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401 Grand St. Paterson, NJ 07505 | (973) 881-4000
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Breaking News for the Business Community

BREAKING NEWS FOR THE BUSINESS COMMUNITY

April 8, 2020
Passaic County, New Jersey
 


The Small Business Owners Guide to the CARES Act

WEBINAR with NJ Economic Development Authority
 
On behalf of the Passaic County Division of Economic Development, Borough of Hawthorne, Hawthorne Chamber of Commerce and CrossFit SOAR, we will be holding a webinar with the New Jersey Economic Development Authority (NJEDA) on the new initiatives to support businesses impacted by COVID-19.  The initiatives range from grants, zero-interest loan program for mid size companies, and support for private sector lenders and Community Development Financial Institutions.
 
The webinar will be conducted on Thursday, April 9, 2020 at 2:00 p.m.  Mathew Abraham, Regional Director of Business Development, will be presenting the NJEDA’s Economic Relief Package for Small and Mid-size businesses.
 
Please Join the FREE Webinar Meeting at https://tenfour.webex.com/tenfour/j.php?MTID=m2c791630bc0dfc8fc7f8ed0fd89abbdb at 2:00 pm Thursday April 9, 2020. 
 
The webinar will be recorded and distributed to everyone.  
 
 
New Jersey Economic Development Authority
Financing Support for Business in Response to COVID-19
 
The EDA Board met on March 26, 2020 and approved a package of several programs to assist companies impacted by the COVID-19 health crisis. 
 
For Information on both State of NJ and Federal USSBA Programs visit:  https://assistance.business.nj.gov/
 
A package of new initiatives from the New Jersey Economic Development Authority includes a grant program for small businesses, a zero-interest loan program for mid-size companies, support for private-sector lenders and Community Development Financial Institutions (CDFIs), funding for entrepreneurs, and a variety of resources providing technical support and marketplace information. Taken together, they will provide more than $75 million of State and private financial support, with the opportunity to grow to more than $100 million if additional philanthropic, State, and federal resources become available. The initiatives will support between 3,000 and 5,000 small and midsize enterprises and are meant to complement recently announced federal economic recovery initiatives.
 
Please click on each program below for more information, including full eligibility criteria.
 
HOTLINE for NJEDA Grant Programs: 844-965-1125 ONLY.
 
Small Business Emergency Assistance Grant Program – A $5 million program that will provide grants up to $5,000 to small businesses in retail, arts, entertainment, recreation, accommodation, food service, and other services – such as repair, maintenance, personal, and laundry services – to stabilize their operations and reduce the need for layoffs or furloughs. Learn more
 
GRANT APPLICATIONS OPEN APRIL 3, 2020 9 am, closes April 10, 2020 – Applications MUST be filled out correctly with requested information and attachments – otherwise they will go back to the bottom of the list of applicants
 
Small Business Emergency Assistance Loan Program – A $10 million program that will provide working capital loans of up to $100,000 to businesses with less than $5 million in revenues. Loans made through the program will have ten-year terms with zero percent for the first five years, then resetting to the EDA’s prevailing floor rate (capped at 3.00%) for the remaining five years.
 
Community Development Finance Institution (CDFI) Emergency Loan Loss Reserve Fund – A $10 million capital reserve fund to take a first loss position on CDFI loans that provide low interest working capital to micro businesses. This will allow CDFIs to withstand loan defaults due to the outbreak, which will allow them to provide more loans at lower interest rates to microbusinesses affected by the outbreak.
 
Notice of Funding Availability: Applications for the CDFI Emergency Assistance Grant Program Will Open at 9:00am on Wednesday April 8, 2020 on https://application.njeda.com/
 
CDFI Emergency Assistance Grant Program – A $1.25 million program that will provide grants of up to $250,000 to CDFIs to scale operations or reduce interest rates for the duration of the outbreak.
 
NJ Entrepreneur Support Program – A $5 million program that will encourage continued capital flows to new companies, often in the innovation economy, and temporarily support a shaky market by providing 80 percent loan guarantees for working capital loans to entrepreneurs.
 
Small Business Emergency Assistance Guarantee Program – A $10 million program that will provide 50 percent guarantees on working capital loans and waive fees on loans made through institutions participating in the NJEDA’s existing Premier Lender or Premier CDFI programs.
 
Emergency Technical Assistance Program – A $150,000 program that will support technical assistance to New Jersey-based companies applying for State and US Small Business Administration programs. The organizations contracted will be paid based on SBA application submissions supported by the technical assistance they provide.
 
The NJEDA has created a webpage that directs business owners to various resources to assist in coping financially with the COVID-19 public health crisis. This site will be updated with any new programs or support that becomes available. 
 
 
 
 
NJ EDA Technical Assistance to Companies to Complete Applications:
 
Rising Tide Capital, 384 Martin Luther King Drive, Jersey City, NJ 07305
 
African American Chamber of Commerce of NJ, 379 West State Street, Trenton, NJ 08618 609-571-1620 www.aaccnj.com
 
NJ State Veterans Chamber of Commerce, 65 School Road West, Marlboro, NJ 07746 732-778-7708 info@njveteranschamber.com    www.njveteranschamber.com
 
Statewide Hispanic Chamber of Commerce of NJ, 1280 Wall Street West, Suite 312, Lyndhurst, NJ 07071 201-935-0035 www.shccnj.org chamber@shccnj.org
 
 
State of New Jersey Website Devoted to COVID-19 Business Concerns
 
The State of New Jersey has established a special website devoted to business concerns during the coronavirus emergency. The site, cv.business.nj.gov, will be updated as new information becomes available. We encourage you to communicate this with the appropriate individuals within your organization.
In addition, the New Jersey Business Action Center’s Helpline is now available from 8:00 am – 9:00 pm, seven days a week. Call 1-800- JERSEY-7 to address any concerns you or your employees have.
 
 
US Small Business Administration Business Information
 
The USSBA has approved lending programs for the current crisis and will be opening up their website for new applications! A good source of information:
 
Small Business Guidance Loan Resources
 
SBA hotline number 800-659-2955.
 
Applicants may apply online, receive additional disaster assistance information, and download applications at: https://disasterloan.sba.gov/ela.
 
Applicants may also call SBA’s Customer Service Center at (800) 659-2955 or email disastercustomerservice@sba.gov for more information on SBA disaster assistance.
 
Additional funding for business has been approved by the US Congress. Please note brief summary below:
 
 
Paycheck Protection Program
Paycheck Protection Program Applications Opens on April 3, 2020
 
The Treasury has just announced the start date of the Paycheck Protection Program (PPP) that is designed to provide the necessary cash flow to give employers the ability to maintain their payroll during this current crisis.
 
