FAQs: Small Business Administration (SBA) Loans and Grants for Agents
Updated on March 30, 2021
TABLE OF CONTENTS
The United States and California governments have passed several laws to provide financial relief to small business owners, independent contractors and other unemployed Americans. There remain many ambiguous provisions in the law that continue to be clarified by rule-making at the federal and state agencies. We will continue to update this FAQ as any rules or other guidance are provided. Please check this FAQ frequently for updates.
Head to the COVID Legal Documents page on car.org for access to:
March 30 Updates:
On March 30, President Biden signed the PPP Extension Act. The Act extends the deadline to apply for a PPP loan to May 31, 2021. The deadline applies for both first and second draw PPP loans.
Starting the week of April 6, 2021, the SBA is raising the loan limit for the EIDL program from 6 months of economic injury with a maximum loan amount of $150,000 to 24 months of economic injury with a maximum loan amount of $500,000. Businesses that received a loan subject to the previous limits do not need to submit a request for an increase. SBA will reach out directly via email and provide more details about how businesses can request an increase close to the April 6 implementation date. Any new loan applications and any loans in process when the new loan limits are implemented will automatically be considered for the 24 months of economic injury up to a maximum of $500,000.
What assistance is available for agents from the SBA?
The federal government, through the U.S. Small Business Administration (SBA), is providing significant relief for small businesses suffering from the impact of the COVID-19 pandemic. Most agents are likely to be eligible for loans that are being made available through the SBA. The following options are available to REALTORS®:
Paycheck Protection Program (PPP) Loans
Economic Injury Disaster Loans (EIDL)
SBA Express Bridge Loans (EBL)
Are California Relief Grants available for brokers from the state of California?
California has created a small business COVID-19 relief grant program that provides micro grants ranging from $5,000 to $25,000 to eligible small businesses (including independent contractors and sole proprietors) impacted by COVID-19 and the related health and safety restrictions. The grant amount will be based on the business’s annual revenue as documented in its most recent tax return. Information is available at careliefgrant.com in addition to the information in this FAQ.
SELECTING THE BEST LOAN
Permissible Uses of Loan Proceeds
$20,833.33 initial loan and $20,833.33 second draw loan for independent contractors without employees
Payroll costs (including paid sick leave), employee salaries, rent expenses, mortgage expenses, PPE expenses, operations expenses, property damage costs, supplier costs, insurance premiums and other debt obligations. "Payroll costs" include net profit of independent contractors.
No; however, emergency grant portion does not need to be repaid
$500,000; eligible borrowers can ask for "targeted" emergency grant of up to $15,000
Working capital purposes, including payments of fixed debts, payroll, and accounts payable
"Disaster-related purposes" to support the survival and/or reopening of the small business.
Which of the SBA loans should I apply for?
As described below, Paycheck Protection Program (PPP) loans are provided on very favorable terms, and they may be the best option for most agents. If you have additional expenses that will not be forgiven if spent with PPP loan proceeds, an Economic Injury Disaster Loan (EIDL) may be a good option. However, keep in mind that EIDLs (with the exception of “targeted” advances) are conventional loans and not forgivable. If you need immediate financial relief, arranging an SBA Express Bridge Loan (EBL) (discussed below) with your lender is a good option.
Can I apply for both a PPP loan and an EIDL loan
Yes – but borrowers cannot take out an EIDL and a PPP loan for the same purposes. You could, if desired, get a PPP loan to cover lost income and other costs that are forgivable under the PPP, and then get an EIDL loan to cover some of your other expenses. You should carefully review the options available to select the SBA loans that will be the best fit for your needs and circumstances.
If an agent applied for or received an EIDL loan related to COVID-19 before April 3, 2020 and used the loan proceeds to cover payroll costs, the agent will be able to refinance the EIDL into a PPP loan for purposes of loan forgiveness. Remaining portions of the EIDL, for purposes other than those laid out as eligible for loan forgiveness under the PPP loan, will remain a non-forgivable loan.
PAYCHECK PROTECTION PROGRAM (PPP) LOANS
What is an initial Paycheck Protection Program loan, and who qualifies?
The Coronavirus Aid, Relief, and Economic Security (CARES) Act has created the Paycheck Protection Program (PPP), an expansion of SBA’s 7(a) loan program for providing financial assistance to small businesses. In 2020, the CARES Act II reopened the PPP program for those who hadn’t taken a PPP loan in the first round, as well as providing for the second draw PPP loans discussed below.
Businesses with fewer than 500 employees — including sole proprietors, independent contractors, and other self-employed individuals — all qualify for initial PPP loans. Since most real estate agents are independent contractors, they are likely to qualify for initial PPP loans.
Borrowers are required to make a good faith certification that they have been affected by COVID-19 and will use funds to maintain payroll and to cover other debt obligations.
What is a second draw Paycheck Protection Program loan, and who qualifies?
