The CARES Act, which was signed into law in late March, included nearly $350 billion in loans specifically for small businesses. Waller's Dustin Timblin explains what you need to do to qualify, reviews the terms for the loan program and provides other important advice for business owners looking to apply.
The CARES Act, which was signed into law in late March, included nearly $350 billion in loans specifically for small businesses. Waller's Dustin Timblin explains what you need to do to qualify, reviews the terms for the loan program and provides other important advice for business owners looking to apply.
Lance: 0:04
welcome to point by point conversations, interviews and legal commentary for today's business professionals. Brought to you by Waller Cares Act. Signed into law in late March, The Cares Act included nearly $350 billion in loans for small businesses. Waller's Dustin Templin explains What you need to do to qualify reviews the terms that provides other important advice for business owners looking to apply. All right, thank you so much for joining us today. Dustin will go ahead and get started on an overview of S B. A loan program that was just past this part of the care. Zach.
Dustin: 0:46
Sure, Lance, you've been part of the kids tonight S B A, which pre existing lending program has been greatly expanded. And it's called the Paycheck Protection Program, or PPP. It was a $349 billion that is now available in government guarantees of loans made by lenders to small businesses. So what is a small business? It's what 500 or Weston boy ease. And for purposes of determining whether you have 500 U. S. Employees, you have to include all your clients Ah, and your subsidiaries in one big pool to count whether you're considered a small business. If you are, you may be eligible for some very advantageous long terms under this program.
Lance: 1:38
Talk to us a little about the terms and what those those terms could look like for businesses.
Dustin: 1:44
Sure, so under the law, you can apply with a qualified SP, a lender to receive a loan that is potentially forgivable and an amount equal to the lesser of $10 million or 2.5 times your average monthly payroll for the last year. So there's some nuance there. But generally speaking, you know you're gonna You're gonna be able to get enough money to cover about 2.5 months of payroll. If you get the law and the rain did upwards, more percent maximum, and the maturity could be from 1 to 10 years. It'll be decided between you and your you and your bank. But those are all very favorable terms compared to the average loan
Lance: 2:29
and part of this. It was designed to help stave, layoffs or stave. Massive job losses are their incentives for companies to that get this loan to preserve as many jobs as possible.
Dustin: 2:44
There are Yes, Lance. So when it comes to loan forgiveness, which is the big part of this that everyone's interested in? If you use the money on payroll or rent or utilities or interest on dead and then you do not lay off workers or cut their wages by more than 25% then you will be eligible for up to 100% of the loan forgiveness in just a couple months after you get the loan. So there's great relief there for employees in particular. And for employers who were worried about having to make layoffs, you know, with with the pandemic than this is at least a a bridge for them. Thio get over the next couple months without worrying about having Thio to pay workers or where the money's gonna come from, because there's also an automatic payment deferral of six months with these loans, where you don't have to pay upfront fees and you don't have to pay principal and interest for the for the 1st 6 months, it alone and the way it works is if you get the loan forgiveness, you may end up not having to pay a dime out of pocket because you'll have done that before six months. Obviously, it's. It's basically a functioning like a cash grant to businesses who are willing to keep their employers on your payroll and not cut their wages beyond 25%.
Lance: 4:04
You talked about eligibility and company size. If a company's thinking about applying for this, are there other types of things that need to be thinking about in terms of information gathering or other things they need to prepare is as they look to get this funding?
Dustin: 4:19
Yes. So in terms of eligibility, you know, they're actually a couple exceptions that I didn't mention an initial 80. So if you're a restaurant or in the hospitality sector or ah franchise, then you don't actually have to include your affiliates in that calculation, and you can apply on a per location basis as long as each individual location doesn't have more than 500 employees. So for our restaurants and hotels and stuff like that that have been particularly hit by this crisis, then you know even if they have a bunch of locations and that might put them over 500 employees, you actually are able to just consider it on a per location basis and for the rest of the businesses attn. This point the regulations haven't been issued, but weaken, weaken, Gather that you're gonna need to start looking for your books and records and identifying, you know, general Ledger entries that relate to, you know, entries for salaries, group health care benefits, unemployment, taxes, retirement contributions, et cetera, all all those sorts of things to come up with that average monthly payroll costs number so that you could be ready to provide it to your bank. You know, as soon as these loans become available, which which could happen as soon as this Friday, the April the bird,
Lance: 5:42
that was my next question. So if Europe a struggling company or company looking at the next 34 months and tryingto figure things out, when is the earliest that they could actually start seeing these funds become available to them?