The interest rate on the PPP is 1%.
Can borrow up to $10,000,000.
Amortization Period: 2 years
Does not need to demonstrate ability to repay or have collateral.
 
How to find an SBA PPP Lender:
 
When to Apply
  • Starting April 3, 2020, small businesses and sole proprietorships can apply.
  • Starting April 10, 2020, independent contractors and self-employed individuals can apply.
 
We encourage you to apply as quickly as you can because there is a funding cap.
 
Additional Resources
 
The Paycheck Protection Program (https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program-ppp) prioritizes millions of Americans employed by small businesses by authorizing up to $349 billion toward job retention and certain other expenses.
 
The Paycheck Protection Program provides small businesses with funds to pay up to 8 weeks of payroll costs including benefits. Funds can also be used to pay interest on mortgages, rent, and utilities.
 
Small businesses employing 500 or less and eligible nonprofit organizations, Veterans organizations, and Tribal businesses described in the Small Business Act, as well as individuals who are self-employed or are independent contractors, are eligible if they also meet program size standards.
 
Under this program:
  • Eligible recipients may qualify for a loan up to $10 million determined by 8 weeks of prior average payroll plus an additional 25% of that amount.
  • Loan payments will be deferred for six months.
  • If you maintain your workforce, SBA will forgive the portion of the loan proceeds that are used to cover the first 8 weeks of payroll and certain other expenses following loan origination.
 
Funds are provided in the form of loans that will be fully forgiven when used for payroll costs, interest on mortgages, rent, and utilities (due to likely high subscription, at least 75% of the forgiven amount must have been used for payroll). Loan payments will also be deferred for six months. No collateral or personal guarantees are required. Neither the government nor lenders will charge small businesses any fees.
 
You can apply through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. Other regulated lenders will be available to make these loans once they are approved and enrolled in the program. You should consult with your local lender as to whether it is participating. All loans will have the same terms regardless of lender or borrower.
 
 
Instructions: https://home.treasury.gov/system/files/136/PPP%20Borrower%20Information%20Fact%20Sheet.pdf
 
Economic Injury Disaster Loans and Loan Advance
The SBA is now processing EIDL loans!
 
Economic Injury Disaster Loan   https://covid19relief.sba.gov/#/
 
In response to the Coronavirus (COVID-19) pandemic, small business owners in all U.S. states, Washington D.C., and territories are eligible to apply for an Economic Injury Disaster Loan advance of up to $10,000. Applications anticipated to open April 13, 2020.
 
The SBA’s Economic Injury Disaster Loan program provides small businesses with working capital loans of up to $2 million that can provide vital economic support to small businesses to help overcome the temporary loss of revenue they are experiencing. The loan advance will provide economic relief to businesses that are currently experiencing a temporary loss of revenue. Funds will be made available within three days of a successful application, and this loan advance will not have to be repaid.
 
This program is for any small business with less than 500 employees (including sole proprietorships, independent contractors and self-employed persons), private non-profit organization or 501(c)(19) veterans’ organizations affected by COVID-19.
 
Businesses in certain industries may have more than 500 employees if they meet the SBA’s size standards for those industries.
 
The Economic Injury Disaster Loan advance funds will be made available within days of a successful application, and this loan advance will not have to be repaid. 
 
The interest rate on the EIDL: For Profits: 3.75% Non-Profits: 2.75%
Can borrow up to $2,000,000.
Amortization Period: 30 years
Does need to demonstrate ability to repay and have collateral.
Personal guarantees required.
 
Apply through your bank or visit: https://covid19relief.sba.gov/#/
SBA Debt Relief Program
The SBA Debt Relief program will provide a reprieve to small businesses as they overcome the challenges created by this health crisis.
Under this program:
o   The SBA will also pay the principal and interest of new 7(a) loans issued prior to September 27, 2020.
o   The SBA will pay the principal and interest of current 7(a) loans for a period of six months.
 
SBA Express Bridge Loans
 
Express Bridge Loan Pilot Program allows small businesses who currently have a business relationship with an SBA Express Lender to access up to $25,000 with less paperwork. These loans can provide vital economic support to small businesses to help overcome the temporary loss of revenue they are experiencing and can be a term loans or used to bridge the gap while applying for a direct SBA Economic Injury Disaster loan. If a small business has an urgent need for cash while waiting for decision and disbursement on Economic Injury Disaster Loan, they may qualify for an SBA Express Disaster Bridge Loan.
 
Terms
  • Up to $25,000
  • Fast turnaround
  • Will be repaid in full or in part by proceeds from the EIDL loan
 
Common Issues Small Businesses May Encounter:
  • Capital Access – Incidents can strain a small business's financial capacity to make payroll, maintain inventory and respond to market fluctuations (both sudden drops and surges in demand). Businesses should prepare by exploring and testing their capital access options so they have what they need when they need it. See SBA’s capital access resources.
  • Workforce Capacity – Incidents have just as much impact on your workers as they do your clientele. It’s critical to ensure they have the ability to fulfill their duties while protected.
  • Inventory and Supply Chain Shortfalls – While the possibility could be remote, it is a prudent preparedness measure to ensure you have either adequate supplies of inventory for a sustained period and/or diversify your distributor sources in the event one supplier cannot meet an order request.
  • Facility Remediation/Clean-up Costs – Depending on the incident, there may be a need to enhance the protection of customers and staff by increasing the frequency and intensity by which your business conducts cleaning of surfaces frequently touched by occupants and visitors. Check your maintenance contracts and supplies of cleaning materials to ensure they can meet increases in demand.
  • Insurance Coverage Issues – Many businesses have business interruption insurance; Now is the time to contact your insurance agent to review your policy to understand precisely what you are and are not covered for in the event of an extended incident.
  • Changing Market Demand – Depending on the incident, there may be access controls or movement restrictions established which can impede your customers from reaching your business. Additionally, there may be public concerns about public exposure to an incident and they may decide not to go to your business out of concern of exposing themselves to greater risk. SBA’s Resources Partners and District Offices have trained experts who can help you craft a plan specific to your situation to help navigate any rapid changes in demand.
  • Marketing – It’s critical to communicate openly with your customers about the status of your operations, what protective measures you’ve implemented, and how they (as customers) will be protected when they visit your business. Promotions may also help incentivize customers who may be reluctant to patronize your business.
  • Plan – As a business, bring your staff together and prepare a plan for what you will do if the incident worsens or improves. It’s also helpful to conduct a tabletop exercise to simulate potential scenarios and how your business management and staff might respond to the hypothetical scenario in the exercise. For examples of tabletop exercises, visit FEMA’s website at: https://www.fema.gov/emergency-planning-exercises
 
