MITVMSCaresActWebinar_ResourceGuide_20200406.2pdf
MITVMSCaresActWebinar_ResourceGuide_20200406.2pdf
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  1. 1| P a g eMIT VMS: CARES Act Webinar –Resource Guide 4/2020MIT VMS Webinar: The CARES Act: An Analysis and Discussion –What it Means for Small Businesses Monday, April 6th, 2:00pm Webinar Presented by Ed Pease, J.D. (Mintz) Resource Guide Assembled by Christiana Kalfas (VMS) Thank you for joining us today at our CARES Act webinar. A hot-topic lately, the CARES Act proposes to help stimulate the economy by providing relief for individuals and businesses impacted negatively by COVID-19. This legislation includes many topics of value for entrepreneurs and businesses. We hope that this webinar helped alleviate some of the questions and concerns around this newly- signed bill and helped our MIT entrepreneurial community understand the resources available to them on-campus. Though we went over the CARES Act (Link: https://www.govtrack.us/congress/bills/116/s3548/text) during the webinar, and offered Q&A, we hope that this resource guide will continue to be useful to you as you navigate the CARES Act and how it pertains to your small businesses. This information was shared with us from our entrepreneurs, mentors, and community in order to provide the most helpful and useful resources for you. It is only guaranteed to be current at the time of the webinar (April 6, 2020) and is not endorsed by MIT or MIT VMS. VMS continues to operate virtually during this time should you need, or continue to need, mentoring help, and continues to offer office hours with skilled corporate, IP, and immigration attorneys, Tax/Payroll and SBIR accountants, HR Specialists, and more. Please reach out to us atVMS@mit.edufor any additional help or services you may need during this time. Pamphlets and Charts: -VMS Mentor, Howard Levin, J.D. (Rich May) CARES Act Comparison Chart (See Page 3)-SBA Emergency Loan Program & Chamber of Commerce Pamphlet (See Pages 4-10)-Small Business Owner’s Guide PDF (See Pages 11-21)Important and Useful Links:Application:Boston’s Small Business Relief Fund (application opens 4/6): boston.gov/businessreliefCARES ACT Application form: https://home.treasury.gov/policy-issues/top-priorities/cares-act/assistance-for-small-businessesPPP Application Form (updated to allow foreign owners pay US payroll) https://www.sba.gov/sites/default/files/2020-04/PPP%20Borrower%20Application%20Form.pdf
  2. 2| P a g eSample guidance links on PPP:•Toborrowers•Tolenders•SampleapplicationExample Bank Participating in Program (BoA) –Requirements, Information Needed:BoA’s CARES Act Application: https://about.bankofamerica.com/promo/assistance/latest-updates-from-bank-of-america-coronavirus/small-business-assistance*Checking account and credit line mandatory*How you can prepare for the Paycheck Protection ProgramIf you believe that you will qualify for relief, plan to contact and to work withyour current small business loan provider. Working with your current provider will be the best and fastest approach.Bank of America small business clients will need toapply online.Ensure you can log in to your Business Online Banking account or enroll inBusiness Online Bankingnow.It also may be helpful to gather the following business documents:2019 Payroll–total payroll for full year 2019, by employee, as reported to the IRS2019 Independent Contractor Costs–Listing of 1099’s-MISC for 2019 independent contractors, by person, as reported to the IRS. (Note: Do NOT include 1099’s for services)Payroll report–as of February 15, 2020 or closest date after that date, by employeeOther information–required by the application is available at theU.S. Treasury websiteCalculator: https://www.valley.com/coronavirus/relief-programs/sba-paycheck-protection-program-calculator
