By: Jack Rybicki, CliftonLarsonAllen
On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief and Economic Security Act (CARES Act), in response to the economic effects of the COVID-19 virus. The CARES Act contains the following key components with respect to the SBA Economic Injury Disaster Loan program (EIDL):
- expands eligibility to include private nonprofit organizations and small agricultural cooperatives;
- waives personal guarantees on loans under $200,000;
- waives the “unable to obtain credit elsewhere” provisions; and
- provides organizations with immediate funding of $10,000 upon application once eligibility has been verified.
Take action nowWe recommend organizations get started immediately and take advantage of assistance programs while funds are available. Banks are still looking for guidance on how to process the programs. While the banks are getting organized, reach out to your banker and let them know you will be applying for a program. Get financial information pulled together, and meet with your CLA advisors to help you strategically look at your needs and choose the program(s) best suited for your situation.
Action steps you can take
- Contact your bank as soon as possible to get your organization registered. Confirm that your bank is an SBA-approved bank, as this is required in order to access funds. Many banks began accepting applications on April 3 for businesses, nonprofits, and sole proprietorships. Independent contracts and self-employed individuals open for application April 10.
- Reach out to your CLA advisor to help you evaluate your cash flow needs and the potential benefits of the new programs that are available.
- As part of the application process, discuss with your CLA advisor the need for certified payroll and personal financial statements for owners.
- Based on initial applications from banks, consider pulling the following information together:
- Documentation for the average monthly payroll and average monthly full-time equivalents, based on calendar year 2019. Although this differs from the period specified in the CARES Act, the SBA application refers to calendar year 2019. (There are payroll limitations that need to be considered.)
- The average payroll by category: salary, hourly, commissions, vacation, sick leave, group health care (both union and non-union) and retirement contributions (both union and non-union).
- The monthly rent (or mortgage interest) over the last 12 months.
- The amount spent on utilities over the last 12 months.
- The interest on mortgage and any other debt obligations that were incurred before 2/15/2020.
- The tax ID# and full legal name of each entity.
- Ownership information to assist in evaluation of the impact of affiliate entities. For any owners who have more than a 50% ownership interest, obtain a complete listing of other entities in which they also hold more than a 50% ownership interest.
- Documentation on any other COVID-19 relief programs you are applying for (e.g., payroll tax credits, etc.).