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We Build the Businesses That Build This Great Nation

Everything business owners need to know about Phase II and Phase III of the Relief package (links to apply below).

Federal:
Small business owners in all U.S. states and territories are currently eligible to apply for a low-interest loan due to Coronavirus (COVID-19). Click here to apply.
NJ State:
COVID-19/Novel Coronavirus Information for New Jersey Businesses. Click for the Programs.

(scroll down  to the bottom for Key Points of New Jersey's relief programs)

Phase III of the Relief Package from the Federal Government: Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) is in 2 parts:

Below is a summary of the Key Points of Phase III:

Part I:

Small Business Interruption Loans (i.e., forgivable loans related to COVID-19)

 

Eligibility

Businesses (including sole proprietors and self-employed) and nonprofits except those with Medicaid funds and :

 

·       With fewer than 500 employees (subject to the limited exceptions); or

·       That meet the Small Business Administration’s (SBA) industry based ‘size standard’ requirements for the applicable NAICS code (based ether on number of employees or annual receipts)

Must have been ‘substantially affected by COVID-19’, which are described as:

·       Supply chain disruptions

·       Staffing challenges

·       A decrease in sales or customers; or

·       Shuttered businesses

 

Loan Duration and Amount

 

With a maximum maturity of 10 years, the amount to be the lesser of (a) $10 million or (b) 2.5 multiplied by the average total monthly payments by the applicant for payroll, mortgage payments, rent payments, and payments on any other debt obligations incurred during the 1 year period before the date on which the loan is made. Note (b) above is different for newer companies or those with seasonal employees.

 

Allowable Use

 

·       Payroll support (up to $100k annual salary), including paid sick, medical, or family leave, and costs related to the continuation of group health care benefits during those periods of leave.

·       Employees salaries

·       Mortgage payments

·       Rent (including rent under a lease agreement).

·       Utilities.

·       Any other debt obligations that were incurred before the covered period

 

Loan Forgiveness

 

An eligible recipient shall be eligible for forgiveness of indebtedness in an amount equal to the cost of maintaining payroll continuity and other allowable costs during the covered period (8 weeks from loan origination). The borrower shall submit to the lender an application, which shall include documentation verifying the number of full-time equivalent employees on payroll and the other costs included in “Allowable Use.”

·       Payroll tax filings reported to the IRS

·       State income, payroll, and unemployment insurance filings

·       Financial statements verifying payment on debt obligations incurred before the covered period.

·       Any other necessary documentation to be determined.

The amount of any loan forgiveness will be reduced by any reductions in employee wages (in excess of 25% for any employee) or a reduction in the number of employees during the covered period.

 

Taxability

 

Canceled indebtedness under this section shall be excluded from gross income.

 

Other terms

 

·       Final rates (which are not to exceed 4%), underwriting standards and other terms and conditions are to be determined

·       These loans will be issued by SBA 7(a) lenders. Go to your SBA Lenders to apply.

 

 

Part II:

Credit Support for Other Affected Businesses (other than Small Businesses)

Overview

  • The Secretary of the Treasury (the ‘Secretary’) is given discretion to determine which businesses will be beneficiaries of the credit support but likely to include businesses that would otherwise not qualify for the Small Business Interruption Loans assistance (eg. Businesses with more than 500 employees)
  • The Secretary will be authorized to make loans, guarantees and other investments (eg. Equity stake or warrants) in support of eligible businesses as well as states and municipalities not to exceed $500 billion.
  • An independent oversight committee will oversee the program.

 

Loan Amounts and Terms

Maturity not to exceed 5 years. The Secretary is given similar discretion on determining the terms related to rates, underwriting and other terms and conditions. These loans are not forgivable.

Compensation Limits

Businesses that receive  loans or guarantees under this provision will be required  to agree to certain caps on compensation and severance payments for employees whose compensation exceeded $425,000 in the 2019 calendar year. Employees with compensation exceeding $425,000, will be capped at the 2019 levels and any severance pay is not to exceed twice the maximum compensation received in 2019.

For officers or employees who earned more than $3 million in 2019 annual salary, their compensation would be capped at $3 million plus 50% of the amount exceeding  $ 3 million in 2019 (example an individual earned $ 5 million in 2019 would be capped at $3 million plus 50% x ($5 million – $3 million) = $4 million cap)

These caps will be in place for the period  while the loan is outstanding plus an additional 12 months.

Buybacks and Dividends

Companies may not conduct stock buybacks nor provide dividends nor capital distributions to investors while the loan is outstanding plus an additional 12 months.

Employment Levels

Until September 30, 2020, companies are to maintain levels of employment as of March 24,2020 to the extent that is practical and in no case is the company to reduce employment by more than 10%.

 
   

Here are Key Points from Phase II:

Phase II of the Relief Package from the Federal Government: (Which had been previously announced)

 

The SBA Economic Injury Disaster Loan Program

This is from Phase II of the relief package for businesses, and it is important to note that this is different from the program in Phase III, and participating in this program may make the borrower ineligible for participating in the Phase III program we just described.