  3. 3| P a g eMIT VMS: CARES Act Webinar –Resource Guide 4/2020Breakdowns:Gunder CARES Act Breakdown: https://www.gunder.com/news/cares-act-small-business-loan-program-update-for-venture-backed-companies-and-their-investors/MassTLC Breakdown: https://www.masstlc.org/covid-19-relief-loans-for-small-businesses/With a highlight:1.an advance of $10,000 to a company that applies for a Disaster Loan, within 3 days of SBA’s receipt of the application, even if the company is subsequently denied the Disaster Loan, so long as the company: (a) is a small business; (b) was in operation on January 31, 2020; and (c) submits a self-certification that the company is an eligibleentity;suchadvancewillnotneedtobepaidback,butwilldeductedfromanyamountforgivenunderthe StimulusLoans;2.waiver of personal guarantees for loans not greater than$200,000;3.waiveroftherequirementthattheborrowerdemonstrateinabilitytoobtainfinancingfromalternatesources(the“credit elsewhere” test); and4.authorization of loans based solely on creditscore.Guides:Angel Capital Association Small Business Owner Guide to CARES Act: https://www.angelcapitalassociation.org/data/Documents/Public%20Policy/The_Small_Business_Owner_s_Guide_to_the_CARES_Act.pdf?rev=E169FlexTeam Q&A CARES Act: https://www.flexteam.com/blog/cares-act-business-financial-support/Pilot Explains Paycheck Protection Program: https://pilot.com/blog/the-paycheck-protection-program-explained/Writeups/Resources:NVCA Information and resources for startups: https://nvca.org/nvca-response-to-covid-19/Employee Rights –Families First Coronavirus Response Act:https://www.dol.gov/sites/dolgov/files/WHD/posters/FFCRA_Poster_WH1422_Non-Federal.pdfGoodwin Law Federal Forgivable Loan Program Writeup:https://www.goodwinlaw.com/publications/2020/03/03_26-us-senate-passes-cares-act
  4. SBA Loan Program ComparisonPaycheck Protection ProgramEconomic Injury Disaster LoanWho is eligible•“Small business concerns” as defined by theSBA•Any business with 500 employees or less, or other size standard established by the SBA, subject to aggregationrules•Sole proprietors, independent contractors and self-employed individuals included (with appropriate documentation)•Will consider whether borrower was operating on Feb. 15, 2020and had employees or contractors whom it waspaying•Lenders should prioritize small businesses, underserved/rural markets, minority and women-owned businesses, and businesses in operation for less than twoyears•“Small business concerns” as defined by the SBA•Any business with 500 employees or less, subject to aggregationrules•Sole proprietors and independent contractors.•Cooperatives and ESOPs with 500 employees orless•Tribal small businessconcernsAND the applicant must be unable to meet its obligations or ordinary and necessary operating expenses as a result of a declared disaster.Maximum amount•2.5 times average monthly payroll costs in prior year, capped at $100k annual compensation peremployee•Formula adjusted for seasonal employers or those not in business prior to June 30,2019•PLUS amount of any EIDL loan made from January 31, 2020 until PPP loans areavailable•Loan amount capped at $10millionUp to $2 million as needed for permissible purposes below.Permissible uses•Payrollincluding:oEmployee compensation incl. salary, wage, commissions, tips; paid leave; severance; health and retirement benefits; payroll taxes; all capped at $100k annualized per employeeoIncome of sole proprietors or independent contractors, capped at $100kannualized•Group health carecosts•Mortgage interest•Rent•Utility payments•Interest on pre-existing debtobligationsWorking capital to pay expenses that cannot be paid as a result of the disaster including:•Payroll•Paid sickleave•Increased costs ofmaterials•Mortgage and rentpayments•Other obligations that cannot be paid due to revenuelossesForgiveness•Amounts used for permissible purposes in the 8 weeks after loan origination will beforgiven•Forgiveness amount reduced for employee cuts or wage reductions not cured by June 30,2020•Forgiveness of non-payroll may be limited to25%•Amounts forgiven are not grossincomeCan request up to $10,000 emergency advance within 3 days of application, to cover payroll, mortgage, rent and other costs. The advance need not be repaid, even if the loan is denied. If approved for PPP program, the advance is deducted from the amount ofPPPforgiveness.TermFor any balance, the term will be 2 years.Maximum term of 30 years.Interest&Payments0.50% interest. All payments deferred for 6 months;interest continues to run.3.75% interest for small businesses, 2.75% fornonprofitsProcess•Apply through any SBA-approved lender; other lenders will also beapproved.•Borrowers will need to certifythat:oThe loan is needed to continue operations due to current economic conditionsoFunds will be used for permittedpurposesoBorrower is not seeking and has not received any other loan under thisprogram•Each 20% owner must initial the abovecertifications•“Buy American” to the extentfeasible.