SBA Products and Resources
Access to Capital
 
SBA provides a number of loan resources for small businesses to utilize when operating their business. For more information on loans or how to connect with a lender, visit: https://www.sba.gov/funding-programs/loans.
  • 7(a) program offers loan amounts up to $5,000,000 and is an all-inclusive loan program deployed by lending partners for eligible small businesses within the U.S. States and its territories. The uses of proceeds include: working capital; expansion/renovation; new construction; purchase of land or buildings; purchase of equipment, fixtures; lease-hold improvements; refinancing debt for compelling reasons; seasonal line of credit; inventory; or starting a business.
  • Express loan program provides loans up to $350,000 for no more than 7 years with an option to revolve. There is a turnaround time of 36 hours for approval or denial of a completed application. The uses of proceeds are the same as the standard 7(a) loan.
  • Community Advantage loan pilot program allows mission-based lenders to assist small businesses in underserved markets with a maximum loan size of $250,000. The uses of proceeds are the same as the standard 7(a) loan.
  • 504 loan program is designed to foster economic development and job creation and/or retention. The eligible use of proceeds is limited to the acquisition or eligible refinance of fixed assets.
  • Microloan program involves making loans through nonprofit lending organizations to underserved markets. Authorized use of loan proceeds includes working capital, supplies, machinery & equipment, and fixtures (does not include real estate). The maximum loan amount is $50,000 with the average loan size of $14,000.
 
Exporting Assistance
 
SBA provides export loans to help small businesses achieve sales through exports and can help these businesses respond to opportunities and challenges associated with trade, such as COVID-19. The loans are available to U.S. small businesses that export directly overseas, or those that export indirectly by selling to a customer that then exports their products.
  • Export Express loan program allows access to capital quickly for businesses that need financing up to $500,000. Businesses can apply for a line of credit or term note prior to finalizing an export sale or while pursuing opportunities overseas, such as identifying a new overseas customer should an export sale be lost due to COVID-19.
  • Export Working Capital program enables small businesses to fulfill export orders and finance international sales by providing revolving lines of credit or transaction-based financing of up to $5 million. Businesses could use a loan to obtain or retain overseas customers by offering attractive payment terms.
  • International Trade loan program helps small businesses engaged in international trade to retool or expand to better compete and react to changing business conditions. It can also help exporting firms to expand their sales to new markets or to re-shore operations back to the U.S.
 
Government Contracting
 
SBA is focused on assisting with the continuity of operations for small business contracting programs and small businesses with federal contracts. For more information on federal contracting, visit https://www.sba.gov/federal-contracting/contracting-guide
 
More specifically:
 
  • 8(a) Business Development program serves to help provide a level playing field for small businesses owned by socially and economically disadvantaged people or entities, and the government limits competition for certain contracts to businesses that participate. The 8(a) program offer and acceptance process is available nationwide, and the SBA continues to work with federal agencies to ensure maximum practicable opportunity to small businesses. 8(a) program participants should stay in touch with their Business Opportunity Specialist (BOS).
  • HUBZone program offers eligibility assistance every Thursday from 2:00-3:00 p.m. ET at 1-202-765-1264; access code 63068189#. Members of the HUBZone team answer questions to help firms navigate the certification process. For specific questions regarding an application, please contact the HUBZone Help Desk at hubzone@sba.gov.
  • Women-owned Small Business firms who have questions, please visit www.sba.gov/wosbready or write to wosb@sba.gov.
  • Current Express lenders in NJ are (doesn’t include all national lenders, just ones who have made at least 15 SBA loans YTD): 
  • 1st Colonial Community Bank
  • 1st Constitution Bank
  • BCB Community Bank
  • Columbia Bank
  • Cross River Bank
  • Crown Bank
  • Financial Resources FCU
  • First Bank
  • First Commerce Bank
  • Fulton Bank
  • Kearny Bank
  • Lakeland Bank
  • Magyar Bank
  • Manasquan Bank
  • M&T
  • New Millennium Bank
  • Parke Bank
  • Peapack-Gladstone Bank
  • PNC
  • Provident Bank
  • Regal Bank
  • Santander Bank
  • Sturdy Savings Bank
  • TD Bank
  • The First National Bank of Elmer
  • Unity Bank
  • Wells Fargo
 
Any Questions, please call or email your Local Lender Relations Specialist:
Claudia Yarborough / LRS: Claudia.Yarborough@sba.gov or 973-645-3572 covers North Bergen, Essex, Hudson, Morris, Passaic, Sussex, and Union Counties
 
Loan Deferment Notice for all lenders:
 
Summary and Tips on Loan Deferments for 7(a) Lenders, 504 program Certified Development Companies (CDCs), and Microloan Intermediaries
 
SBA 7(a) Loans
 
  • May use your own unilateral authority to provide temporary relief 7(a) Business Loans
  • Loan Not Sold on Secondary Market: Lenders may grant a deferment of up to six (6) consecutive months.
  • Loan Sold on Secondary Market: Lenders may grant a one-time unilateral deferment of up to 90 days without requiring prior investor consent. Lenders may make additional loan deferments only with prior investor consent.
  • Tip: Need to assess the viability of the Borrower post deferment. 
  • Tip: If granting to Borrowers that are already 60 days or more past due on loans make sure to document why this is warranted as this will receive greater scrutiny during a Purchase review by the SBA should the Borrower eventually default.
  • Tip: Payment deferments can either be deferments of principal only, or principle and interest. Please note that if interest is deferred then the Borrower will need to catch up on their interest payments post-deferment. The Borrower’s future payments most likely would be interest-only until they catch up or if the loan is re-amortized the Borrower’s monthly payments may likely increase when the loan is re-amortized. 
  • 7(a) COVID-19 language:  Under the CARES Act, 7(a) Borrowers are relieved of any obligation to pay the principal, interest and any associated fees that are owed on a 7(a) loan in a regular servicing status (including Community Advantage loans) for a 6-month period beginning with the first payment due on a loan after March 27, 2020. SBA will pay this first loan payment to the Lenders within 30 days of the first loan payment due date after March 27, 2020. If a Lender receives a loan payment from a Borrower after March 27, 2020, the Lender must inform the Borrower that it has the option of the Lender either returning the loan payment to the Borrower or applying the loan payment to further reduce the loan balance after application of SBA’s payment.
  • To make the first payment, SBA will need Lenders to provide the gross monthly loan amount due (that includes both the guaranteed and non-guaranteed portions of the loan) as soon as possible to the FTA. SBA will provide further guidance to Lenders on the method and the date by which Lenders must provide the gross monthly loan amount.
 
SBA 504 Business Loans
  • The amount deferred should not exceed six (6) cumulative monthly payments or 20% of the original loan amount, whichever is less. Unless SBA has purchased the Debenture, the CDC must notify the Central Servicing Agent (CSA) of any deferment in order to avoid acceleration of the Note and the need to purchase the Debenture.
 