Pursuant to the COVID relief package that passed on December 27, 2020 (known as the CARES Act II), borrowers that have previously received a PPP loan will now be allowed to take out a second PPP loan. This second loan is called a “second draw PPP loan.”
The eligibility requirements for a second draw PPP loan are different than the requirements for an initial PPP loan. In order to receive a second draw PPP loan, a borrower must:
Employ not more than 300 employees. Independent contractors and sole proprietors are also eligible.
Have used or will use the full amount of their initial PPP loan.
Demonstrate at least a 25 percent reduction in gross receipts in the first, second, or third quarter of 2020 relative to the same 2019 quarter.
For businesses established after the second quarter of 2019, the SBA compares revenue from any 2020 quarter to revenue from the third or fourth quarter of 2019.
For businesses established after the third quarter of 2019, the SBA compares revenue from any 2020 quarter to the fourth quarter of 2019.
For businesses established after the fourth quarter of 2019, the SBA compares your second or third quarter of 2020 revenue to revenue from the first quarter of 2020.
Businesses that were not in operation on or before February 15, 2020 are not eligible for second draw PPP loans.
“Gross receipts” includes all revenue in whatever form received or accrued (in accordance with the borrower’s accounting method) from whatever source, including from the sales of products or services, interest, dividends, rents, royalties, fees, or commissions, reduced by returns and allowances. Generally, receipts are considered “total income” (or in the case of a sole proprietorship, independent contractor, or self-employed individual “gross income”) plus “cost of goods sold,” and excludes net capital gains or losses as these terms are defined and reported on IRS tax return forms. Since real estate agency is a personal service business (which makes “cost of goods sold” inapplicable for most agents), agents should typically be able to use “gross income” to determine their “gross receipts” for a quarter. PPP loan proceeds, EIDL advances, and direct payments from the IRS (e.g., tax refunds, rebates, stimulus or economic impact payments pursuant to the CARES Act) should not be included in gross receipts. Consult with your accountant if you need assistance determining your “gross receipts,” and/or refer to SBA’s FAQ document available here.
I heard that my broker is applying for a PPP loan. Can I, as an independent contractor, also apply for a PPP loan?
Yes. The SBA determined that a broker will not be able to use PPP loan proceeds to compensate independent contractors. However, independent contractor agents are eligible to apply for PPP loans on their own.
How much money can I borrow with a PPP loan?
SBA will loan borrowers up to $2 million for an initial PPP loan and up to $2 million for a second draw PPP loan. The actual loan size independent contractors receive will be determined by a formula based on average total monthly gross income or net profit over the prior year. Because an independent contractor without any employees can only use $100,000 of gross income or net profit to calculate their loan eligibility, the maximum loan an independent contractor without employees can qualify for is $20,833.33 for an initial PPP loan and $20,833.33 for a second draw PPP loan. If an independent contractor hasn’t taken any PPP loan yet, they will only be able to take the initial PPP loan.
What can I use the PPP loan proceeds for?
Once received, the loans may be used by borrowers for payroll costs (including paid sick leave), employee salaries, rent expenses, mortgage expenses, utility expenses, PPE expenses, operation expenses, property damage costs, supplier costs, insurance premiums and other debt obligations during the covered loan period. “Payroll costs,” as defined in the CARES Act and SBA guidance, includes any income of a sole proprietor or independent contractor that is a wage, commission, income, net earnings from self-employment, or similar compensation. The SBA refers to this as “owner income replacement,” and it means that an agent who is having difficulty earning commissions on real estate sales due to the COVID-19 pandemic can use the PPP loan proceeds as a substitute for the compensation the agent would normally receive from commissions. The borrower can spend the “owner income replacement” portion of the PPP loan on anything the borrower chooses. (Note: Sick leave tax credits under the Families First Coronavirus Relief Act are not included as “payroll costs” that can be paid with a PPP loan. C.A.R.’s Guidance for Employers regarding the COVID-19 situation provides more information on the FFRCA sick leave tax credits.)
What are the benefits of a PPP loan?
PPP loans are offered on highly favorable terms for borrowers: They are forgivable, they are guaranteed by the government, and payments are deferred. Additionally, no collateral is required to obtain a loan, and there is no personal guarantee requirement.
“Loan forgiveness” means that you are not required to repay your loan. More information about PPP loan forgiveness can be found in the "Loan Forgiveness” section of the FAQs.
“Government guarantee” of a loan means that the government assumes the debt obligation for the loan if the borrower defaults. A government guarantees reduces the risk to the borrower. PPP loans are 100% guaranteed by the government through September 30, 2021. After that, PPP loans are 75% guaranteed for loans exceeding $150,000 and 85% guaranteed for loans equal to or less than $150,000. PPP loans will have a non-compounding and non-adjustable 1.00% fixed interest rate.
“Payment deferment” means that you are not required to immediately begin making payments to the lender.
What are the PPP loan terms for any amounts that are not forgiven?