•Program intended to be running by April 3, 2020, and borrowers to receive on funds the day of the application•Apply online through the SBAwebsite•Applicants may be approved based solely on credit scores (no tax returns required) or “alternative appropriate methods to determine an applicant’s ability torepay.”•May require submission of personal financial statements, tax returns, P&Ls and otherdocumentation•Loan processing may take 2-3 weeks, with an initial disbursement of $25,000 within five days ofclosingOther Features•All fees, personal guarantee requirements, collateral requirements and requirement that the business be unable to obtain credit elsewhere arewaived.•Can be refinanced into PPPloan•No personal guarantee for loansunder$200k•Requirement that the business be unable to obtain credit elsewhere iswaived•Requirement that entity have been in business for one year prior to disasteriswaived© 2020 RICH MAY, P.C. ALL RIGHTS RESERVED
  5. CARES Act for businesses updateThefollowingrepresentsasummaryoftherecentlysignedintolawCARESAct—alsoreferredto as the Stimulus Package. Specifically, we are providing a summary of the Paycheck Protection Program.Title1oftheCARESAct,entitled“KeepingAmericanWorkersPaidandEmployedAct,”provides relief for small businesses and their employees who are adversely affected by the COVID-19 outbreak. The key provision in this Act is the Paycheck Protection Program—an emergency lending facility to provide small business loans on favorableterms to borrowers impacted by the current economicstate.PAYCHECK PROTECTION PROGRAM –KEY POINTSThe following offers highlights of the Paycheck Protection Program that small business owners need to be aware of and consider as they move forward:●Available to businesses with 500 employees orless.●Loan period ranges from March 15, 2020 through June 30,2020.●Loan amount equates to 2.5 times average monthly payroll expenses from 2019—up to $10million.●Loan interest is rate capped at4%.●Loan duration is a maximum of 10years.●Loan forgiveness is available—A borrower is eligible for loan forgiveness equal to the amount spent on the following items, during the eight-week period beginning on the loan originationdate:○Payrollcosts○Mortgage interest incurred in the ordinary course ofbusiness○Rent paid based on a leasingagreement○Payments for utilities—including electricity, gas, water, transportation, telephone orinternet○Additional wages paid to tippedemployeesNote: The loan forgiveness amount can be reduced if there is a reduction in the number of employees or a reduction of greater than 25% in wages paid to employees.●Collateral is not required to secure theloan.●No personal guarantee is required to secure theloan.●Loan repayments are automatically deferred for six months and up to one year. This includes interest, fees and loanprincipal.●PaymentProtectionProgramloansareappliedforthroughapprovedbanks.TheSBAmay administer some loans based onviability.●For businesses that have been denied SBA loans previously, lending requirements are morelenient.Needham Division:105 Chestnut Street, Suite 10, Needham, MA 02492 T: 781‐449‐3346www.tdacpas.comCapeDivision:258 Main St, SuiteA1, Buzzards Bay,MA02532 T:508‐759‐6761F:508‐759‐6762
  6. CARES Act for businesses update -continuedCARES ACT –ADDITIONAL KEY POINTSEmployee Retention Payroll Tax Credit●TheEmployeeRetentionPayrollTaxCreditcannotbeusedinconjunctionwiththePayroll Protection Program or any other loan where payroll costs areforgiven.●Employee retention credit is equal to 50% of the qualified wages paid but cannotexceed$10,000 per employee.●The employer’s gross receipts must be 50% or less than the same calendar quarter in 2019 toqualify.●Foremployerswith100orlessemployees,qualifiedwagesaredefinedaswagespaidfor all employees during the period—whether they were able to work or not. For employers with100ormoreemployees,qualifiedwagesaredefinedaswagespaidtoemployeesnot providingservices.Deferral of Employer Social Security TaxesThe deferral of employer social security taxes cannot be used in conjunction with the Payroll Protection Program. This allows an employer to defer their portion of Social Security taxes from March 27, 2020 to January 1, 2021. 50% is due by December 31, 2021 and the remainder byDecember 31, 2022.Bonus DepreciationThis allows employers to expense qualified improvement property under the section 168 bonus depreciation rules.