 

  • Loan size -Up to $2,000,000
  • Who is eligible – Small businesses, including ESOPs, and non-profits affected by the coronavirus in presidential and SBA-declared disaster areas (check for your area).
  • Interest rate – 2.75% for non-profits and 3.75% for small businesses
  • Term length – Will vary, but up to 30 years
  • Usage – Accounts payable, fixed debts, payroll, and other bills due to the virus
  • What you’ll need to provide – Supporting documents could include the business’ most recent tax returns, a personal financial statement and a schedule of liabilities that lists all your current debts.
  • More information – https://www.sba.gov/page/coronavirus-covid-19-small-business-guidance-loan-resources
  • How to apply – Apply directly to the SBA at https://disasterloan.sba.gov/ela/ select Economic Injury as your reason. Or, call SBA disaster assistance customer service center at 800-659-2955, or email disastercustomerservice@sba.gov
  • Note – Be sure to analyze this program versus the Phase III program to determine what will make the most sense for your situation.
 
   

 

 

Additional Relief Programs

Income tax filing and payment – The federal tax return filing and payment deadlines are now July 15, 2020.

Check with your state and local tax agencies as well. Some have aligned with federal deadlines.

State and local relief programs – Several local jurisdictions are supporting small businesses with loans, grants, or deferment of collection of taxes and fees.

B2B transactions – Check with your providers, many companies, utilities, etc. are providing discounts, deferral of payments and/or grants to small businesses.

Phase II Coronavirus Stimulus: Families First response Act

  • Tax credits for businesses with fewer than 500 employees to cover
    • Two weeks of paid sick leave for employees who have been quarantined, have a sick family member, or have been affected by school closings
    • Up to three months of paid family and medical leave amounting to no less than two-thirds of regular pay for those employees listed above.
  • The option for the Labor Department to exempt businesses with fewer than 50 employees from abiding by the paid leave mandate, if the Labor Department decides the new law could pose an existential threat to the company.

Phase III Coronavirus Stimulus

  • Delays of payment of Employer Payroll Taxes
    • Payroll taxes due to the IRS through the end of 2020 can be deferred with 50% of those deferred payments due by December 31, 2021 and the remaining 50% due by December 31, 2022.
    • Taxpayers that had indebtedness forgiven under the CARES Act are excluded from this benefit
  • Changes to Net Operating Loss Rules to use losses today against past profits to claim refunds
    • The Act temporarily reverses changes to how net operating losses can be carried back.
    • Losses from 2018, 2019 and 2020 will be permitted to be carried back for up to five years (or forego the carryback and instead carry the loss forward) for 2019 and 2020 income.
  • Increases to the amount of interest expense businesses may deduct from 30% to 50% for 2019 and 2020.
 
   

 

 

Business Relief Programs in New Jersey

The NJ Economic Development Authority (EDA) approved 7 programs to help businesses who have suffered from COVID-19 crisis

 

Grant program for small businesses and a zero-interest loan program for midsize companies are 2 of the initiatives

 

The New Jersey Economic Development Authority approved a package of seven initiatives that can be worth an estimated $75 million to $100 million to help businesses cope with the impact the coronavirus outbreak has had on the economy, voting during a special meeting Thursday afternoon that was called on account of the crisis.

Included in the approvals is a grant program for small businesses, a zero-interest loan program for midsize companies, support for private-sector lenders and community development financial institutions, funding for entrepreneurs, and a variety of resources providing technical support and marketplace information.

The EDA estimates that, taken together, the programs will provide more than $75 million of state and private financial support, with the opportunity to grow to more than $100 million if additional philanthropic, state and federal resources become available. The EDA said the initiatives will support between 3,000 and 5,000 small and midsize enterprises and are meant to complement recently announced federal economic recovery initiatives.

A look at the programs:

  • Small Business Emergency Assistance Grant Program: A $5 million program that will provide grants up to $5,000 to small businesses in retail, arts, entertainment, recreation, accommodation, food service and other services — such as repair, maintenance, personal and laundry services — to stabilize their operations and reduce the need for layoffs or furloughs.
  • Small Business Emergency Assistance Loan Program: A $10 million program that will provide working capital loans of up to $100,000 to businesses with less than $5 million in revenues. Loans made through the program will have 10-year terms with zero percent for the first five years, then resetting to the EDA’s prevailing floor rate (capped at 3%) for the remaining five years.
  • Community Development Finance Institution Emergency Loan Loss Reserve Fund: A $10 million capital reserve fund to take a first loss position on CDFI loans that provide low-interest working capital to microbusinesses. This will allow CDFIs to withstand loan defaults due to the outbreak, which will allow them to provide more loans at lower interest rates to microbusinesses affected by the outbreak.
  • CDFI Emergency Assistance Grant Program: A $1.25 million program that will provide grants of up to $250,000 to CDFIs to scale operations or reduce interest rates for the duration of the outbreak.
  • NJ Entrepreneur Support Program: A $5 million program that will encourage continued capital flows to new companies, often in the innovation economy, and temporarily support a shaky market by providing 80% loan guarantees for working capital loans to entrepreneurs.
  • Small Business Emergency Assistance Guarantee Program: A $10 million program that will provide 50% guarantees on working capital loans and waive fees on loans made through institutions participating in the NJEDA’s existing Premier Lender or Premier CDFI programs.
  • Emergency Technical Assistance Program: A $150,000 program that will support technical assistance to New Jersey-based companies applying for assistance through the U.S. Small Business Administration. The organizations contracted will be paid based on SBA application submissions supported by the technical assistance they provide.

More information about the programs, including complete eligibility

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