While this has been in limbo for a few days, it was signed into law last night by the President. Below is a summary of the benefits for business owners, PPP borrowers, buyers, and sellers. We don't attempt to cover the many other facets (unemployment benefits, stimulus checks, funds for vaccinations, etc.) that are included to bolster individuals and consumers, as there will be many other sources for those items. As we saw with the first CARES Act and PPP, many of the details and a few changes, are bound to be published once the SBA and the lenders work through the actual processes. However, this time, the field has already been plowed once, so hopefully, it will be much smoother.
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For Business Owners:
· If you have an SBA loan, the SBA Principal and Interest Subsidy is back! You will receive an additional three months of principal and interest payments paid by the SBA to your loan servicer. Certain industries, like restaurants, retail stores, and salons, will be eligible for an additional five months (an additional eight months total).
· Round 2 of PPP (second rounds and first-timers, including independent contractors, self-employed)
· Max loan amount of 2.5x average monthly payroll (and can now use 2019 or the last twelve months prior to the loan, not just 2019). Companies in the foodservice industry (NAICS 72) can use a 3.5x multiplier.
· More expenses are eligible for PPP funds, although you now have 24 weeks to use the funds, so most will be used for wages.
· To qualify, the Company must have suffered a 25% drop in any 2020 quarter's revenue when compared to the same quarter in 2019.
For PPP Borrowers:
· The PPP funds were clarified to be not taxable (the loan amount is not included in gross income), and you can deduct the expenses paid with PPP funds from your taxes.
· If you haven't received your forgiveness yet, and your PPP Loan was less than $150,000, you are eligible for simplified forgiveness (i.e., limited documentation and paperwork required!).
· If you received the $10,000 EIDL Advance (grant), you no longer have to deduct it from your forgiveness amount.
For Buyers (and thus indirectly for Sellers):
· The SBA is waiving the guarantee fee to all borrowers until 9/30/21. For loans over $150,000, this fee ranged from 3% to 3.75% of the guaranteed amount.
· The SBA Principal and Interest Subsidy for new borrowers is back! The SBA will pay for six months of principal and interest (up to $9,000 per month) for loans approved between 2/1/2021 and 9/30/2021.
· The SBA will now guarantee to lenders 90% of the loan, up from 75%. Note, this doesn't change the down payment requirements but reduces the amount of risk the lender holds with the loan, potentially enabling loans to qualify that might not otherwise have.
· The existing guidance from October 2, 2020, on closing a transaction with a PPP loan outstanding, still stands. If your PPP loan is not forgiven by closing, you will need your PPP Lender's consent, and you will need to escrow funds covering the PPP loan prior to closing. Ideally, apply for forgiveness now (if you haven't already), and hopefully, it will be settled and off the books by closing.
Sources, and thanks to:
· Ron Buck, Regional Director, Murphy Business & Financial Services , North Carolina
· Steve Mariani, Diamond Financial: Major Updates to SBA Included in Stimulus Bill - Diamond Financial (diamondfs.com)