  7. Prepared by the U.S. CHAMBER OF COMMERCECORONAVIRUSEMERGENCYLANSSmallBusinessGuideandChecklistTheCoronavirusAid,Relief,andEconomicSecurity(CARES) Actallocated$350billiontohelpsmallbusinesseskeep workersemployedamidthepandemicandeconomic downturn.KnownasthePaycheckProtectionProgram,theinitiativeprovides100%federallyguaranteedloans to smallbusinesses.Importantly,theseloansmaybeforgivenifborrowers maintaintheirpayrollsduringthecrisisorrestoretheir payrollsafterward.Theadministrationsoonwillreleasemoredetailsincluding thelistoflendersofferingloansundertheprogram.Inthe meantime,theU.S.ChamberofCommercehasissuedthis guide to help small businesses and self-employed individuals prepare to file for a loan.Herearethequestionsyoumaybeasking—and what you need to know.
  8. Prepared by the U.S. CHAMBER OF COMMERCE1Am IELIGIBLE?You are eligible if you are:•Asmallbusinesswithfewerthan500employees•AsmallbusinessthatotherwisemeetstheSBA’ssizestandard•A501(c)(3)withfewerthan500employees•Anindividualwhooperatesasasoleproprietor•Anindividualwhooperatesasanindependentcontractor•Anindividualwhoisself-employedwhoregularlycarriesonany trade orbusiness•ATribalbusinessconcernthatmeetstheSBAsizestandard•A501(c)(19)VeteransOrganizationthatmeetstheSBAsizestandardIn addition, some special rules may make you eligible:•Ifyouareintheaccommodationandfoodservicessector(NAICS72), the500-employeeruleisappliedonaperphysicallocationbasis•Ifyouareoperatingasafranchiseorreceivefinancialassistance fromanapprovedSmallBusinessInvestmentCompanythenormal affiliation rules do notapplyREMEMBER:The500-employeethresholdincludesallemployees: full-time,part-time,andanyotherstatus.Whatwilllendersbe LOOKINGFOR?Inevaluatingeligibility,lendersaredirectedtoconsiderwhether theborrowerwasinoperationbeforeFebruary15,2020andhad employeesforwhomtheypaidsalariesandpayrolltaxesorpaid independentcontractors.Lenders will also ask you for a good faith certification that:1.Theuncertaintyofcurrenteconomicconditionsmakestheloan requestnecessarytosupportongoingoperations2.Theborrowerwillusetheloanproceedstoretainworkersand maintainpayrollormakemortgage,lease,andutilitypayments3.Borrowerdoesnothaveanapplicationpendingforaloan duplicativeofthepurposeandamountsappliedforhere4.FromFeb.15,2020toDec.31,2020,theborrowerhasnot receivedaloanduplicativeofthepurposeandamountsapplied forhere(Note:Thereisanopportunitytofoldemergencyloans madebetweenJan.31,2020andthedatethisloanprogram becomesavailableintoanewloan)Ifyouareanindependentcontractor,soleproprietor,orself-employed individual,lenderswillalsobelookingforcertaindocuments(finalrequirementswillbeannouncedbythegovernment)suchas payrolltaxfilings,Forms1099-MISC,andincomeandexpensesfrom the soleproprietorship.What lenders willNOT LOOK FOR•Thattheborrowersoughtandwas unabletoobtaincreditelsewhere.•A personal guarantee isnot requiredfortheloan.•Nocollateralisrequiredfortheloan.2
  9. Prepared by the U.S. CHAMBER OF COMMERCE3BHoOwRmRucOhcWan?ILoanscanbeupto2.5xtheborrower’s averagemonthlypayrollcosts,notto exceed $10 million.HowdoIcalculatemyaveragemonthlyPAYROLLCOSTS?sum ofINCLUDEDpayroll costsINCLUDEDPayroll Cost:PAYROLL COSTSNON SEASONAL EMPLOYERS:Maximum loan =2.5xAveragetotalmonthly payroll costs incurred during theyearpriortotheloandateFor businesses not operational in 2019:2.5x Average totalmonthly payrollcostsincurredfor1.ForEmployers:Thesumofpaymentsofanycompensationwith respecttoemployeesthatisa:•salary,wage,commission,orsimilarcompensation;•paymentofcashtiporequivalent;•paymentforvacation,parental,family,medical,orsickleave•allowancefordismissalorseparation•paymentrequiredfortheprovisionsofgrouphealthcarebenefits, including insurancepremiums•paymentofanyretirementbenefit•paymentofstateorlocaltaxassessedonthecompensation of theemployee2.For Sole Proprietors, Independent