NONPROFIT WEBINAR SERIES COVID-19 LEGISLATIVE IMPACT AND SBA RESOURCES APRIL 3, 2020 Thank you for attending! All attendees have been muted. The presentation will start at 1:00pm. Direct all your questions to the Q&A box.
Who We Are Debra Seefeld Non-Profit Leader Audit Partner Angie Armstrong Tax Director Kaylee Prescott Tax Senior Manager | page
Washington’s Response Phase 1 - Tax deadlines originally set for April 15 were pushed • back to July 15 Phase 2 – The “ Families First Coronavirus Response Act ” • (FFCRA) was passed on March 18; provides financial relief for business to provide time off for employees Phase 3 – The “ Coronavirus Aid, Relief, and Economic Security • Act’ ’ or ‘‘CARES Act’’, signed March 27, provides tax benefits and potentially loans/grants for businesses and nonprofits Program 1 – SBA/ Paycheck Protection Program (PPP) • Program 2 – Emergency Economic Injury Grants & • Economic Injury Disaster Loans (EIDL) Program 3 – Small Business Debt Relief Program • Phase 4 – who can imagine? • | page 3
B&V SBA Task Force – formed March 27 for internal & external • Briggs & education on Washington’s response. Veselka’s Response Education / Webinars - First two COVID-19 webinars Tuesday • and Wednesday had over 1,000 participants. We know you have questions and we are working to share quickly what we have learned. Wednesday we decided to highlight for nonprofits. Support – SBA Task Force ready to assist clients with data • recovery and application processes. Caution – Information is being released fast and furious. The • CARES act is over 600 pages and it was signed just a week ago. Be careful, some mainstream articles are not accurate in the details. New IRS Forms released on Wednesday, Apr 1. The information is changing and our Task Force is staying up to date. There is not a cookie cutter answer, each business and nonprofits needs are different. | page 4
SBA Response Which Program Is Right for My Business? to COVID-19: What we know today Cash flow assistance through 100% federally Paycheck guaranteed loans to employers who maintain Protection payroll during the emergency; up to 100% of funds borrowed are forgivable, if certain conditions are Program (PPP) met. NOT ALL NPO’s QUALIFY! Grants: Emergency grant provides up to $10,000 to businesses harmed by COVID-19 with no repayment Emergency Economic Injury Grants & required. Economic Injury Loans: EIDLs are low interest, long term loans Disaster Loans (EIDL) providing working capital to sustain small businesses; repayment is required Provides immediate relief to small businesses with Small Business non-disaster SBA loans; the SBA will cover all loan Debt Relief payments on new or existing SBA loans, including Program principal, interest, and fees for up to six months Source: U.S. Senate Committee on Small Business & | page 5 Entrepreneurship
Quick Comparison Economic Injury Disaster Paycheck Protection Between PPP Loan (EIDL) Program (PPP) Loans and Disaster Payroll expenses, employee Payroll, fix debts, accounts payable What the proceeds be used salaries, mortgage interest, rent and other expenses that cannot be Loans for?* and utilities paid due to disaster impact 2.5 times business's average Amount covered? Up to $2 million monthly payroll Annual percentage rate, 2.75% for Annual percentage rate, 1% Interest rate? NONPROFITS (Business 3.75%) Payment deferment for No payments for 12 mo. Loan terms? 6mo. Repayment 2 years Repayment up to 30 years Eligible, up to 100%, with documentation & approval Amount/Loan forgiveness? 0% eligible for forgiveness (“shall be” not “will be” ) Through an SBA-approved Where to apply? Through the SBA bank/lender *Business can apply for both programs; however, there can be no duplication in the use of funds | page 6
Quick Comparison Economic Injury Paycheck Protection Between PPP Disaster Loan (EIDL) Program (PPP) Loans and Disaster Loans Only 501(c)(3) and some All nonprofits, if fewer than Nonprofits Qualifying? 501(c)(19)’s (veteran’s 500 employees organizations) Nonprofits Qualifying for All nonprofits, if fewer than NO up to $10,000 Grants? 500 employees | page 7