SBA Microloans
  • Intermediaries may provide a deferment on a loan made to a small business to ensure full repayment of the Microloan. Microloan Intermediaries may make deferments for up to six (6) months. No deferment may cause the life of the Microloan to extend beyond the maximum six (6) year maturity.
 
 
Additional SBA Links to visit:
 
 
 
 
CARES ACT TO PROVIDE COVID-19 RELIEF FOR BUSINESSES
Courtesy of SAX, LLP
 
On March 27, 2020, President Trump signed the “Coronavirus Aid Relief, and Economic Security Act” (CARES Act), allocating $2.2 trillion in spending and tax breaks to increase liquidity in the economy, provide relief for individuals and businesses, as well as specific industries most seriously harmed by this pandemic.
 
Important tax provisions include deferrals of employer payroll tax liabilities coupled with an employee retention tax credit, rollbacks of TCJA limitations on net operating losses (NOLs), deferral of the business interest limitation under Section 163(j), and a technical correction on qualified improvement property (QIP) that benefits taxpayers.
 
Here are the key business tax provisions in the CARES Act:
 
Payroll Tax Delay
Employers and self‚€employed individuals can defer payment of the 6.2% employer share of Social Security taxes on employee wages from 3/27/2020 to 12/31/2020, with 50% deferral required to be paid by the end of 2021 and the remaining 50% by the end of 2022. Employers, who have indebtedness forgiven under the paycheck protection program will not qualify for this deferral.
 
During the payroll tax deferral period, all employment tax payments made by the applicable dates above will be treated as having been timely made.
 
Employee Retention Credit
Eligible employers could receive a 50% payroll tax credit on qualified wages each quarter to encourage the retention of employees who cannot work due to a COVID-19 related circumstance. If the requirements of qualified wages, qualified employees and qualified employers are met, the credit would be for wages paid or incurred from 3/13/2020 to 12/31/2020.
Eligible employers including non-profits are employers:
  1. Whose operations have been fully or partially suspended as a result of a government order limiting commerce, travel, or group meetings, or
  2. Who have experienced a greater than 50% reduction in quarterly receipts, measured on a year-over-year basis
Eligible wages:
  • For employers who had an average of 100 or fewer full-time employees in 2019, all employee wages are eligible, regardless of whether the employee is furloughed.
  • For employers who had more than 100 full-time employees in 2019, only the wages of employees who are furloughed or face reduced hours as a result of their employers’ closure or reduced gross receipts are eligible for the credit.
 
Wages are capped at the first $10,000 and includes health benefits. Wages do not include amounts taken into account for purposes of the payroll credits, for required paid sick leave or required paid family leave in the Families First Coronavirus Act, nor for wages taken into account for the employer credit for paid family and medical leave.
 
The credit is not available to employers receiving Small Business Interruption Loans. No credit is also available with respect to an employee for any period for which the employer is allowed a Work Opportunity Credit.
 
Net Operating Losses (NOLs)
The law temporarily suspends the 80% taxable income limitation on utilizing NOLs through taxable years beginning before January 1, 2021.
 
Additionally, the law also allows for a 5-year carryback of NOLs arising in years 2018, 2019 and 2020. These provisions apply to individuals, estates and trusts as well.
 
Limitation on Business Interest 163 (j)
The new law relaxes the limitation on the deduction of business interest from 30% of adjusted taxable income (ATI) to 50% ATI, for taxable years beginning in 2019 or 2020.
 
In anticipation that the 2020 income will be lower than 2019, the CARES Act also provides for an election whereby the taxpayer can use their 2019 ATI to calculate the 2020 limitation. In the case of a taxpayer who had 2019 as a short year, income should be annualized to 12 months.
 
Considering that most partnership returns for 2019 have already been filed, the law provides for a special rule for them. The increase in the ATI limitation to 50% will apply to the 2020 tax year.
 
For partners that don’t elect out, any excess business interest disallowed in 2019 will be treated as follows:
  1. 50% of the excess business interest will be treated as paid or accrued by the partner in the partner’s first tax year beginning in 2020 and will not be subject to Section 163(j) limitation.
  2. The balance of 50% of the excess business interest will be subject to the limitations of Section 163(j). In other words, it will remain suspended until the partnership allocates excess taxable income or excess interest income to the partner.
Taxpayers may elect out of the increase, for any tax year. Once made, the election can be revoked only with IRS consent. For partnerships, the election must be made by the partnership and can be made only for tax years beginning in 2020.
 
Technical Correction: Qualified Improvement Property (QIP)
A correction to a drafting error in the Tax Cuts & Jobs Act (TCJA) now allows Qualified Improvement Property (QIP) to be treated as 15-year property. This will allow taxpayers to apply 100% bonus depreciation to eligible QIP retroactively for assets acquired and placed in service after 12/31/17.
Qualified improvement property includes any improvement made by the taxpayer, to a building’s interior, provided such improvement was placed in service after the building itself was placed in service. However, improvements do not qualify if they are attributable to:
  • the enlargement of the building;
  • any elevator or escalator; or
  • the internal structural framework of the building.
 
Charitable Contributions
The law increases the limitation of qualifying charitable contributions (QCC) made in 2020 from 10% to 25% of corporation’s taxable income. QCC are contributions made in the form of cash and not made to donor advisor funds or non-operating private foundations.
 
Also Included in the CARES Act for Businesses:
  • The taxable income limitation on the deduction for food inventory has also been increased from 15% to 25%.
 
For loan incentive programs available for businesses through the CARES Act, visit: https://www.saxllp.com/new-loan-incentive-programs-available-to-businesses-through-the-cares-act/     
 
New Loan Incentive Programs Available to Businesses Through the CARES Act
 
Due to the unfortunate Coronavirus pandemic, bi-partisan Congressional efforts have been in full force to support and encourage economic relief for individuals and businesses hard hit during this ongoing crisis. There have been a number of benefits passed via the Phase 1, Coronavirus Preparedness and Response Supplemental Appropriations Act and the Phase 2, Families First Coronavirus Response Act.
 
However, the most significant benefits package to date, the Phase 3 Coronavirus Aid, Relief, and Economic Security Act (“CARES Act or Act”) has recently been passed by Congress and signed into law by the President. The Act delivers over $2 trillion in economic stimulus aimed at providing relief for individuals and businesses, as well as specific industries most seriously harmed by this pandemic.
 
There are a number of beneficial provisions available in the Act, but we specifically wanted to inform you of two key provisions surrounding loan programs available for small businesses. While both programs are administered by the Small Business Administration (“SBA”), there are important eligibility, loan amount and debt forgiveness features and differences between the two that applicants must consider.
 
