Federal Legislation Summary (02/17/2021)

Below are some details and a summary of federal government relief efforts for existing small businesses that will be coordinated through the Small Business Administration (SBA).

The U.S. Small Business Administration, in consultation with the U.S. Treasury Department, will re-open the Paycheck Protection Program (PPP) loan portal to PPP-eligible lenders with $1 billion or less in assets for First and Second Draw applications on Friday, January 15, 2021 at 9 am ET.  The portal will fully open on Tuesday, January 19, 2021 to all participating PPP lenders to submit First and Second Draw loan applications to SBA.


Brief Overview: Consolidated Appropriations Act, 2021

In this episode of ChoiceU LIVE! hear from Rolf Lundberg, VP of Public Policy and External Affairs at Choice Hotels, as he provides key details about the latest stimulus bill, what provisions will help you as a small business owner in the hospitality industry, and specifics about the Troubled Debt Restructuring provision (TDR).


Economic Assistance for Hotels: Consolidated Appropriations Act, 2021

The time is now to ask for help. Hear from Small Business Administration loan expert, Yolanda Merriweather, as she discusses what economic relief is available to you as a small business owner in the hospitality industry and how you can get the help that you need from the latest COVID Relief Package.

Click here to view more financing resources and information


CURRENT AND RECENTLY APPROVED SBA 7A AND SBA 504 LOANs (2ND MORTGAGE)

Update 02/17/2021

Adjustment Plan Effect Date February 16, 2021

For ease of reference, NADCO has updated their section 1112 payment flowchart to note SBA’s Adjustment Plan. NADCO continues to advocate for additional funding from Congress to overcome this funding shortfall.

SBA Loans Approved BEFORE March 27, 2020
First Round Loans of section 1112 payments: Will NOT be capped as noted by the CARES ACT.  Full monthly loan payments will be provided.
  • Now two groups noted by date of approval and if the loan is “fully disbursed”.
  • If loan approved and fully disbursed before Sept. 27, 2020 will get the 6 months of section 1112 payments
  • Newly Eligible First Round loans (defined as Loans approved before Sept. 27, BUT not fully disbursed until after Sept. 28, 2020)-Will get only 3 months of payments.

Second Round of section 1112 payments: will remain capped at $9K as noted in the Consolidated ACT.
  • Loans approved before March 27, 2020 will get two months of payments instead of three
  • 72 NACIS (in accordance with SBA records) will get an additional three months of payments instead of five
SBA Loans Approved AFTER March 27, 2020 to September 27, 2020
First Round Loans Only of section 1112 payments: Will NOT be capped as noted by the CARES ACT.  Full monthly loan payments will be provided.
  • Now two groups noted by date of approval and if the loan is “fully disbursed”.
  • If loan approved and fully disbursed before Sept. 27, 2020 will get the 6 months of section 1112 payments
  • Newly Eligible First Round loans (defined as loans approved before Sept. 27, BUT not fully disbursed until after Sept. 28, 2020)- Will get only 3 months of payments.
SBA Loans Approved September 28, 2020 to January 31, 2021
No section 1112 payments will be provided. This is no change from the original plan
Newly Approved SBA Loans through February 1 through September 30, 2021
Payments will remain capped at $9K as noted in the Consolidation ACT

Will make three months of payment subsidies instead of six and it is subject to availability

SBA CAFS System – Borrower Portal

NADCO was recently made aware of the existence of a Borrower Portal in the SBA Capital Access Financial System (CAFS).  The portal provides existing borrowers the ability to view a listing of loans that they are associated with and key information about those loans.  NADCO confirmed the Borrower Portal’s existence with SBA who in turn provided resources to help build industry awareness.  These resources include a slide deck outing the SBA Borrower Portal and one-page instruction sheet detailing how borrowers can create account access in CAFS.


Paycheck Protection Program (PPP) Second Draw Loan Program  

This program will allow a borrower to receive second loan from the Paycheck Protection Program (PPP) for eligible businesses and businesses qualifying originally under this eligibility.  Please note if borrower did not get a PPP loan through the CARES ACT, they can apply for this PPP loan offered in the new relief bill.  This bill extends the time of the program to March 31, 2021.

