COVID-19: Small Business Assistance FAQs
The SBA has published additional guidelines on the primary economic stimulus programs being offered to small businesses impacted by COVID-19 pandemic. This page is meant to provide the most current information on the Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL) Emergency Advance.
Regency Centers hosted a webinar with the National Federation of Independent Businesses (NFIB) that answers your questions on the program and funding.
Payroll Protection Program
The Paycheck Protection Program is a loan designed to provide a direct incentive for small businesses impacted by COVID-19 pandemic. The primary purpose of the PPP is to provide small businesses the financial means to keep workers on their payroll (or rehire workers that were laid off), but loan proceeds can also be used to pay rent, mortgage interest, or utilities. Businesses should apply for PPP loans through existing SBA 7(a) lenders, federally insured depository institutions, or other regulated lenders that have enrolled and been approved to make PPP loans.
Under the PPP, the maximum loan amount is the lesser of $10 million or an amount equal to 2.5 times their total monthly payroll. Importantly, as many businesses have already slashed jobs, companies will rely on payroll numbers from the crisis.
In its final interim rule, the SBA has raised the fixed interest rates on loans made under the program from 0.5% to 1%. All payments can be deferred for the first 6 months after the loan proceeds are received. However, interest will continue to accrue during this deferment period. While the CARES Act stated the loan maturity date for the PPP Loans could extend up to 10 years, the SBA now specifies that the loan maturity date for all PPP Loans (to the extent not forgiven) will be 2 years. There are no prepayment penalties or fees. No collateral or personal guarantees are required.
For the loan to be forgiven, the money must be spent on payroll, rent, mortgage interest and utilities during the eight weeks after the loan is made. Any portion spent on anything else won't be forgiven.
More specifically, the following payroll costs are eligible for forgiveness:
- Compensation to employees (whose principal place of residence is the United States) in the form of salary, wages, commissions, or similar compensation;
- Cash tips or the equivalent (based on employer records of past tips or, in the absence of such records, a reasonable, good-faith employer estimate of such tips);
- Payment for vacation, parental, family, medical or sick leave;
- Allowance for separation or dismissal;
- Payment for the provision of employee benefits consisting of group health care coverage, including insurance premiums, and retirement; and
- Payment of state and local taxes assessed on compensation of employees;
- For independent contractors or sole proprietorships this includes wages, commissions, income or net earnings for self-employed or similar compensation
The following overhead expenses are also eligible for forgiveness, but cannot exceed more than 25% of the total loan amount:
- Mortgage interest payments (but not mortgage prepayments or principal payments);
- Rent payments if the lease agreement was in effect before February 15, 2020;
- Utility payments for services which were being provided as of February 15, 2020;
- Interest payments on any other debt obligations that were incurred before February 15, 2020
Importantly, the interim final rules now specify that at least 75% of the PPP Loan proceeds must be used for payroll costs and only a maximum of 25% can be used for the borrower's other overhead expenses such as mortgage interest, utilities and rent.
To be eligible for the PPP you must be a small business, sole proprietor, independent contractor or non-profit that has fewer than 500 employees, OR, a business with more than 500 employees that meets the SBA industry size standards https://www.sba.gov/federal-contracting/contracting-guide/size-standards.
The application period for the program began Friday, April 3, 2020, and the window closes on June 30, 2020. However, loans will be given on a first-come-first serve basis, so we should encourage all tenants to apply as soon as possible.
The application requires much less information than a typical small business loan. A sample form put out by the SBA ahead of the program showed there were just two pages of questions on basic information, like payroll size and what the owner intends to use the money for. The applicant must submit the application form with the required supporting documentation to its lender. This documentation may include IRS Forms 940 and 941, payroll summary reports with corresponding bank statements, summaries of payroll benefits (vacation and sick leave, allowance for dismissal, group health benefits, retirement benefits, etc.) and 1099's, recent mortgage or rent statements, and recent invoices for utility services.