Any unforgiven amounts will be considered loans with the following terms:
A 1.00% interest rate (non-compounding and non-adjustable)
Payment deferment until: (a) whenever the amount of loan forgiveness is remitted to the lender; or (b) 10 months after the applicable forgiveness covered period if a borrower does not apply for forgiveness during that 10‑month period.
A default loan term of 2 years for loans dispersed prior to the enactment of the PPP Flexibility Act, and 5 years for loans dispersed after the enactment of the PPP Flexibility Act. However, lenders and borrowers can mutually agree to modify the maturity terms of a PPP loan.
Where can I apply for a PPP loan?
The United States Small Business Administration (SBA) delegates the authority to make PPP loans to numerous lenders throughout the country. These lenders will be handling the PPP application process. Because PPP is an expansion of the already-existent 7(a) program, the financial institutions that offer 7(a) loans will be offering PPP loans as well. There are thousands of banks that already participate in the SBA’s lending programs, including numerous community banks. All of the largest banks (such as JPMorgan Chase and Bank of America) are offering PPP loans.
The SBA has announced that PPP applications will re-open on Friday, January 15, 2021 for certain small lenders (including community banks and credit unions), and applications will reopen on Tuesday, January 19, 2021 for all lenders. PPP applications already reopened the week of January 11 for community development financial institutions.
The SBA has released the sample application forms for first and second draw PPP loans:
These are sample forms which illustrate the information you will need to apply for a PPP loan. Check with your lender for specific details on how they will accept applications.
If you choose to apply for assistance, work with your lender to apply as soon as possible. If you are applying for a second draw PPP loan, the best option may be to work with the lender that provided you with the initial PPP loan. You cannot apply for PPP loans on the SBA website. The deadline for all borrowers to apply for an initial or second draw PPP loan is May 31, 2021.
How do agents calculate their maximum PPP loan amount?
Formula for agents to determine eligible loan amount:
Step 1: From your 2019 or 2020 IRS Form 1040 Schedule C, you may elect to use either your line 7 gross income amount or your line 31 net profit amount. Using line 7 gross income will usually lead to a higher loan calculation, so it will be preferred for most agents. If this amount is over $100,000, reduce it to $100,000. If this amount is zero or less, you are not eligible for a PPP loan.
Step 2: Calculate the average monthly gross income or net profit amount (divide the amount from Step 1 by 12).
Step 3: Multiply the average monthly gross income or net profit amount from Step 2 by 2.5. Thus, if your Schedule C gross income or net profit amount is $100,000 or greater, you qualify for the maximum loan available to an independent contractor without employees, which is $20,833.33. ($100,000 ÷ 12 * 2.5)
Step 4: Add the outstanding amount of any Economic Injury Disaster Loan (EIDL) made between January 31, 2020 and April 3, 2020 that you seek to refinance, less the amount of any advance under an EIDL COVID-19 loan (because it does not have to be repaid).
Note: Since SBA allows borrowers to use 2019 or 2020 payroll costs to calculate their maximum PPP loan amount for both first and second draw PPP loans originating in 2021, borrowers will want to use the year in which their payroll costs were highest to obtain the largest PPP loan amount.
If I previously applied for a PPP loan and calculated my loan amount based on net profit, can I now reapply based on a gross income calculation?
No. The SBA is only allowing the gross income formula to be used for loans approved on or after March 3, 2021.
My gross income was more than $150,000 in 2019 or 2020. Will this affect my PPP application?
If a Schedule C filer elects to use gross income to calculate its loan amount on a First Draw PPP Loan, and the borrower reported more than $150,000 in gross income on the Schedule C that was used to calculate the borrower’s loan amount, the borrower will not automatically be deemed to have made the statutorily required certification concerning the necessity of the loan request in good faith, and the borrower may be subject to a review by SBA of its certification. The SBA instituted this rule to serve as an additional deterrent to fraud, waste, and abuse. Thus, if your gross income is greater than $150,000 and you apply for a PPP loan, the SBA may send you a Loan Necessity Questionnaire to verify that “current economic uncertainty” made the loan request necessary to support the ongoing operation of your business. For more information about the Loan Necessity Questionnaire, please refer to question #53 of this document.
What forms do agents need to provide to the lender to apply for a PPP loan?
Regardless of whether you have filed a 2019 or 2020 tax return with the IRS, you must provide the 2019 or 2020 Form 1040 Schedule C (depending on which year you used to calculate your maximum loan amount) with your PPP loan application to substantiate the applied-for PPP loan amount. You must also provide a 2019 or 2020 IRS Form 1099-MISC (depending on which year you used to calculate your maximum loan amount) detailing nonemployee compensation received (box 7), or an invoice, bank statement, or book of record that establishes you are self-employed.
You must also provide a 2020 invoice, bank statement, or book of record to establish you were in operation on or around February 15, 2020.