Paycheck Protection Program
Section 1102 of the CARES Act offers a $349 billion program to aid small businesses via federally guaranteed loans. Provided certain criterion are met, a portion of these loans are eligible for forgiveness such that qualifying small businesses would have access to cash without future repayment requirements or federal cancellation of indebtedness income recognition. Specific items to keep in mind include:
  • Eligibility is predicated solely on the number of full-time, part-time or other employees in both for-profit and non-profit small businesses.
  • Generally, the employee limit is 500, but there are exceptions for the accommodation and food service industry, affiliated groups and certain businesses in SBA-designated industries.
  • Sole proprietorships, self-employed individuals and independent contractors are eligible as well.
  • Ability to repay the loan is not an eligibility requirement.
  • Maximum amount of the loan is the lesser of:
  • 2.5 times the average total monthly Payroll Costs incurred during the 1-year period before the date the loan is made; plus
  • Refinance-eligible loans that were made from January 31, 2020 through the date the Paycheck Program Protection Loan is received; or
  • $10,000,000.
  • Note that special rules exist for businesses that were not in existence from February 15, 2019 – June 30, 2019.
  • Payroll Costs up to $100,000 in annual compensation (pro-rated from February 15, 2020 – June 30, 2020) include:
  • Salary, wages, commissions or similar compensation, including cash tips;
  • Vacation, parental leave, family leave, medical or sick leave;
  • Severance payments;
  • Group healthcare payments;
  • Retirement benefits; and
  • State or local tax assessed on the compensation of employees.
  • Loan proceeds can be used for:
  • Payroll Costs;
  • Group healthcare benefits, including health insurance premiums, sick leave, medical leave and/or family leave;
  • Mortgage or other interest on debts incurred prior to February 15, 2020; and
  • Rent and utilities.
  • The SBA plans to grant banking institutions with the authority to work directly with the businesses on application submission.
 
Loan Forgiveness
While there are a number of nuances that still need to be worked out, an area of great interest surrounds the debt forgiveness aspect. In particular, loan proceeds used for the expenditures listed above for an 8-week period beginning on the date the loan is received are eligible for 100% forgiveness. Amounts eligible for forgiveness will be proportionately reduced to the extent there is a year-over-year reduction in retained workers, although qualifying small businesses will be allowed to rehire previously terminated personnel without penalty.
 
To the extent loan proceeds are used outside this 8-week period and/or are used for ineligible expenditures, the interest rate is capped at 4% and the loan maturity period is up to 10 years. Additionally, there would be no borrower and/or lender fees and collateral and/or personal guarantees would not be necessary. Lastly, the loan payments can be deferred for 6 – 12 months.
 
Economic Injury Disaster Loans
While the SBA already had a program in place in the event of economic disaster and injury, Section 1110 of the CARES Act expands eligibility requirements for impacted small businesses while easing some of the documentation and collateral requirements.
 
Key criterion for applicants to consider under the Economic Injury Disaster Loan (“EIDL”) program are listed below. However, the most significant difference to applicants likely surrounds the debt forgiveness component, as loans under this program, other than potential $10,000 advances, are not eligible for forgiveness.
  • EIDL eligibility has been expanded to include small for-profit and non-profit businesses, as well as cooperatives and ESOPs, with 500 or fewer employees.
  • Certain SBA-designated business industries may also be eligible despite headcount in excess of 500 employees
  • Eligible applicants include businesses directly and indirectly impacted by the pandemic, as well as businesses that provide services and/or products to impacted businesses.
  • The SBA qualifying criteria and information requests, in comparison to the Paycheck Protection Program, can be more stringent, as repayment capabilities are factored into the SBA acceptance process.
  • Expanded program runs retroactively from January 31, 2020 – December 31, 2020.
  • Loan proceeds may be used for:
  • Payroll and certain types of sick/medical leaves;
  • Mortgage or rent payments;
  • Debts that could not be repaid due to decreased or lost revenue; and
  • Other expenses needed to operate the business
  • The maximum loan amount is $2,000,000 and interest rates range from 2.75% for non-profit entities to 3.75% for all other entities.
  • The loan term can be up to 30 years.
  • Whereas the SBA has empowered banking institutions to work directly with applicants as part of the Paycheck Protection Program, EIDL applicants are required to apply on the SBA website.
  • Collateral requirements exist for loans in excess of $25,000, although applicants will not necessarily be rejected strictly for lack of collateral.
  • Applicants must apply via the SBA website.
For the key tax provisions for individuals in the CARES Act, click here. https://www.saxllp.com/cares-act-to-provide-covid-19-relief-for-individuals/
 
The following is a chart comparing the two loan programs that have been introduced (or modified) by the CARES Act

COVID-19 Business

Private Sector Programs to Assist Companies
 
Bank Assistance Information
Several banks have set-up contact lines to work with individuals impacted by COVID-19. If a bank is not listed below, reach out to them
To find out what they are doing to assist those affected by COVID-19.
 
The Federal Deposit Insurance Corporation (FDIC) and the (National Credit Union Administration (NCUA) have also put out information
For bankers and consumers.
 
FDIC: https://www.fdic.gov/coronavirus/index.html
NCUA: https://www.ncua.gov/
 
Other banks assisting during COVID-19:
  • Bank of America: https://about.bankofamerica.com/promo/assistance/latest-updates-from-bank-of-america-coronavirus
  • Capitol One: https://www.capitalone.com/coronavirus/
  • Chase: https://www.chase.com/digital/resources/coronavirus
  • Citibank: https://online.citi.com/US/JRS/pands/detail.do?ID=covid19
  • Discover: https://www.discover.com/coronavirus/
  • PNC: https://www.pnc.com/en/customer-service/coronavirus-update.html
  • US Bank: https://www.usbank.com/splash/covid-19.html
  • Wells Fargo: https://newsroom.wf.com/press-release/corporate-social-responsibility/wells-fargo-donates-625-million-aidcoronavirus
 
JPMorgan Chase Makes $50 Million Philanthropic Investment to Help Address Immediate and Long-Term Impacts of COVID-19
 
Note article below about other bank support for the business community:
 
 
Call to Action
 
The Passaic County Division of Economic Development is reaching out to all companies who can manufacture masks, gowns, hand sanitizers and ventilators as needed by our health care providers. We already have companies manufacturing these products in Passaic County – THANK YOU! Please email Deborah Hoffman: deborahh@passaiccountynj.org if you would like to participate and we will link you with the appropriate federal and state contacts.
 