Details:

  • This bill and program will allow those franchisees that have a current PPP loan but experienced a revenue decline 2020 the ability to apply for a second PPP loan.
  • This Second Loan will forgivable and can be for the same amount and expenses used in the CARES ACT PPP.
  • The new bill will introduce and allow several other expenses that can be included that are COVID related (details “Eligibility Items” below). 
  • Franchisees who did not get a PPP in the CARES Act will be able to apply for this new PPP loan. The franchisees will be able to also include the same expenses available.
  • Those franchisees who are working on and or have not started their forgiveness from the first PPP will be able to use the new expenses not as COVID related in their application as well.

Eligibility Items:

  • Businesses with multiple locations that are eligible entities under the initial PPP requirements may employ not more than 300 employees per physical location.
  • Waiver of affiliation rules that applied during initial PPP loans apply to a second loan.
  • An eligible entity may only receive one PPP second draw loan.
  • A business or organization that was not in operation on February 15, 2020 shall not be eligible for an initial PPP loan and a second draw PPP loan.
  • Franchisee must have used or will use the full amount of their first PPP; and demonstrate at least a 25 percent reduction in gross receipts in the first, second, or third quarter of 2020 relative to the same 2019 quarter. Note: the program provides applicable timelines for businesses that were not in operation in Q1, Q2, Q3, and Q4 of 2019. Applications submitted on or after January 1, 2021 are eligible to utilize the gross receipts from the fourth quarter of 2020.
  • Approved uses of funds received from the PPP loans include:
  • Paying payroll costs as defined below
  • Payments of interest on mortgage obligations or other debt obligations (no pre-payment penalties or principal)
  • Rent (including rent under a lease agreement)
  • Utilities

This new relief package will deem the following expenses as “allowable and forgivable” uses for Paycheck Protection Program funds:

  • Covered operations expenditures. Payment for any software, cloud computing, and other human resources and accounting needs.
  • Property damage costs. Costs related to property damage due to public disturbances that occurred during 2020 that are not covered by insurance.
  • Covered supplier costs. Expenditures to a supplier pursuant to a contract for goods in effect prior to February 15, 2020 that are essential to the recipient’s current operations.
  • Covered worker protection expenditure. Personal protective equipment and adaptive investments to help a loan recipient comply with federal health and safety guidelines related to COVID-19 during the period between March 1, 2020, and the end of the national emergency declaration.

You can utilize loan proceeds to pay for the same eligible expenses as used in the first PPP for Second Draw application along with including the new eligible expenses as noted above.

Total definition of payroll costs eligible to calculate for loan amount includes:

  • salaries, wages, commission or similar compensation
  • payment of cash tip or equivalent
  • payment of vacation, parental, family, medical or sick leave
  • allowance for dismissal and separation
  • payments for provisions of group health care benefits; insurance premiums-NOTE new bill clarifies that other employer-provided insurance can be included such as group life, disability, vision, and or dental insurance.
  • payment of retirement benefits or payment and state local tax assessed on compensation
  • Sole proprietor independent contract that is a wage, commission, income net earnings from self-employment that is NOT more than $100,000 prorated for the covered period (February 15- June 30, 2020)
  • Those paid by distributions more guidance to come, but certain they will not let this exceed no more than $100,000 prorated for cover period.

Loan Forgiveness Considerations

Borrowers of a PPP second draw loan would be eligible for loan forgiveness equal to the sum of their payroll costs, as well as covered mortgage, rent, and utility payments, covered operations expenditures, covered property damage costs, covered supplier costs, and covered worker protection expenditures incurred during the covered period.  The 60/40 cost allocation between payroll and non- payroll costs in order to receive full forgiveness will continue to apply.

For businesses that borrow under $150,000, the law creates a simplified forgiveness application whereby the borrower signs and submits a one-page certification that requires the borrower to list the:

  • Loan amount
  • Number of employees retained
  • Estimated loan amount spent on payroll costs

PPP Forms

PPP Form 3508EZ Forgiveness Applications and Instructions Updated 1.19.2021

Used for Borrowers that received a PPP or PPP2 loan of more than $150,000 AND can answer yes to one of the following (a) borrower did not reduce employees annual salary or hourly wages by more than 25% during covered period OR (b) borrower did not reduce employees annual salary or hourly wages of any employees by more than 25% during the covered period compared to the most recent full quarter before the covered period.