For second draw PPP loans of not more than $150,000, borrowers must submit documentation sufficient to establish that they experienced a reduction in revenue. Such documentation may include relevant tax forms, including annual tax forms, or, if relevant tax forms are not available, a copy of the borrower’s quarterly income statements or bank statements. This documentation can be submitted: (i) at the time of the loan application; (ii) on or before the date the borrower submits an application for loan forgiveness; or, (iii) if the borrower does not apply for loan forgiveness, at SBA’s request. If you have the documentation available when applying for the loan, submitting it when applying will be preferable since it will simplify the forgiveness process once you reach that stage.
Can I apply for a PPP loan if I am a new agent that did not have any income during 2019?
You are eligible for a PPP loan as long as you were in operation as of February 15, 2020. Newer agents will need to calculate their maximum PPP loan amount based on 2020 payroll costs rather than 2019 payroll costs.
I tried to apply for a PPP loan at my bank, but the bank refused to consider my application or rejected it. Do I have any other options?
Many major lenders are currently only assisting independent contractors who already have a business checking account with them. If you only have a personal checking account, these lenders will still not accept your PPP application. However, there are some PPP lenders, such as community banks, that are willing to take new customers. If you need assistance finding a PPP lender, SBA has created a “Lender Match” tool that allows you to search for lenders based on your Zip Code: https://www.sba.gov/paycheckprotection/find.
Additionally, many financial technology (“FinTech”) companies have started processing PPP loan applications. Before you apply for a PPP loan, it is important to review the options with your CPA or financial advisor. If you are considering a FinTech lender, you will want to determine if the FinTech company is actually submitting applications to a bank or to the SBA, not just collecting your contact information for marketing purposes. Also, you will want to determine if the lender has a specific timeline indicated in its written materials that promises to provide a response when you submit an application request.
Below are some resources and links that you can use to find a PPP lender. Please be advised that you are not required to seek services from any of the companies suggested. These companies are not in any way reviewed, supported or endorsed by C.A.R.
FinTech Companies Providing PPP Loans**
Lend IO / Paychex – https://www.lendio.com/
Biz2Credit.com / Paychex (may be requiring 2 or more employees) - https://www.biz2credit.com/disaster-support/cares-act-loans-coronavirus
NAV – https://www.nav.com/
Square Capital - https://squareup.com/us/en/l/sba-ppp-loans
Intuit – Quickbooks - https://quickbooks.intuit.com/small-business/coronavirus/paycheck-protection-program/
ReadyCapital - https://ppp.readycapital.com/
Fundera - https://www.fundera.com/
Some PPP funding has been set aside for community banks, credit unions, and community development financial institutions. However, be aware that many of these lenders will only be accepting applications from customers that have a pre-existing relationship with the lender, and/or the lender will be prioritizing applications from those customers. If you are considering applying for a PPP loan with one of these smaller lenders, here are some resources to locate a lender in your area.
Community Banks, Credit Unions and Community Development Financial Institutions**
Search for community banks based on your Zip Code: https://www.icba.org/about/find-a-community-bank
List of credit unions in California: https://www.creditunionsonline.com/california-credit-unions.html
List of community development financial institutions (Excel spreadsheet that you can sort to list California institutions): https://www.cdfifund.gov/Documents/CDFI%20Cert%20List%2004-14-2020%20Final.xlsx”
List of 2019 Top 100 U.S Small Business Administration (SBA) Lenders: https://www.sbalenders.com/most-active-sba-banks-in-2019-mid-year-review/
** C.A.R. is not making any representations or warranties regarding the quality of their services. C.A.R. has not paid and will not pay the companies any compensation whatsoever for the level of service they have committed to providing. The companies will not pay C.A.R. or its members any referral fee or any other thing of value for being on this list. C.A.R. disclaims any and all liability related to the services provided by the companies on this list. Please be advised the lists above may be amended at any time without notice
I need help completing my PPP application. What should I do?
If you need assistance completing the PPP application, C.A.R. recommends seeking a CPA to provide that assistance. Pursuant to guidance from the Department of the Treasury, CPAs are not supposed to charge fees for assistance in preparation of a PPP loan application. However, keep in mind that CPAs are allowed to charge fees for advisory services, such as helping you decide which tax relief program is the best fit for your needs and circumstances.
How long will it take for me to get a PPP loan after I apply?
According to the Wall Street Journal, it usually takes SBA around one month to process a 7(a) loan. However, government officials have stated that the PPP process will be significantly expedited. According to the Department of the Treasury, the lender must make the first disbursement of a PPP loan no later than ten calendar days from the date of loan approval.
Do I need to report my receipt of PPP loan proceeds to the EDD if I am receiving PUA or UI benefits?