Dustin: 5:56
So you know the wall past less Friday to 27th and the Small Business Administration has 14 days to issue administrative regulations, which will weigh out in more specificity the details of the program on Until that point, no bank is going to submit, allow an application or poor process alone, you know, theoretically, they have until next Monday to release the regulations, but we expect that them to do so this week. And the Treasury secretary, Steve Nugent, has said that he expects the loans, too become available starting Friday, April 3rd. So I would, if you're interested in applying, I would go ahead and reach out to your existing bank relationship. You know, if your small business and you keep your cash deposits with local bank, I would go and give your banker call and, you know, confirmed that they're participating and asked to be put on a list of people to receive the application as soon as as soon as they have it
Lance: 6:56
now. This wasn't an unlimited hope of money. Obviously, there was a money set aside. But is there some advantage Thio getting in early? I would imagine if there are a lot of companies applying, there could be a point that which should be in too late. What's that looking like?
Dustin: 7:11
Yes, so it's $349 billion there are no it's just first come first serve. You have every incentive if you feel like you need the money to apply as soon as possible because it's highly likely that the program will run out of funds. You know very quickly now Congress could come back later and authorize more more money, but that's, you know, a month or two away at the earliest. So I strongly recommend contacting your lawyer Waller if you have any questions, and also applying as soon as as soon as this program becomes available because it will run out of money
Lance: 7:51
and one of the interesting things beyond Just Cos. And small businesses. There are provisions for sole proprietors, independent contractors and self employed individuals, and you talk a little bit about that eligibility and what what that might look like.
Dustin: 8:07
Yes, So you're you're right, Lance, that in addition, Thio small businesses and nonprofits you know, sole proprietors, independent contractors, circled gig economy type workers. They may also be eligible. You know, the terms work the same way. It's it's still 2.5 times your average payroll costs. There will be a little different difference there because most independent contractors aren't paying the same sorts of things. They're providing the same sorts of benefits to themselves. But, you know it's still worth looking at the program if you're if you're an independent contractor, if you receive 10 99 miss, you work for yourself as a gig Economy worker Bill are eligible for this. You just You know, if you pay yourself a salary or take earnings from self employment, it works the same way. And the loan forgiveness works the same way as well. So yeah, definitely, definitely. Take a look if you're self employed
Lance: 9:03
and in terms of companies that may have thought about applying for a small business. Ah, association alone in the past on Maybe didn't qualify. We're worried about qualifications. Are some of the traditional qualifications waiting or changed for this loan program?
Dustin: 9:20
Yes. So, previously, the S B A was designed for small businesses who may have tried to find credit elsewhere and were unable to do so for whatever reason, that requirement is explicitly waved in this law. So if you're concerned about evidence in your ability to repay the loan or that you haven't found credit elsewhere, um, you shouldn't worry because those requirements are specifically waved. It's really just focused on Do you have less than 500 employees and What is What is that? Average monthly payroll costs those air. Really? All banks are required. Thio look at to determine whether they're eligible on
Lance: 10:03
doesn't We've talked a lot about the S B A loan program, but I'm curious if there any other aspects of the cares act that small business owners should be looking at or they might be able to take advantage of
Dustin: 10:15
Yeah, I would. I would just sum it up by saying, Be proactive. Um, every indication is that there will be a mad rush. I would also ask folks to consider whether other parts of the Cares act helped them as well. For example, there are economic injury disaster loans that you can apply for through the government. Those are different requirements, and they're not forgivable. But they still have very advanced and advantageous terms, and you can't use it for the same purpose as the PPP alone. But a lot of businesses haven't costs in peril. And there's all this man, you know, relief around Karel X is in the dough. And for health care providers, he might want one look into some of the accelerated payments. What CMS is offering, there's no limitation on the size of that. You know, as we as we go along, the reserve is supposed to develop new lending platforms, or mid and large businesses were also We will keep you guys up to date on that as this come out. But at this time, there's not very many specific details on that.
Lance: 11:24
All right, Dusted. Thank you so much. We appreciate it and look forward to having you back. Wilson,
Dustin: 11:31
thank you for having me.
Lance: 11:34
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