Like you, Sandor Development Company is concerned about the impact of COVID-19 on the business world and has been committed to working with our tenants during these challenging times. For those who have not yet had a chance to do anything other than take care of your families, we thought we would take this opportunity to provide you with some possibly helpful information.
This past Friday, March 27, the President signed the Coronavirus Aid, Relief, and Economic Stimulus Act (the “CARES Act”) into law. The CARES Act provides $350 billion in funds available to small businesses (those with fewer than 500 employees) in the form of loans on very favorable terms via the Paycheck Protection Program (the “PPP”).
The CARES Act permits the Small Business Administration’s loan program to be expanded to address the current crisis. If you’re not familiar with it, the SBA loan program is a partnership between private lenders, which issue the loans, and the SBA, which guarantees them. There are thousands of pre-approved lenders, and they can be found here: www.sba.gov/funding-programs/loans.
If you were operating your business on February 15, 2020, you may be eligible for a non-recourse loan under the PPP, without collateral or a personal guarantee. Under the PPP, you may borrow up to 2.5 times your payroll. Lenders cannot charge more than 4.0% interest on all PPP loans; all principal, interest, and fees are deferred for at least six months; all prepayment penalties are waived; and the SBA’s “credit elsewhere” test (the ability to obtain funding from other sources without undue hardship) is also waived.
Generally speaking, if you continue paying your employees at normal levels during the eight weeks following origination of the loan, then the amount you spend on certain payroll costs, mortgage interest, rent payments, and utility payments can be combined, and that portion of the loan will be completely forgiven by your lender. The forgiven amount of the loan will not be taxable income to you under the CARES Act.
To participate in the PPP, you must submit an application that includes (i) documentation verifying the number of full-time equivalent employees on your payroll along with pay rates and payroll tax filings for the applicable periods; (ii) state income, payroll, and unemployment insurance filings; and (iii) documentation verifying payments on mortgage obligations, lease obligations, and utilities, including canceled checks, receipts, and account statements.
As of Monday, March 30, the SBA has not yet posted an application for PPP loans. You should frequently check the SBA website (www.sba.gov) for more details. Under the CARES Act, the SBA has fifteen days to issue guidance and regulations implementing the PPP.
We encourage you to gather your documentation, contact your local SBA-approved lender, and apply for economic relief. The CARES Act has a fixed amount of money available to small businesses, and once it’s gone, it’s gone. The sooner you apply, the more likely you will be to receive a loan!
While Sandor cannot offer you any legal advice or help you with your PPP loan application, we are here to help by discussing the terms of your lease and providing you with any documentation you need from us. Please let us know if we can assist you in obtaining a loan to cover your rent payments along with any other fixed expenses your business incurs each month. You can reach us at CARESAct@sandordev.com.
In the meantime, please be healthy and safe!