There is currently no official guidance from the EDD as to whether PPP loan proceeds need to be reported as income when you are certifying for PUA or UI. However, EDD suggests it is “safer” to do so. Members should expect that reporting PPP loan proceeds will reduce benefits for those weeks. If a member doesn’t report loan proceeds and they are eventually determined to be reportable income, EDD may seek to recover amounts paid plus penalties. Members electing to report PPP loan proceeds to EDD should do so over 8 weeks following when the loan was disbursed. We will provide additional information and guidance if it becomes available.
Head to the COVID Legal Documents page on car.org for access to:
Step-by-Step Guide to PPP Loan Forgiveness for Borrowers With Employees
Step-by-Step Guide to PPP Loan Forgiveness for Borrowers Without Employees
How will I be able to obtain forgiveness for my PPP loan?
The CARES Act II signed on December 27 creates a simplified loan forgiveness application process for loans under $150,000. A borrower will now be able to receive forgiveness if the borrower signs and submits to the lender a one-page certification form. All independent contractors and sole proprietors without employees will be able to use this short certification form, since their loans were capped at $20,833.
The one-page certification form requires the borrower to provide:
The number of employees retained by use of the loan. (Note: The SBA wants to collect this information for tracking purposes. If you are a sole proprietor or independent contractor without employees, entering “0” on the form will not affect your forgiveness.)
The estimated amount of the loan used for payroll costs.
The total loan amount.
An attestation that the loan was used in compliance with the law.
CARES Act II expressly prohibits lenders from requiring any documentation to be submitted by the borrower to obtain forgiveness for loans under $150,000 beyond the items above.
To apply for forgiveness of your PPP loan, you must complete the certification form and submit it to your lender. Check with your lender to determine if you will be required to submit a paper version of the certification or if the lender will be offering an electronic certification. Your lender may have additional instructions for submitting the PPP loan forgiveness certification.
When do I have to begin and end using PPP loan proceeds to qualify for forgiveness?
A borrower is eligible for loan forgiveness for amounts the borrower spends during a period which begins on the date the lender makes the first disbursement of the PPP loan to the borrower and ends between 8 and 24 weeks after disbursement of the loan (the “Covered Period”). The Covered Period cannot extend beyond September 30, 2021.
You will determine the length of the Covered Period for your loan when you fill out the PPP loan forgiveness application. You do not need to take any action related to this decision prior to filling out the loan forgiveness application.
When can I submit my loan forgiveness application?
A borrower may submit a loan forgiveness application any time on or before the maturity date of the loan, including before the end of the Covered Period, if the borrower has used all of the loan proceeds for which the borrower is requesting forgiveness.
What expenses can I spend the PPP loan proceeds on if I want the loan to be forgiven?
At least 60% percent of the PPP loan must be spent on “payroll costs” in order for the loan to be fully forgiven. The SBA is stating that PPP loan forgiveness for “payroll costs” for independent contractors is limited to: (i) “proprietor expenses” when calculating your PPP loan using the “gross income” formula; and (ii) “owner income replacement” when calculating your PPP loan using the “net profit” formula. “Proprietor expenses” are defined as business expenses plus owner compensation and are calculated based on a proportionate share of the borrower’s 2019 or 2020 gross income, as reflected in the individual’s 2019 or 2020 Form 1040 Schedule C. “Owner income replacement” is calculated based on a proportionate share of the borrower’s 2019 or 2020 net profit, as reflected in the individual’s 2019 or 2020 Form 1040 Schedule C. The SBA has clarified that borrowers can now attribute up to 2.5 times their 2019 or 2020 IRS Form 1040 Schedule C average monthly gross income as “proprietor expenses” and up to 2.5 times average monthly net profit as “owner income replacement.”
Since this amount (whether you used the “gross income” or “net profit” loan calculation method) is equivalent to the maximum PPP loan size for borrowers without employees, these borrowers are able to classify 100% of their PPP loan proceeds as forgivable “payroll costs.” This means independent contractors will be able to get their PPP loans fully forgiven simply by filling out and submitting the short certification form to their lender.
No additional forgiveness is provided for retirement or health insurance contributions for self-employed individuals, since such expenses may be paid out of their net self-employment income.
For the loan to be fully forgivable, any PPP loan proceeds that are not spent on payroll costs must be spent on certain non-payroll costs: namely, mortgage interest payments, rent, and utilities. However, keep in mind that all loan proceeds for borrowers without employees can be attributed as “proprietor expenses” or “owner income replacement,” and there is no need to attribute any of the loan proceeds to the non-payroll costs category.
Do I need to submit any additional supporting documentation with my forgiveness certification form?
Borrowers who fill out the short-form certification will not need to submit additional documentation to obtain forgiveness.
Are “desk fees” that an agent pays to their firm an eligible non-payroll rent expense?
The answer is likely “no,” unless the agreement between the agent and the firm regarding desk fees is written as a leasing agreement.
Do I need to submit any additional supporting documentation with my loan forgiveness application?