PPP Form 3508S Forgiveness Application and Instructions Updated 1.19.2021

Used only for Borrowers that received a PPP or PPP2 loan of $150,000 or less

PPP Form 3508 Forgiveness Application and Instruction Updated 1.19.2021

Used only for Borrowers that received a PPP or PPP2 loan of $150,000 or more that reduced salaries during the covered period of its employees of more than 25%

How to Calculate Revenue Reduction & Maximum Loan Amounts Including What Documentation to Provide

The Small Business Administration (SBA), in consultation with the Department of the Treasury, is providing this guidance to assist businesses in calculating their revenue reduction and payroll costs (and the relevant documentation that is required to support each set of calculations) for purposes of determining their eligibility for and amount of a Second Draw PPP Loan.

Read more…


Enhancements to the SBA Loan Programs

The following enhancements are being made to the current SBA Loan Programs:

SBA 7a Loan Program

  • Complete waivers of all program fees (upfront and ongoing guaranty fees) for borrowers and lenders.
  • Increased guaranty from 75% to 90% until October 1, 2021.
  • Creates parity between bank-held and secondary market-owned 7(a) loans to seek up to a 1-year deferral.
  • Increases the Express Loan amount from $350,000 to $1 million on January 1, 2021, and then reverts permanently to a lower amount of $500,000 on October 1, 2021.

SBA 504 Loan Program

  • Complete waivers of all program fees (upfront and ongoing guaranty fees) for borrowers and lenders.
  • Enhances the 504 refinancing rules to create reciprocity for refinancing between 504 and 7(a) programs.
  • Grants authority through September 30, 2023 for SBA to establish a 504 Express Loan Program for the most experienced successful 504 lenders to expedite 504 loans of less than $500,000.

Economic Injury Disaster Loan (EIDL) Advance for Small Business Continuity
At this time EIDL advances are for small businesses in low-income communities and:

  • Provides additional targeted funding for eligible entities located in low-income communities through the EIDL Advance program
  • Makes entities in low-income communities that received an EIDL Advance under Section 1110 of the CARES Act eligible to receive an amount equal to the difference of what the entity received under the CARES Act and $10,000.
  • •Provides $10,000 grants to eligible applicants in low-income communities that did not secure grants because funding had run out.

Economic Injury Disaster Loans (EIDL)

This loan and assistance is only available to businesses that have not yet applied for this loan previously.

Details:

  • Extends covered period for Emergency EIDL grants through December 31, 2021.
  • Extends time for SBA to approve and disburse Emergency EIDL grants from 3 to 21 days.
  • Small business owner does not have to have or had SBA loans previously to utilize this program.
  • Up to $2MM at a 30-year fixed rate – 3.75% interest rate no fees to apply
  • No pre-payment penalties
  • Personal guaranties have been waived for loans less than $200,000, but any loan amount over $200,000 up to the $2M will require anyone who owns more than 20% ownership in the entity will have to guaranty
  • Small businesses can qualify with having no more than 300 employees
  • MUST have been operating on January 31st, 2020.

Use of proceeds for the EIDL can used to pay for:

  1. Providing sick leave to employees unable to work directly due to direct effect of the COVID-19
  2. Maintaining payroll to retain employees during business disruptions or slowdowns
  3. Meeting increased costs to obtain materials unavailable form the applicant’s original source due to interruption of supply chain (inventory, supplies, vendors etc.)
  4. Making rent and mortgage payments
  5. Repaying obligations that cannot be met due to revenue losses (accounts payable, inventory, credit cards, supplies etc. Broad can use this to take care of expenses not noted in the use of funds for the Paycheck Protection Program.

Questions?

Choice has a dedicated loan consultant, Yolanda Merriweather that can also facilitate your needs when it comes to lender resources. You may contact her by submitting your question(s) below.

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    Updated on February 17, 2021

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