Contractors, and Self-Employed Individuals:Thesumofpaymentsofanycompensationtoor incomeofasoleproprietororindependentcontractorthatisa wage,commission,income,netearningsfromself-employment,or similarcompensationandthatisinanamountthatisnotmorethan$100,000 in one year, as pro-rated for the covered period.EXCLUDEDPayrollCost:1.Compensationofanindividualemployeeinexcessofanannualsalary of$100,000,asproratedfortheperiodFebruary15,toJune30,20202.Payrolltaxes,railroadretirementtaxes,andincometaxes3.Anycompensationofanemployeewhoseprincipalplaceof residenceisoutsideoftheUnitedStates4.Qualifiedsickleavewagesforwhichacreditisallowedundersection 7001oftheFamiliesFirstCoronavirusResponseAct(PublicLaw116–5127);orqualifiedfamilyleavewagesforwhichacreditisallowed undersection7003oftheFamiliesFirstCoronavirusResponseActJanuary and February 2020SEASONAL EMPLOYERS:Maximum loan=2.5xAveragetotalmonthly paymentsforpayrollcostsfor the 12-week periodbeginning February15,2019orMarch1, 2019 (decided by the loan recipient) andendingJune 30, 2019sum ofEXCLUDEDpayroll costs
  10. Prepared by the U.S. CHAMBER OF COMMERCEWillthisloanbe FORGIVEN?Borrowers are eligible to have their loans forgiven.How Much?Aborroweriseligibleforloanforgivenessequaltotheamountthe borrowerspentonthefollowingitemsduringthe8-weekperiod beginningonthedateoftheoriginationoftheloan:•Payrollcosts(usingthesamedefinitionofpayrollcostsusedtodetermine loaneligibility)•Interestonthemortgageobligationincurredintheordinarycourse ofbusiness•Rentonaleasingagreement•Payments on utilities (electricity, gas, water, transportation,telephone, orinternet)•Forborrowerswithtippedemployees,additionalwagespaid to thoseemployeesThe loan forgiveness cannot exceed the principal.How could the forgiveness bereduced?Theamountofloanforgivenesscalculatedaboveisreducedifthere isareductioninthenumberofemployeesorareductionofgreater than25%inwagespaidtoemployees.Specifically:Reduction based on reduction of number of employeesWHAT'S NEXT?Look out for more information about eligible lenders and additional guidance fromtheSBA soon.For more guidance and resources for small businesses, visit uschamber.com/coPAYROLL COSTCalculated on page 2Average Number of Full-Time Equivalent Employees (FTEs) Per Month for the8-Weeks Beginningon Loan OriginationOption 1:Average number of FTEs per month from February 15, 2019 toJune 30, 2019Option 2:Average number of FTEs per monthfrom January1,2020toFebruary29,2020For Seasonal Employers:Average number of FTEs per month from February 15, 2019 to June 30, 2019Reduction based on reduction in salariesForanyemployeewhodidnotearnduringanypayperiodin2019wages atanannualizedratemorethan$100,000,theamountofanyreductionin wagesthatisgreaterthan25%comparedtotheirmostrecentfullquarter.What if I bring back employees or restore wages?Reductionsinemploymentorwagesthatoccurduringtheperiod beginningonFebruary15,2020,andending30daysafterenactment oftheCARESAct,(ascomparedtoFebruary15,2020)shallnotreduce theamountofloanforgivenessIFbyJune30,2020theborrower eliminatesthereductioninemployeesorreductioninwages.PAYROLL COSTCalculated on page 24
  11. The Small Business Owner’s Guide to the CARES ActThe programs and initiatives in the Coronavirus Aid, Relief, and Economic Security (CARES) Act that was just passed by Congress are intended to assist business owners with whatever needs they have right now. When implemented, there will be many new resources available for small businesses, as well as certain non-profits and other employers. Thisguide provides information about the major programs and initiatives that will soon be available from the Small Business Administration (SBA) to address these needs, as well as some additional tax provisions that are outside the scope of SBA.To keep up todate on when these programs become available, please stay in contact with your local Small Business Administration (SBA) District Office, which you can locate here.Struggling to get started? The following questions might help point you in the right direction. Do you need:•Capital to cover the cost of retaining employees? Then thePaycheckProtection Programmight be right foryou.