For an independent contractor’s “owner income replacement,” the 2019 Form 1040 Schedule C that was provided by the applicant at the time of the PPP loan application must be used to determine the amount of net profit allocated to the borrower for the covered period. Since the form is already provided by the borrower at the time the PPP application is submitted, no additional documentation will need to be submitted by the borrower to obtain forgiveness for the portion of the loan used by the independent contractor as “owner income replacement.”
If my PPP loan is forgiven, will I still be required to pay interest?
If the full principal of the PPP loan is forgiven, the borrower is not responsible for the interest accrued.
I think my lender allowed my loan amount to be too high. How will this affect forgiveness?
If your loan was too high (for example, if you received more than $20,833 despite not having any employees), then it might not be possible to obtain full forgiveness. The best option is to contact the lender to arrange returning any portion of the loan in excess of what can be forgiven.
I’m an independent contractor without employees but indicated on my PPP application that I have 1 employee (myself). Will this affect my loan forgiveness?
As long as you did not receive a larger PPP loan than you are eligible for, this should not have any impact on loan forgiveness.
If I received an EIDL advance, will the amount of the advance be deducted from my PPP loan forgiveness?
No. CARES Act II provides that EIDL advances will no longer be deducted from PPP loan forgiveness.
What happens if I previously had an EIDL advance deducted from my PPP loan forgiveness?
Any EIDL Advance Amounts previously deducted from a borrower’s forgiveness amount will be remitted to the lender, together with interest to the remittance date. SBA has not yet announced when these remittances will occur.
When will I know if my PPP loan is forgiven?
Lenders are required to issue decisions on borrowers' forgiveness applications to the SBA within 60 days after receiving them. A borrower may request that the SBA review the lender’s decision regarding forgiveness of the loan in the event that the lender determines that the borrower is not eligible for forgiveness. If the lender determines that the borrower is entitled to forgiveness of some or all of the loan amount, the lender must request payment from SBA at the time the lender issues its decision. SBA will, subject to any SBA review of the loan or loan application, remit the appropriate forgiveness amount to the lender, plus any interest accrued through the date of payment, not later than 90 days after the lender issues its decision to SBA. If SBA determines in the course of its review that the borrower was ineligible for the PPP loan based on the provisions of the CARES Act, CARES Act II, SBA rules or guidance available at the time of the borrower’s loan application, the loan will not be eligible for loan forgiveness. The lender is responsible for notifying the borrower of the forgiveness amount after the SBA makes its decision.
What happens if any portion of my PPP loan is not forgiven?
The remainder of the loan that is not forgiven (if any) will operate according to the loan terms described in the “Loan Terms” section above.
Will I need to pay income tax on forgiven PPP loan proceeds?
Any forgiven PPP loan proceeds do not need to be reported as gross income by the borrower for federal and state income taxes.
The CARES Act II signed into law on December 27, 2020 makes it clear that expenses paid with forgiven PPP loan proceeds can be deducted from the business’ federal income taxes, overturning a previous IRS rule on this subject. A California law passed on September 9 stated that expenses paid with forgiven PPP loan proceeds cannot be deducted for state income taxes. However, it is possible the state law will be changed to conform with the new federal law. C.A.R. will update this section if the state law changes. You should consult with your tax advisor to see how PPP loan forgiveness may affect you and your business.
ECONOMIC INJURY DISASTER LOANS (EIDL)
What is an Economic Injury Disaster Loan, and who qualifies?
Economic Injury Disaster Loans (EIDLs) are targeted, low-interest loans to small businesses that have been severely impacted by the coronavirus. They are currently available to small businesses with fewer than 500 employees, including sole proprietors, independent contractors and other self-employed individuals. Because most agents operate as independent contractors, agents can qualify for EIDLs.
Independent contractors who have experienced “substantial economic injury” are eligible for an EIDL. “Substantial economic injury” means the contractor is unable to meet their obligations and pay their ordinary and necessary operating expenses.
I heard that the SBA was offering EIDL emergency grants of $1,000 to independent contractors that did not need to be repaid. Are these grants still available?
With the adoption of the CARES Act II on December 27, 2020, Congress appropriated additional funds for the EIDL emergency grant program (which had previously run out of funds). However, emergency grants will now be “targeted,” meaning that the eligibility criteria are more restrictive. Please refer to the “’Targeted’ EIDL Advances” section below for more information.
How much money can I receive for an EIDL loan?
The full amount of the loan can be up to $500,000, with interest rates of 3.75% for for-profit businesses. You cannot request the specific amount of the loan - instead, the SBA determines how much you can borrow using a formula intended to approximate 24 months of your operating expenses.
Are EIDL loans forgivable?
No. Repayment plans are available — up to 30 years — as determined on a case-by-case basis.
What can I use the EIDL funds for?
The EIDL loan proceeds may be used for working capital purposes, including payments of fixed debts, payroll, and accounts payable. They may not be used to refinance long term debt.
Where can I apply for an EIDL, and what information do I need?
