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NAR’s Federal Advocacy team has been working closely with Congress and the Administration to ensure the interests of REALTORS® and their clients are protected in any federal action in response to COVID-19. Many REALTORS® are small businesses, or work with them as clients. In the most recent relief package passed into law, the “Coronavirus Aid, Relief, and Economic Security Act” or CARES Act, there were significant provisions aimed at assisting small businesses during this difficult time. The CARES Act appropriates more than $360 billion total for new Small Business Administration (SBA) programs – the 7(a) Paycheck Protection Program loans and the Economic Injury Disaster Loans (EIDL) advance grants program.
Provided below are a number of Q&As to address frequent questions about who is eligible and how to apply for these brand new programs created by the Administration. We continue to learn more about these relief measures daily and will update this document as events warrant.
1. What relief can small businesses get through the SBA from the CARES Act?
The CARES Act creates two new programs/grants through the Small Business Administration: the SBA 7(a) “Paycheck Protection Program” (PPP) and the SBA Economic Injury Disaster Loan (EIDL) grant. The Act appropriates more than $360 billion for the administration of these two programs and the loans/grants that they will provide.
The PPP loans are based on the average monthly payroll expenses of a business, multiplied by 2.5 and capped at $10 million. They are intended to cover expenses for a business during any 8-week period between February 15, 2020 and June 30, 2020. They can be used for payroll costs, rents, mortgage interest, and utilities. If a business owner maintains a certain level of payroll expenses and employee numbers during that 8-week period, the loan is 100% forgiven; as employees go below those levels, the forgivable amount is phased out. (More details on this loan can be found in Section II, SBA 7(a) Paycheck Protection Program (PPP) loans).
For additional information, please read the Treasury Department’s overview of the SBA 7(a) PPP loan program(link is external).
Beginning April 3, small businesses and sole proprietorships can apply for SBA 7(a) PPP loans with an approved SBA lender. Independent contractors and self-employed individuals can apply beginning April 10.
The EIDL grants are a new feature of the EIDL program. SBA EIDL loans are available for small businesses during a declared disaster that have suffered economic harm(link is external). The COVID-19 crisis has been declared an eligible disaster. The limit on these loans is $2 million. Under the CARES Act, applicants can receive a $10,000 advance on their EIDL loans from lenders which will be disbursed within three business days of applying. That $10,000 advance would be forgivable. EIDL loans can be used to provide paid sick leave to employees unable to work due to COVID-19, maintaining payroll, meeting increased costs due to supply chain disruptions, rent or mortgage payments, and repaying debt obligations. (More details on this can be found in Section III, SBA Economic Injury Disaster Loans (EIDL) and EIDL Grants).
For information direct from the drafters of the legislation, please read the Senate Small Business Committee’s Guide to the CARES Act for Small Businesses(link is external).
2. What counts as a “small business”?
The CARES Act broadens the definition of “small business” to include any business that operates with 500 or fewer employees, or, a size standard set for the industry by the Administration. Sole proprietors, independent contractors and the self-employed also qualify. The SBA does not currently have an industry size standard for employee numbers for real estate brokerages, property managers, appraisers, or other activities related to real estate.
3. Who is eligible for a PPP loan?
In addition to small businesses that meet current SBA requirements, any business with 500 or fewer employees, sole proprietors, independent contractors, and “gig economy” workers qualify for the 7(a) PPP loans.
4. Who is eligible for an EIDL?
Under the CARES Act, an EIDL is available to any small business or business with 500 or fewer employees (or an industry size standard above 500 set by the Administration) that experiences an economic hardship as a result of COVID-19. This includes sole proprietors, independent contractors, tribal businesses, and cooperatives.
A business must make a good-faith certification that it is suffering an economic injury due to the COVID-19 crisis.
5. What about businesses with multiple locations?
Under the CARES Act, businesses with multiple physical locations that fall under the category of a hotel, restaurant, or bar covered by NAICS Code 72(link is external) (“Accommodations and Food Services”) which has 500 or fewer employees per physical location may qualify for the SBA 7(a) loan program. However, if a single location has more than 500 employees than you may not qualify. We are awaiting clarification on the SBA on this point.
6. What about franchises?
Franchises that are assigned codes in the SBA’S Franchise Directory(link is external) are considered their own entity – so, those businesses will not need to combine employee numbers across all franchise locations. Franchises with 500 or fewer employees are eligible for the PPP loans.
7. How long will it take for loans to be disbursed?
EIDL emergency advance grants are to be distributed within three days of application, but the other programs do not have deadlines for lenders to disburse loans.However, the purpose of these new programs is to get funds to small businesses struggling to stay open and keep employees paid due to COVID-19, so the CARES Act has provisions to reduce burdens in the processes and increase efficiency. For example, SBA lenders are delegated the authority to make and approve most loans with minimal agency interaction. Documentation requirements will be minimal, and it is presumed that a business has been negatively impacted by COVID-19 if it was operating on February 15, 2020 and had employees or paid independent contractors.
In addition, Congress appropriated millions of dollars to the SBA specifically for purposes of administering the new loan programs and creating resources for borrowers.
8. Where do I get an SBA loan from?
SBA 7(a) PPP Loans are disbursed by SBA-approved lenders. Due to the circumstances of the COVID-19 crisis, the Administration has given the Treasury and the SBA the ability to grant temporary “SBA-lender status” to lenders that do not currently participate in the program, in order to process and disburse more loans in a short period of time. The SBA does not itself issue the loans, but guarantees them to the lender.
SBA EIDLs are administered directly by the SBA. To apply for an SBA EIDL loan, visit the application page(link is external)(see Section III, “SBA Economic Injury Disaster Loans and EIDL Grants” below for more information).
9. Where can I find an SBA lender?
You can call your bank or find SBA-approved lenders in your area through the SBA online Lender Match Tool(link is external). In addition, you can reach out to a Small Business Development Center or a Women’s Business Center (see #11 below) and they will provide free assistance and guide you to lenders.
The CARES Act also gives the Treasury and the SBA the authority to grant temporary SBA lender status to lenders that do not currently participate in the program, so the list of lenders will likely grow.
10. What documents will be required to get an SBA loan?
Applicants for the SBA emergency loans will only need to provide minimal documentation to show financial hardship – a “good faith certification” that it needs the loan to continue operations, that the loan will be used for eligible expenditures (payroll, rent, mortgage interest, or utility payments), and that it has not already received SBA loans for these purposes.
However, for the 7(a) PPP loans, the borrower will need to provide documentation to calculate their average monthly payroll for the year prior to receiving the loan. The Treasury Department has released the application form for SBA 7(a) PPP loans(link is external).
11. Where can I get individual counseling on SBA loans and programs for small businesses?
The SBA has several options for in-person assistance to small businesses around the country. In addition to the SBA Regional and District Offices around the country, there is a network of Small Business Development Centers and Women’s Business Centers, which provide counseling and training to small business owners, including assistance finding lenders and choosing the right loan products. Please visit SBA’s Local Assistance page(link is external) for information on the SBA’s local assistance offerings.
Read the full article here.
By: NAR