•A quick infusion of a smaller amount of cash to cover you right now? Youmight want to look into anEmergency Economic InjuryGrant.•To ease your fears about keeping up with payments on your current orpotential SBA loan? TheSmall Business Debt Relief Programcouldhelp.•Just some quality, free counseling to help you navigate this uncertaineconomic time? Theresource partnersmight be your bestbet.Already know what resources you’re looking for? The table of contents can direct you to more information about the program or assistance product you need.Table of ContentsPaycheck Protection Program Loans2Small Business Debt Relief Program6Economic Injury Disaster Loans andEmergency Economic Injury Grants7Small Business Counseling9Small Business Contracting10Small Business Tax Provisions11
  12. FAQ’s continue on the next page!Payment Protection Program (PPP) LoansThe program would provide cash-flow assistance through 100 percent federally guaranteed loans to employers who maintain their payroll during this emergency. If employers maintain their payroll, the loans would be forgiven, which would help workers remain employed, as well as help affected small businesses and our economy to snap-back quicker after the crisis. PPP has a host of attractive features, such as forgiveness of up to 8 weeks of payroll based on employee retention and salary levels, no SBA fees and at least six months of deferral with maximum deferrals of up to a year. Small businesses and other eligible entities will be able to apply if they were harmed by COVID-19 between February 15, 2020 and June 30, 2020. This program is would be retroactive to February 15, 2020, in order to help bring workers who may have already been laid off back onto payrolls. Loans are available through June 30, 2020.FREQUENTLY ASKED QUESTIONSQUESTION:What types of businesses and entities are eligible for a PPP loan?Answer:•Businesses and entities must have been in operation on February 15,2020.•Small business concerns, as well as any business concern, a 501(c)(3) nonprofit organization, a 501(c)(19) veterans organization, or Tribal business concern described in section 31(b)(2)(C) that has fewer than500 employees or fewer employees than established by the relevant industrycode.•Individuals who operate a sole proprietorship or as an independent contractor and eligible self-employedindividuals.•Any business concern that employs not more than 500 employees per physical location of the business concern and that is assigned a North American Industry Classification System code beginning with 72, for which the affiliation rules arewaived.•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 InvestmentCompany.QUESTION:What are affiliation rules?Answer:They become important when SBA is decidingwhether a business’s affiliations precludethem 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. Please see this resourcefor more on these rules and how they can impact your business’s eligibility.QUESTION:What types of non-profits are eligible?Answer:All 501(c)(3) non-profits with 500 employees or fewer, or more if SBA’s size standards forthe non-profit allows. Please visit https://www.sba.gov/size-standards/to find out your non-profit’s SBA size standards by number of employees. For example, churches and museums with fewer than 500 employees are eligible. You will need the 6-digit North American Industry Classification Code for your business.2
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