Good day! It’s important to stay abreast of new updates and changes for the federal government’s two most essential Coronavirus relief and emergency financial support programs for small businesses. This client alert has updates on both:
PPP Program Likely to be Extended Until August 8, 2020
In an unprecedented move, the U.S. Senate voted last night to extend authorization for the PPP program so that small businesses weathering the pandemic can continue receiving aid. The PPP program was scheduled to end last night, but with $130 billion in loan funds unspent, the Senate has now extended the application period five more weeks, to August 8th.
The change must still secure House approval and be signed by the President, both of which are likely to take place during the coming weeks. If you have not yet applied for a PPP loan, now is the time to begin preparing so that you can take advantage of the extended application period once this legislation is signed into law.
EIDL Program Use of Proceeds
The EIDL program has some very specific use of proceeds requirements you should be aware of. These include:
– All proceeds must be used as working capital to alleviate economic injury caused by the crisis beginning on January 31, 2020 and continuing forward.
– Funds may also be used to pay UCC lien filing fees and a third-party UCC handling charge which will be deducted from the loan amount.
– You must obtain and itemize all receipts (paid receipts, paid invoices or cancelled checks) and contracts for all funds spent from the loan proceeds and retain them for a period of three (3) years from the date of the final loan disbursement.
– Please note that since disaster loans are tied to a physical location, you may not use EIDL funds to relocate a business without the SBA’s prior written permission. Note: Since the entire U.S. constitutes the applicable disaster area, this may be more of a programmatic formality but the fact remains that it is still written into the program as a strict requirement.
– Proceeds must only be used to purchase American-made equipment and products “to the extent feasible”. Translation: You should make sure you have documentation demonstrating a lack of American suppliers or manufacturers for such purchases if you elect to make a purchase from a non-U.S. source.
– Under most circumstances, the SBA can and will only consider increasing the loan for additional disaster-related damages after the time of initial approval for a period of two (2) years after that point.
Additional EIDL Requirements to Note
– It is critical to note that it is a strict and unbending requirement of the EIDL program that borrowers must maintain active hazard insurance covering at least 80% of the insurable value of the business and its assets. In fact, proof of insurance is required as part of the loan process and must be submitted within a year of receiving the proceeds.
Borrowers must submit proof of insurance to: U.S. Small Business Administration, Office of Disaster Assistance, 14925 Kingsport Road, Fort Worth, TX, 76155.
– Record keeping requirements for the EIDL program are extensive and include detailed requirements for keeping accurate and up-to-date financial records for up to five (5) years after the data of loan maturity or the date the loan is repaid in full; and ongoing authorization to enable the SBA to audit or review your financial records is also a core program requirement. In fact, the record keeping requirements section of the EIDL loan covers five specific requirements, each with multiple points within.
– Finally, you should note that distribution of assets for the EIDL program is strictly limited and in most cases SBA must give prior written authorization before loans, gifts, bonuses or other distributions of assets to partners, employees or other parties is made.
As always, we will strive to keep you informed and if you have any questions, simply use the Contact Us button below to forward any questions directly to our team.
Thank you, and have a wonderful July 4th holiday.
Matt Brady, CPA