 
Department of Labor and Workforce Development – State of NJ
 
 
A new site has been set up by the Governor's Office to help share information with the public regarding the current situation. The "Jobs Portal" shows opportunities for employment, and the data comes from the employers themselves. This can be a good resource for NJ LWD, One-stop’s, Workforce Development Board’s, College staff, businesses, or for anyone who may have been displaced to find a new opportunity.  
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State of New Jersey COVID-19 Jobs and Hiring Portal. The State of New Jersey has developed a centralized resource to match talent with opportunities in industries on the front lines of serving New Jersians during the outbreak.   http://jobs.covid19.nj.gov.
 
Please visit the link below for important information on Sick Leave benefits for your employees and business compensation.
 
 
 
CARES Act Includes Payroll Protection Program Loans
 
Courtesy ofSeth Tipton and Sarah Powell, Florio Perrucci Steinhardt & Cappelli
 
Although the CARES Act contains numerous provisions, one of the most important for businesses with fewer than 500 employees is Section 1102. Section 1102 allows companies employing fewer than 500 employees (full, part-time, or otherwise), to obtain a Payroll Protection Program Loan (a "PPP Loan") of up to $10 Million from local Small Business Administration lenders for the covered period of February 15, 2020 through June 30, 2020 through an existing loan guarantee program of the Small Business Act (the "SBA"). 
           
The following entities and individuals may also be eligible for PPP loans:
 
  • 501(c)(3) nonprofits
  • 501(c)(19) veteran's organizations
  • Tribal business concerns with not more than 500 employees
  • Sole-proprietors, independent contractors and other self-employed individuals
  • Certain businesses in the hospitality/restaurant industry that employ no more than 500 employees per physical location and are below a certain gross annual receipts threshold
 
These PPP Loans allow companies to borrow the lesser of:
 
  • The average monthly amount paid by the applicant for payroll costs incurred during the one-year period before the date on which the loan is made, multiplied by 2.5, plus the value of any existing Disaster Loan under Section (b)(2) of the SBA received after January 31, 2020; or
  • $10 Million.
  • For example, if a company’s payroll from March 1, 2019 to February 29, 2020 was $1,500,000, that company would qualify for a loan of $3,750,000 ($1,500,000 x 2.5). 
 
"Payroll costs" includes any of the following:
 
  • Salary, wage, commission, or similar compensation
  • Payment of cash tip or equivalent
  • Payment for vacation, parental, family, medical or sick leave
  • Allowance for dismissal or separation
  • Payment required for the provisions of group health care benefits, including insurance premiums
  • Payment of any retirement benefit
  • Payment of state or local tax assessed on the compensation of employees
 
Applicants for PPP Loans do not need to demonstrate that they could not achieve credit elsewhere, fees are waived in their entirety, and interest rates are capped at 4%. Additionally, PPP Loans require neither collateral nor a personal guarantee by the borrower, and lenders are required to defer payments on PPP Loans for between six months and one year. Finally, the CARES Act does not prohibit PPP Loans for applicants who have already received Disaster Loans under the SBA, so long as the loans are not used for duplicative purposes. 
 
PPP loans can be used to repay or refinance existing Disaster Loans, for any authorized purpose under the SBA, as well as for the following:
 
  • Payroll costs
  • Sick leave
  • Maintaining group health insurance plans
  • Mortgage payments
  • Rent payments
  • Other existing debt obligations incurred before the covered period
 
The portion of PPP Loans used to cover payroll, mortgage, rent or utility costs from February 15, 2020 through June 30, 2020 are eligible for forgiveness, meaning that the borrower will not have to repay that portion of the loan. In order to incentivize the retention of employees at existing salaries, the amount of loan forgiveness is reduced by:
 
  • Any reduction in the average number of monthly full-time equivalent ("FTE") employees employed by the loan recipient during the eight weeks following disbursement of the loan (the "covered period"), as compared to the average number of monthly FTE employees employed by the recipient during, at the recipient's election, the period from February 15, 2019 through June 30, 2019, or the period between January 1, 2020 and February 29, 2020 (the "reference period"), with special rules for seasonal employers; and
  • For example, if the recipient had an average of 85 FTE employees during the covered period, and an average of 100 FTE employees during the reference period, then the recipient would only be entitled to 85% of the loan forgiveness that would otherwise be available.
 
The amount of any reduction in total salary or wages of any employee with an annualized rate of pay of $100,000 or less during the covered period that is in excess of 25% of the total salary or wages of the employee during the most recent full quarter during which the employee was employed
In order to incentivize the rehiring of employees and reversal of any salary reductions, loan forgiveness will be determined without regard to any reductions, if, by June 30, 2020, the loan recipient rehires all laid off employees and fully restores any salary reductions occurring during the period of February 15, 2020 through 30 days after enactment of the CARES Act.
 
The Firm’s lending and business attorneys have a wealth of experience in handling commercial loans for a variety of different industries. This team is poised and ready to begin the process of obtaining PPP Loans for qualifying companies, and to assist you with other provisions of the CARES Act. Please contact us at stipton@floriolaw.com or spowell@floriolaw.com if you have any questions.
 
 
Recent Executive Orders Signed by Governor Murphy
Content from BIONJ
 
 
Governor Phil Murphy today signed Executive Order No. 119, which extends the Public Health Emergency declared on March 9, 2020 through Executive Order No. 103. Under the Emergency Health Powers Act, a declared public health emergency expires after 30 days unless renewed. 
 
Executive Order No. 119 extends all Executive Orders issued under the Governor’s authority under the Emergency Health Powers Act. It also extends all actions taken by any Executive Branch departments and agencies in response to the Public Health Emergency presented by the COVID-19 outbreak.
 
For the full text of Executive Order No. 119, https://nj.gov/infobank/eo/056murphy/pdf/EO-119.pdf.
 
 
Order Also Prohibits All Social Gatherings, Mandates Work from Home Arrangements for Employees When Possible, and Invalidates Any Conflicting Local and County Regulations
 
To mitigate the impact of COVID-19 and protect the capacity of New Jersey's health care system for the State's most vulnerable, Governor Phil Murphy today signed Executive Order No. 107, directing all residents to stay at home until further notice. The order provides for certain exceptions, such as obtaining essential goods or services, seeking medical attention, visiting family or close friends, reporting to work or engaging in outdoor activities. 
 
"From day one, we've made a commitment to be guided by the facts and take any action necessary to protect the health and safety of New Jersey's nine million residents," said Governor Murphy. "We know the virus spreads through person-to person contact, and the best way to prevent further exposure is to limit our public interactions to only the most essential purposes. This is a time for us all to come together in one mission to 'flatten the curve' and slow -- and eventually halt -- the spread of Coronavirus."
 
