020 Proof of number of employees Name, phone number, birth date, SSN, and residential address for all owners Bank name, account number, and routing number Here’s a checklist of everything you should prepare before you apply: Reminder: Information on the PPP and EIDL is subject to change, so be sure to check SBA.gov for updates. 8 info@incorpherated.com 8 WHAT’S THE DIFFERENCE BETWEEN PPP AND EIDL? Paycheck Protection Program (PPP) Type of support Forgiveable Expenses covered Maximum allowed to borrow Loan rate/period Economic Injury Disaster Loan (EIDL) Loan, Grant (aka Advances) No Working capital and normal operating expenses For loan: up to six months of your working capital For advance: $1,000 per employee up to $10,000 For loan: 30 years at 2.75% or 3.75% APR Loan Yes Payroll and non-payroll expenses First time borrowers: up to $10 million Second time borrowers: up to $2 million Calculate here End of term at 1% fixed annual rate 9 info@incorpherated.com 9 NEED HELP WITH APPLYING FOR A PPP OR EIDL? These PPP and EIDL applications can be daunting, especially if you’re planning to apply for both. If you need assistance navigating through the process, SCORE is a non-profit resource partner of the SBA with a network of 10,000 volunteer business experts who can help. Small business owners can sign up for free mentoring sessions and other business resilience advice. During the pandemic, mentors are available to connect remotely, via phone, video chat, or email. You can sign up for mentorship at SCORE.org. If you’re based in NYC, visit https://newyorkcity.score.org/, where you can also find additional grants and loans available to local small business owners. 10 info@incorpherated.com 10 MORE GRANT PROGRAMS FOR SMALL BUSINESSES 1. Women Entrepreneurs NYC has WE Fund Growth and WE Fund Crowd. With the former, NYC partners with local lenders for loans. With the latter, New York matches 10% or up to $1k of your crowdfunding goal. WE Fund Venture does investment for tech startups. 2. The Amber Grant is a monthly grant for women-owned businesses. The foundation gives out $4,000 each month to grant recipients and an annual $25,000 award. You can apply for an Amber Grant using a simple online form where you explain your business or idea and describe how you would use the grant to grow your company. 3. The Minority Business Development Agency is a chapter of the US Department of Commerce that offers grants and loans for minority groups. They host grant competitions and have physical centers across the country business owners to take advantage of financial counseling and other guidance. 4. FedEx has a small business grant for up to 25k if the business has been operating for at least 6 months. 5. The National Minority Supplier Development Council runs the Business Consortium Fund for non-profits.