Program #1: Paycheck The Coronavirus Aid, Relief, and Economic Security Protection (CARES) Act allocated $349 billion to help small Program businesses keep workers employed amid the (PPP) pandemic and economic downturn Known as the Paycheck Protection Program (PPP), the initiative provides 100% federally guaranteed loans to small businesses who maintain their payroll during this emergency Importantly, these loans may be forgiven if borrowers maintain their payrolls during the crisis or restore their payrolls afterward | Source: U.S. Chamber of page 8 Commerce
PPP: Eligible • Small businesses or nonprofits (only Applicants 501(c)(3)’s and some 501(c)(19)’s qualify) with fewer than 500 employees • Required to be in operation as of February 15, 2020 • An individual who is self-employed (sole proprietorship or as independent contractor) who regularly carries on any trade or business • A Tribal business concern that meets the SBA size standard • Ineligible: some nonprofits 501(c)(6)’s (business associations) and 501(c)(7)’s (pleasure/recreation) Source: U.S. Chamber of | page 9 Commerce
PPP: Acceptable To be eligible for loan forgiveness, proceeds must Uses of be used to cover only specific costs during 8 weeks Proceeds beginning on date of loan origination: Payroll must be 75% of loan amount: • Payroll Costs • Healthcare benefits Limited to 25% of loan amount: • Mortgage interest obligations • Rent obligations • Utility payments • Interest on other debt obligations incurred previous to February 15, 2020 | page 10
PPP: Maximum Maximum: Lesser of $10mil or 2.5 x Payroll Costs Loan Amount Payroll Costs: average MONTHLY payroll during year before loan date x 2.5 Includes: salaries, wages, cash tips, vacation, parental, family medical, sick leave, health care benefits, retirement benefits, state/local tax assessed on compensation (unemployment) Does not include independent contractors Excludes: salary/wage cap $100,000 / person, no federal payroll taxes, only US residence, FFCRA credit wages Source: U.S. Chamber of | page 11 Commerce
Cautions: PPP Loan Not guaranteed forgiveness Forgiveness • The loan forgiveness cannot exceed the principal • borrowed, even if actual expenses exceed expectations in loan application. Forgivable amount is reduced if number of employees is • reduced. Forgivable amount is reduced if greater than 25% • reduction in wages paid to employees. Weigh Cost/Benefit: Even with reduced forgiveness, left with 1% operating • loan, payments for two years No personal guarantees needed, no collateral • No prepayment penalty • Source: U.S. Chamber of | page 12 Commerce
GRANTS: Applicants can get up to $10,000 in emergency cash Program #2: grants even if they don’t qualify for additional funds. Economic The advance does not need to be repaid under any • Injury circumstance, and may be used to keep employees on payroll, Disaster to pay for sick leave, meet increased production costs due to Loans supply chain disruptions, or pay business obligations, including debts, rent and mortgage payments. LOANS: EIDLs are low interest loans of up to $2 million, with principal and interest deferment for 12 months, that are available to pay for expenses that could have been met had the disaster not occurred, including payroll and other operating expenses. Unlike traditional Economic Injury Disaster Loans (EIDL), CARES now waives the requirement that you be unable to obtain credit elsewhere which allow you to apply even if you have access to a credit line. | page 13
Key differences from PPP Economic Injury Forgiveness Disaster EIDLs are non-forgivable : they are low interest, long term • Loans (up to 30 years) loans with scheduled P&I payments PPPs may be up to 100% forgivable , if requirements are • documented and approved Grant EIDL includes up to $10,000 emergency grant that • never has to be repaid No automatic grant with PPP • Application EIDLs obtained by applying directly to SBA - • https://covid19relief.sba.gov/#/ PPPs obtained through SBA lenders • | page 14
Program #3: Small This program will provide immediate relief to small Business businesses with non-disaster SBA loans, in Debt Relief particular 7(a), 504, and microloans Program Under it, SBA will cover all loan payments on these SBA loans, including principal, interest, and fees, for six months This relief will also be available to new borrowers who take out loans within six months of the President signing the bill into law | page 15
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