In effort to strengthen the existing social distancing measures in place, the order also prohibits all gatherings of individuals, such as parties, celebrations or other social events, unless otherwise authorized by the Order. When in public, individuals must practice social distancing and stay at least six feet apart whenever possible, excluding immediate family members, caretakers, household members or romantic partners.
Governor Murphy's Executive Order further directs the closure of all non-essential retail businesses to the public, with the exceptions of:
 
  • Grocery stores, farmer's markets and farms that sell directly to customers, and other food stores, including retailers that offer a varied assortment of foods comparable to what exists at a grocery store;
  • Pharmacies and medical marijuana dispensaries;
  • Medical supply stores;
  • Gas stations;
  • Convenience stores;
  • Ancillary stores within health care facilities;
  • Hardware and home improvement stores;
  • Banks and other financial institutions;
  • Laundromats and dry-cleaning services;
  • Stores that principally sell supplies for children under five years;
  • Pet stores;
  • Liquor stores;
  • Car dealerships, but only for auto maintenance and repair, and auto mechanics;
  • Printing and office supply shops;
  • Mail and delivery stores.
 
Nothing in the Order shall limit 1) the provision of health care or medical services; 2) access to essential services for low-income residents, such as food banks; 3) the operations of the media; 4) law enforcement agencies, or 5) the operations of the federal government.
 
Additionally, the order mandates that all businesses or non-profits, wherever practicable, must accommodate their workforce for telework or work-from-home arrangements. To the extent a business or non-profit has employees that cannot perform their functions via telework or work-from-home arrangements, the business or non-profit should make best efforts to reduce staff on site to the minimal number necessary to ensure that essential operations can continue. 
 
Examples of employees who need to be present at their work site in order to perform their job duties include, but are not limited to, law enforcement officers, fire fighters, other first responders, cashiers or store clerks, construction workers, utility workers, repair workers, warehouse workers, lab researchers, IT maintenance workers, janitorial and custodial staff and certain administrative staff.
 
The Order continues existing bans on recreational and entertainment businesses, requirements that all restaurants operate by delivery and takeout only, and the directive that all pre-K, elementary and secondary schools close and all institutions of higher education cease in-person instruction.
 
Governor Murphy also signed Executive Order No. 108, which invalidates any county or municipal restriction that in any way will or might conflict with any of the provisions of Executive Order No. 107. Municipalities or counties cannot 1) make any additions to or deletions from the list of essential retail businesses; 2) impose any additional limitations on businesses beyond the Governor's Order; 3) impose any additional density or social distancing requirements; or 4) impose any additional restrictions on freedom of movement. The only exceptions are two categories over which municipalities or counties may impose any additional restrictions: 1) online marketplaces for arranging or offering lodging and 2) municipal or county parks.
All additional county and municipality restrictions, subject to the provisions above, are not only invalidated, but, going forward, municipalities or counties may not enact or enforce any rule or ordinance which will or might conflict with any of the provisions of Executive Order No. 107.
 
Click here for FAQ on Executive Orders No. 107 and 108.
For a copy of Executive Order No. 107, click here.
For a copy of Executive Order No. 108, click here.
 
The orders shall take effect on Saturday, March 21 at 9:00 p.m.”
 
 
Business Counseling and Resources
 
Passaic County Division of Economic Development
Deborah Hoffman
Mobile: 201-738-3039
 
 
William Paterson University Small Business Development Center
Kathleen Muldoon, Executive Director
 
 
 
NJ BIA Free Webinar
 
The Impact of COVID-19 on Independent Contractors & Sole Proprietors
Webcast
Thursday, April 9
3pm
 
REGISTER NOW
 
           NJBIA will be hosting a webcast exclusively for our independent contractor and sole proprietor members.
 
The agenda will include an update on executive and legislative matters relating to the COVID-19 crisis, the CARES Act, as well as a discussion on how our independent contractors and sole proprietors are meeting critical needs and the challenges unique to them. There will be an opportunity for you to share your thoughts, concerns and needs.
WEBINAR with NJ Economic Development Authority
 
On behalf of the Passaic County Division of Economic Development, Borough of Hawthorne, Hawthorne Chamber of Commerce and CrossFit SOAR, we will be holding a webinar with the New Jersey Economic Development Authority (NJEDA) on the new initiatives to support businesses impacted by COVID-19.  The initiatives range from grants, zero-interest loan program for mid size companies, and support for private sector lenders and Community Development Financial Institutions.
 
The webinar will be conducted on Thursday, April 9, 2020 at 2:00 p.m.  Mathew Abraham, Regional Director of Business Development, will be presenting the NJEDA’s Economic Relief Package for Small and Mid-size businesses.
 
Please Join the FREE Webinar Meeting at https://tenfour.webex.com/tenfour/j.php?MTID=m2c791630bc0dfc8fc7f8ed0fd89abbdb at 2:00 pm Thursday April 9, 2020. 
 
The webinar will be recorded and distributed to everyone.  
 
 
New Jersey Economic Development Authority
Financing Support for Business in Response to COVID-19
 
The EDA Board met on March 26, 2020 and approved a package of several programs to assist companies impacted by the COVID-19 health crisis. 
 
For Information on both State of NJ and Federal USSBA Programs visit:  https://assistance.business.nj.gov/
 
A package of new initiatives from the New Jersey Economic Development Authority includes a grant program for small businesses, a zero-interest loan program for mid-size companies, support for private-sector lenders and Community Development Financial Institutions (CDFIs), funding for entrepreneurs, and a variety of resources providing technical support and marketplace information. Taken together, they will provide more than $75 million of State and private financial support, with the opportunity to grow to more than $100 million if additional philanthropic, State, and federal resources become available. The initiatives will support between 3,000 and 5,000 small and midsize enterprises and are meant to complement recently announced federal economic recovery initiatives.
 
Please click on each program below for more information, including full eligibility criteria.
 
HOTLINE for NJEDA Grant Programs: 844-965-1125 ONLY.
 
Small Business Emergency Assistance Grant Program – A $5 million program that will provide grants up to $5,000 to small businesses in retail, arts, entertainment, recreation, accommodation, food service, and other services – such as repair, maintenance, personal, and laundry services – to stabilize their operations and reduce the need for layoffs or furloughs. Learn more
 
GRANT APPLICATIONS OPEN APRIL 3, 2020 9 am, closes April 10, 2020 – Applications MUST be filled out correctly with requested information and attachments – otherwise they will go back to the bottom of the list of applicants
 
Small Business Emergency Assistance Loan Program – A $10 million program that will provide working capital loans of up to $100,000 to businesses with less than $5 million in revenues. Loans made through the program will have ten-year terms with zero percent for the first five years, then resetting to the EDA’s prevailing floor rate (capped at 3.00%) for the remaining five years.
 
