SobelCo hosted a webinar on April 2, 2020 that focused on an overview of the current situation regarding some of the loans that are becoming available with the goal of helping business owners gain some economic stability.

The severity of the negative impact that has occurred as a result of the pandemic is palpable.

In fact, 44% of the attendees on the webinar believe the situation has impacted them slightly and 45% replied it has impacted them significantly. The combined total of 89% of business decision makers on the call expressed concern over the impact of COVID-19. Interestingly, there were outliers at both ends of the spectrum, with 5% of respondents saying there has been no impact and 6% saying there has been a positive impact! 

Paycheck Protection Plan (PPP) is Front and Center

Given the situation as it is today, most business leaders are interested in learning as much as they can about PPP. Here is a distilled version of the key points of PPP based on our webinar:

  • The loan amount is equal to 2.5 times the employer’s average monthly payroll
  • Loan amounts can be up to $10,000,000
  • The loan forgiveness amount is equal to eight weeks salaries, plus several other costs incurred during that period
  • Loan forgiveness is not taxable for New Jersey or Federal purposes
  • Self-employed individuals and sole proprietorships can qualify
  • Interest rate is .5% payable over two years
  • There are no SBA fees; the lender fees are paid by SBA
  • A deferral on non-forgiven portion of the loan extends for six months after the disbursement of the loan

Along with the most essential points, decision makers will also need to know the specific criteria for businesses that will be covered by PPP: 

  • Businesses and entities must have been in operation on February 15, 2020
  • Included are:
    • Any business concerns
    • 501(c)(3) nonprofit organizations
    • A 501(c)(19) veterans organizations
    • Tribal business concerns described in section 31(b)(2)(C) that have fewer than 500 employees, or the applicable size standard in number of employees for the North American Industry Classification System (NAICS) industry as provided by SBA, if higher 
    • Individuals who operate a sole proprietorship
    • Individuals who are independent contractors and eligible self-employed individuals (as defined under Section 7002(b) of the Families First Coronavirus Response Act).
    • Medicaid recipients are eligible

Business owners are paying careful attention to the forgiveness aspects under PPP. The following items if paid or incurred during the covered period will be subject to forgiveness:

  • Payroll costs (which include a significant number of items, some of which are salary, wage, commission, or similar compensation, cash tips or equivalent, vacation pay, parental pay and pay for family, medical, or sick leave)
  • Costs related to the continuation of group health care benefits during periods of paid sick,   medical, or family leave, and insurance premiums
  • Employee salaries, commissions, or similar compensations (see exclusions above)
  • Payments of interest on any mortgage obligation (which shall not include any prepayment of or payment of principal on a mortgage obligation)
  • Rent under a lease agreement
  • Utilities – including telephone and Internet access

Other issues that were raised during the webinar included:

  • 20% owners must disclose their information and sign the application
  • If the business has more than 20% foreign ownership – it may not qualify; but details on this are not clear. We are monitoring the situation and will notify everyone of updates. 

These details were especially critical right now as owners and senior leaders are focusing on loan opportunities as they look to the future and their ability to regain economic stability. 

During the webinar, attendees said they expect to recover as follows:

  • Only 3% projected recovery in one month
  • 42% anticipated recovery in three months
  • 52% - more than half – expect to recover within one year
  • 3% said they are already ahead of where they were before the outbreak!

Presented here is a basic outline to keep you informed of salient points of this new program. Click here to watch the webinar