A streamlined online application for EIDL loans has been made available by SBA at the following link: https://covid19relief.sba.gov/
You will need to provide the following information as part of the application process:
General information about the business, including EIN (or SSN for a sole proprietorship)
Gross revenues for the 12 months prior to the date of the disaster (which SBA designates as Jan. 31, 2020)
Cost of goods sold for the 12 months prior to the date of the disaster
Personal and contact information for business owners
Information about where to send funds (bank name, account number, and routing number)
How long will it take for me to get an EIDL after I apply?
According to the New York Times, it typically takes one to two weeks for the SBA to make a decision on an application, and up to a week after that for the full loan check to be disbursed. Because of the current application backlog, application approvals are likely to be significantly delayed.
Where can I find more information about EIDLs?
The SBA has an online guide, which is available here:
"Targeted" EIDL Advances
What is a “targeted” EIDL advance?
The CARES II Act created additional targeted EIDL advances for eligible entities located in low-income communities. If the eligible entity received an EIDL advance earlier under the CARES Act, the “targeted” advance allows the entity to receive an amount equal to the difference of what the entity received under the CARES Act and $10,000. If the eligible entity has previously applied for EIDL assistance on or before December 27, 2020 but has not yet received an EIDL advance, the entity will be eligible to receive a grant of $10,000.
Additionally, the American Rescue Plan created a new supplemental “targeted” advance program. Eligible entities will be able to receive additional $5,000 grants through this program.
Can I receive a “targeted” EIDL advance if I have not yet applied for an EIDL?
No. Only those who applied for EIDL assistance on or before December 27, 2020 are eligible to receive a “targeted” EIDL advance.
What are the eligibility requirements for a “targeted” EIDL advance?
An eligible entity must be: (i) located in a low-income community; (ii) have suffered an economic loss of greater than 30 percent; and (iii) employ not more than 300 people (sole proprietors and independent contractors are also eligible).
“Low-income community” is defined in the Internal Revenue Code as any population census tract where the poverty rate is at least 20 percent, or (i) in the case of a tract not located within a metropolitan area, the median family income for such tract does not exceed 80 percent of statewide median family income; or (ii) in the case of a tract located within a metropolitan area, the median family income for such tract does not exceed 80 percent of the greater of statewide median family income or the metropolitan area median family income.
“Economic loss” is defined as the amount by which the gross receipts of the covered entity declined during an 8-week period between March 2, 2020 and December 31, 20201, relative to a comparable 8-week period immediately preceding March 2, 2020 or during 2019.
To be eligible for a supplemental “targeted” advance, an entity must meet all of the criteria above, plus: (1) the entity must employ not more than 10 people; and (2) the entity must have suffered an economic loss greater than 50 percent. Entities eligible for a supplemental “targeted” advance will be able to receive an additional $5,000 grant.
How can I apply for a “targeted” EIDL advance?
According to the SBA, applicants do not need to take any action at this time. The SBA will reach out to those who qualify to explain how to receive a “targeted” EIDL advance. SBA will first reach out to EIDL applicants that already received a partial EIDL advance (i.e. between $1,000 - $9,000) and will later reach out to those who applied for EIDL assistance on or before December 27, 2020 but did not receive an EIDL advance due to lack of program funding. Applicants will be contacted directly by SBA via email in the coming weeks with instructions to determine eligibility and submit documentation.
EXPRESS BRIDGE LOANS (EBL)
What is an SBA Express Bridge Loan, and who qualifies?
The Express Bridge Loan (EBL) program authorizes SBA express lenders to provide expedited guaranteed bridge loan financing on an emergency basis for disaster-related purposes to small businesses (including sole proprietors, independent contractors and other self-employed individuals) while those small businesses apply for and await long-term financing. Effective March 25, 2020, SBA expanded the program to apply nationwide. Independent contractors who have been adversely impacted by the COVID-19 emergency are eligible. The contractor must have been engaging in business when the declared disaster commenced and must meet all other 7(a) loan eligibility requirements.
SBA express lenders are only allowed to make EBL loans to eligible borrowers with which the lender had an existing banking relationship on or before the date of the applicable disaster. Check with your bank to determine if it is currently offering EBLs and to see if you qualify. Applying for an EBL will be done through your lender.
How much money can I borrow with an EBL, and what are the terms of the loan?
You can borrow up to $25,000, which can be used for “disaster-related purposes” to support the survival and/or reopening of your business. The maximum EBL loan term is 7 years. The lender may require the EBL borrower to pay the loan, in part or in full, if the borrower is approved for long-term disaster financing (such as an EIDL) that allows loan proceeds to be used for EBL loan reimbursement.
How long will it take for me to get an EBL after I apply?
Because an EBL loan is a bridge loan, first disbursement of the EBL loan must occur within 45 days of the lender’s receipt of an SBA loan number. If the first disbursement is not made within 90 days from receipt of an SBA loan number, the EBL loan will be canceled.
