The Baton Rouge Area Chamber hosted a Q&A session with Sen. Bill Cassidy this morning on small business support provisions in the CARES Act, including the new Paycheck Protection Program that rolls out this week.
“‘We are trying to make this as elastic as possible so as to meet the needs of small business,” Cassidy says about the CARES initiatives. “We need people employed on this side of the rough patch at that side of the rough patch … so that when we emerge, we can take off to grow.”
The Paycheck Protection Program provides forgivable federally guaranteed loans to employers who maintain their payroll during the pandemic. PPE applications will open Friday for small businesses and sole proprietorships, then open up to independent contractors and self-employed individuals April 10.
Here are some paraphrased answers provided by Cassidy and his staff during this morning’s webinar:
Q: Will my participation in the Economic Injury Disaster Loan program affect eligibility for the PPP loans?
A: You can use both seamlessly if the EIDL loan is not COVID-19 related. If you have an EIDL loan for economic implications from COVID-19, you can use both if you started with EIDL. Business owners can start with EIDL, get the $10,000 advance within 72 hours, and then when sufficient guidance is out, roll it into the PPP loan. Don’t use EIDL to pay for payroll Save that money for something else and use the forgivable PPP loan for payroll.
Q: What does it mean to roll EIDL into PPP?
A: You can take the EIDL loan first, then when you apply for PPP, sit down with your banker and let them know you want the EIDL to become part of PPP and not to remain separate. If you take out $5 million under PPP, and $1 million under EIDL, that $1 million will be part of the $5 million PPP total. The advantage of rolling into PPP is the 0.5% interest rate.
Q: Is the EIDL grant forgivable?
A: If you put the initial $10,000 into payroll, then roll that loan into PPP, then it is forgivable. If you use that money to pay long-term debts, unrelated to PPP, then you will not get loan forgiveness.
Q: What are the rules for rehiring personnel under PPP?
A: If you hire someone back by June 30, they are still eligible to be considered part of your payroll. But to not have any penalties, they need to be rehired within 30 days of the date of the bill. If you don’t need workers, you can furlough them, but keep paying their benefits and they will count as employed by you.
Q: If you have three separate entities, all using a single payroll system, do I file together or separately?
A: If you want to take advantage of PPP and EIDL, it’s best to sit tight and wait until guidance comes out later this week, but it will likely be three separate applications.
Q: Are consulting fees included in payroll costs?
A: Consultants on a 10-99 are less likely to be included in payroll, so businesses likely won’t get credit. But consultants can apply separately because independent contractors are also eligible.
Q: Will health care providers have access to these loans?
A: They’re considered small business just like everybody else, so they should be able to access the same provisions.
Q: What kind of documentation is needed to track spending?
A: Meticulously track the money that comes in the door and any money that goes out, especially for payroll, utilities and health care. It will be much easier to do it in real time than at the end when asking for loan forgiveness. The loans certify in good faith that you are using the money because of economic uncertainty. Rulemakers are talking about a 25% limit of loan forgiveness on non-payroll costs, and you will have to provide lenders documents to verify that.
Q: Is health care considered a payroll cost?
A: Yes, so are retirement contributions.
Q: If you’re exempt from the Family First Act, does that limit your eligibility for CARES?
A: It doesn’t; the two programs are designed to work together and have different eligibility criteria.
Q: Is there future legislation planned to supplement the CARES Act?
A: The president is talking about a large infrastructure package, that’s something I’ve been pushing for a while. I’m looking at a near 0% interest rate program that would dole out money over several years, and give communities and states alternatives to fund their share.
The House will write the next bill. … House Speaker Nancy Pelosi has a lot of things she would like to put in. It will be a political document folded into additional aid for small business. Republicans are not going to be buying into a Green New Deal, but there will be some, and there should be, emphasis on energy conservation.
Other areas Cassidy said await clarification on later this week are:
• The latest SBA rules for affiliates;
• How the PPP will cover part-time and commission employees as well as how full-time employees will be determined;
• How hospitalization grants will be awarded;
• Guidance to lenders and tax professions.