The SBA appears to have fixed the "Find Eligible Lenders" functionality on their website which provide users ability to search for approved lenders by zip code - https://www.sba.gov/paycheckprotection/find. There are thousands of SBA approved lenders, but some of the notable banks include Wells Fargo, Bank of America, US Bank, Chase, and Key Bank. In addition, the SBA just recently approved Fintech companies PayPal, Intuit, and Square to participate in the PPP. These could be good options for small businesses that don't already have a banking relationship with some of the larger traditional banks.
This is left to each individual bank's discretion. However, we have heard a few stories from tenants that were initially turned away from banks because they didn't have an existing relationship, only to have these banks reverse their decisions days later. It now appears that many of the large banks are accepting applications regardless of pre-existing relationship. Also, recommend small tenants that don't have existing relationships with SBA lenders try the Fintech companies such as PayPal, Intuit, and Square.
No, the SBA realizes that many businesses are currently closed. The SBA stated that small businesses have until June 30, 2020 to restore their full-time employment and salary levels for any changes made between February 15, 2020 and April 26, 2020. It's possible that these deadlines get extended if the Stay at Home orders are extended.
Independent contractors do not count as employees for purposes of PPP Loan forgiveness since independent contractors have the ability to apply for a PPP Loan on their own.
In order to be eligible for PPP loans, businesses must have operated their business as of February 15, 2020. Please note that "in operation" may not mean "open and operating" for our retail businesses, but rather may mean that the business must have been incorporated and have some operating history (e.g. an executed lease).
We don't know the answer to that, and probably depends on the bank and the applicant. That said, the intent is to get the money out as quickly as possible, and we have heard of some tenants that received the money within about a week of submitting their application.
The SBA stated that small businesses have until June 30, 2020 to restore their full-time employment and salary levels for any changes made between February 15, 2020 and April 26, 2020.
It's not clear. There is a very real possibility that $349 billion won't meet the demand, which is why we recommend our clients apply as soon as possible. That said, Congress is already adding another $250 billion to the $376 billion already approved.
EIDL Emergency Advance
Small businesses are eligible to apply for an EIDL advance up to $10,000. The funds will be made available within days of a successful application, and this loan advance will not have to be repaid. The application process is direct with the SBA and can be completed in 10 to 15 minutes - https://covid19relief.sba.gov/#/
Unfortunately, no. The 3-day stipulation in the legislation appears to have been ignored by the SBA. The SBA now says that payments will be made within "days of a successful application".
Yes, although there is still some ambiguity around this one. The law provides that applicants can request up to $10,000; however, it seems that the SBA may scale the advance based on the number of employees an applicant has. Based on reports, the SBA may provide $1,000 per employee for up to ten employees. However, SBA has not provided public guidance on how it will determine the amount of the advance.
The PPP has a strong loan forgiveness component, but only if the proceeds are used for payroll expenses, mortgage interest, rent, and utilities. What requirements exist for forgiveness of the EIDL Emergency Advance?
The EIDL Emergency Advance can be used for any working capital needs, including payroll, sick leave, increased production costs, or any business obligations including debts, rents, mortgage payments, etc. The SBA hasn't published any requirements for businesses to provide documentation of how the proceeds were used in order to qualify for forgiveness, and as of today, the SBA is still saying that the advance does not need to be repaid under any circumstance.
Yes, the EIDL Emergency Advance is meant as a stopgap option and provide businesses with a quick influx of cash for working capital needs, whereas the PPP is meant to provide businesses with larger amounts of money. Businesses can apply for both programs, but the proceeds need to be used for different purposes. Furthermore, the amount of the EIDL Advance must be deducted from any loan forgiveness amount under a PPP loan.
In order to qualify for the EIDL Emergency Advance, you must have been in operation as of January 31, 2020. Please note that "in operation" may not mean "open and operating" for our retail businesses, but rather may mean that the business must have been incorporated and have some operating history (e.g. an executed lease). I would still encourage any business that was incorporated by 1/31/20 to apply for EIDL Emergency Advance.
This depends on each businesses circumstances, but in general, PPP is better if you are looking to maximize forgiveness based on qualified expenses. But, EIDL provides more flexibility on how you spend the funds and should provide a quick injection of cash while waiting for larger PPP loan to be approved (although this has yet to be the case as EIDL payments are not happening in 72 hours as originally promised in the legislation).
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