Where can I find more information about EBLs?
SBA’s EBL program guide is available here:
CALIFORNIA SMALL BUSINESS COVID-19 RELIEF GRANT PROGRAM
What is the California Small Business COVID-19 Relief Grant Program, and how much money can I receive from the program?
California has announced a new relief grant program for small businesses affected by the COVID-19 pandemic. The program provides micro grants ranging from $5,000 to $25,000 to eligible small businesses (including independent contractors and sole proprietors) impacted by COVID-19 and the related health and safety restrictions. The grant amount will be based on the business’s annual revenue as documented in its most recent tax return.
For annual revenues of $1,000 to $100,000, the available grant amount is $5,000.
For annual revenues greater than $100,000 up to $1,000,000, the available grant amount is $15,000.
For annual revenues greater than $1,000,000 up to $2,500,000, the available grant amount is $25,000.
How can I apply for the program?
Applications for the program must be submitted through a Community Development Financial Institution (CDFI) that has partnered with the state of California to distribute the funds. The list of partners, organized by location and by language services, can be found here.
The first two rounds for applications for the relief grant program were in January and February, and those awarded grants in those rounds were already notified. From March 5 to March 11, grants will be awarded to waitlisted businesses that applied during the previous application rounds, but new applications will not be accepted during this round. From March 25 to March 31, there will be another application round where businesses that have not yet applied for a grant will be permitted to apply. Applicants who submitted their application and submitted all documentation in an earlier application round should not reapply during subsequent rounds, since one complete application qualifies an applicant to be considered for all rounds.
What are the eligibility requirements for the program?
A small business must satisfy the following criteria to be eligible to receive a grant award:
Must be a sole proprietor, independent contractor, or registered “for-profit” business entity (e.g., C-corporation, S-corporation, limited liability company, partnership) that has yearly gross revenue of $2.5 million or less (but at least $1,000 in yearly gross revenue) based on the most recently filed tax return.
Must be an active business operating since at least June 1, 2019.
Must currently be operating or have a clear plan to re-open once the State of California permits re-opening of the business.
Must be impacted by COVID-19 and the health and safety restrictions such as business interruptions or business closures incurred as a result of the COVID-19 pandemic.
Must be able to provide organizing documents including 2018 or 2019 tax returns or Form 990s, copy of official filing with the California Secretary of State, if applicable, or local municipality for the business such as one of the following: Articles of Incorporation, Certificate of Organization, Fictitious Name of Registration or Government-Issued Business License.
Must be able to provide acceptable form of government-issued photo ID.
Applicants with multiple business entities, franchises, locations, etc. are not eligible for multiple grants and are only allowed to apply once using their eligible small business with the highest revenue.
How will the decision be made as to who receives a grant?
Applications will be reviewed to determine whether the applicant meets the eligibility requirements. Eligible businesses will then be scored based on COVID-19 impact factors incorporated into the program’s priority criteria, including the following:
Geographic distribution based on COVID-19 health and safety restrictions following California’s Blueprint for a Safer Economy and county status and the new Regional Stay At Home Order;
Industry sectors most impacted by the pandemic; and
Underserved small business groups served by the state-supported network of small business centers (i.e., businesses majority owned and run on a daily basis by women, minorities/persons of color, veterans and businesses located in low-to-moderate income and rural communities).
Therefore, please keep in mind that it is not certain you will receive a grant even if you apply and meet all eligibility requirements.
How can I use the grant money?
Eligible costs are only those costs incurred due to the COVID-19 pandemic and the health and safety restrictions such as business interruptions or business closures incurred as a result of the COVID-19 pandemic. The following are the eligible uses of grant funds:
All employee expenses including payroll costs, health care benefits, paid sick, medical, or family leave, and insurance premiums;
Working capital, overhead (including rent, utilities, mortgage principal and interest payments (excluding mortgage prepayments)), debt payments (principal and interest) incurred before March 1, 2020;
Costs associated with re-opening business operations after being fully or partially closed due to state-mandated COVID-19 health and safety restrictions and business closures;
Costs associated with complying with COVID-19 federal, state or local guidelines for reopening with required safety protocols, including but not limited to equipment, plexiglass barriers, outdoor dining, PPE supplies, testing, and employee training expenses; or
Any other COVID-19 related expenses not already covered through grants, forgivable loans or other relief through federal, state, county or city programs.
The following are the ineligible uses of grant funds:
Human resource expenses for the State share of Medicaid
Employee bonuses or severance pay
Personal expenses or other expenses unrelated to COVID-19 impacts
Expenses for repairs from damages already covered by insurance
Reimbursement to donors for donated items or services
Where can I find a step-by-step guide for completing the application?
There is a guide available here:
Where can I find more information?
For a complete FAQ about the California COVID-19 relief grant program, please refer to this page: https://careliefgrant.com/50440-2/.