Community Development Finance Institution (CDFI) Emergency Loan Loss Reserve Fund – A $10 million capital reserve fund to take a first loss position on CDFI loans that provide low interest working capital to micro businesses. This will allow CDFIs to withstand loan defaults due to the outbreak, which will allow them to provide more loans at lower interest rates to microbusinesses affected by the outbreak.
 
Notice of Funding Availability: Applications for the CDFI Emergency Assistance Grant Program Will Open at 9:00am on Wednesday April 8, 2020 on https://application.njeda.com/
 
CDFI Emergency Assistance Grant Program – A $1.25 million program that will provide grants of up to $250,000 to CDFIs to scale operations or reduce interest rates for the duration of the outbreak.
 
NJ Entrepreneur Support Program – A $5 million program that will encourage continued capital flows to new companies, often in the innovation economy, and temporarily support a shaky market by providing 80 percent loan guarantees for working capital loans to entrepreneurs.
 
Small Business Emergency Assistance Guarantee Program – A $10 million program that will provide 50 percent guarantees on working capital loans and waive fees on loans made through institutions participating in the NJEDA’s existing Premier Lender or Premier CDFI programs.
 
Emergency Technical Assistance Program – A $150,000 program that will support technical assistance to New Jersey-based companies applying for State and US Small Business Administration programs. The organizations contracted will be paid based on SBA application submissions supported by the technical assistance they provide.
 
The NJEDA has created a webpage that directs business owners to various resources to assist in coping financially with the COVID-19 public health crisis. This site will be updated with any new programs or support that becomes available. 
 
 
 
 
NJ EDA Technical Assistance to Companies to Complete Applications:
 
Rising Tide Capital, 384 Martin Luther King Drive, Jersey City, NJ 07305
 
African American Chamber of Commerce of NJ, 379 West State Street, Trenton, NJ 08618 609-571-1620 www.aaccnj.com
 
NJ State Veterans Chamber of Commerce, 65 School Road West, Marlboro, NJ 07746 732-778-7708 info@njveteranschamber.com    www.njveteranschamber.com
 
Statewide Hispanic Chamber of Commerce of NJ, 1280 Wall Street West, Suite 312, Lyndhurst, NJ 07071 201-935-0035 www.shccnj.org chamber@shccnj.org
 
 
State of New Jersey Website Devoted to COVID-19 Business Concerns
 
The State of New Jersey has established a special website devoted to business concerns during the coronavirus emergency. The site, cv.business.nj.gov, will be updated as new information becomes available. We encourage you to communicate this with the appropriate individuals within your organization.
In addition, the New Jersey Business Action Center’s Helpline is now available from 8:00 am – 9:00 pm, seven days a week. Call 1-800- JERSEY-7 to address any concerns you or your employees have.
 
 
US Small Business Administration Business Information
 
The USSBA has approved lending programs for the current crisis and will be opening up their website for new applications! A good source of information:
 
Small Business Guidance Loan Resources
 
SBA hotline number 800-659-2955.
 
Applicants may apply online, receive additional disaster assistance information, and download applications at: https://disasterloan.sba.gov/ela.
 
Applicants may also call SBA’s Customer Service Center at (800) 659-2955 or email disastercustomerservice@sba.gov for more information on SBA disaster assistance.
 
Additional funding for business has been approved by the US Congress. Please note brief summary below:
 
 
Paycheck Protection Program
Paycheck Protection Program Applications Opens on April 3, 2020
 
The Treasury has just announced the start date of the Paycheck Protection Program (PPP) that is designed to provide the necessary cash flow to give employers the ability to maintain their payroll during this current crisis.
 
The interest rate on the PPP is 1%.
Can borrow up to $10,000,000.
Amortization Period: 2 years
Does not need to demonstrate ability to repay or have collateral.
 
How to find an SBA PPP Lender:
 
When to Apply
  • Starting April 3, 2020, small businesses and sole proprietorships can apply.
  • Starting April 10, 2020, independent contractors and self-employed individuals can apply.
 
We encourage you to apply as quickly as you can because there is a funding cap.
 
Additional Resources
 
The Paycheck Protection Program (https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program-ppp) prioritizes millions of Americans employed by small businesses by authorizing up to $349 billion toward job retention and certain other expenses.
 
The Paycheck Protection Program provides small businesses with funds to pay up to 8 weeks of payroll costs including benefits. Funds can also be used to pay interest on mortgages, rent, and utilities.
 
Small businesses employing 500 or less and eligible nonprofit organizations, Veterans organizations, and Tribal businesses described in the Small Business Act, as well as individuals who are self-employed or are independent contractors, are eligible if they also meet program size standards.
 
Under this program:
  • Eligible recipients may qualify for a loan up to $10 million determined by 8 weeks of prior average payroll plus an additional 25% of that amount.
  • Loan payments will be deferred for six months.
  • If you maintain your workforce, SBA will forgive the portion of the loan proceeds that are used to cover the first 8 weeks of payroll and certain other expenses following loan origination.
 
Funds are provided in the form of loans that will be fully forgiven when used for payroll costs, interest on mortgages, rent, and utilities (due to likely high subscription, at least 75% of the forgiven amount must have been used for payroll). Loan payments will also be deferred for six months. No collateral or personal guarantees are required. Neither the government nor lenders will charge small businesses any fees.
 
You can apply through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. Other regulated lenders will be available to make these loans once they are approved and enrolled in the program. You should consult with your local lender as to whether it is participating. All loans will have the same terms regardless of lender or borrower.
 
 
Instructions: https://home.treasury.gov/system/files/136/PPP%20Borrower%20Information%20Fact%20Sheet.pdf
 
Economic Injury Disaster Loans and Loan Advance
The SBA is now processing EIDL loans!
 
Economic Injury Disaster Loan   https://covid19relief.sba.gov/#/
 
In response to the Coronavirus (COVID-19) pandemic, small business owners in all U.S. states, Washington D.C., and territories are eligible to apply for an Economic Injury Disaster Loan advance of up to $10,000. Applications anticipated to open April 13, 2020.
 
The SBA’s Economic Injury Disaster Loan program provides small businesses with working capital loans of up to $2 million that can provide vital economic support to small businesses to help overcome the temporary loss of revenue they are experiencing. The loan advance will provide economic relief to businesses that are currently experiencing a temporary loss of revenue. Funds will be made available within three days of a successful application, and this loan advance will not have to be repaid.
 
This program is for any small business with less than 500 employees (including sole proprietorships, independent contractors and self-employed persons), private non-profit organization or 501(c)(19) veterans’ organizations affected by COVID-19.
 
Businesses in certain industries may have more than 500 employees if they meet the SBA’s size standards for those industries.
 
The Economic Injury Disaster Loan advance funds will be made available within days of a successful application, and this loan advance will not have to be repaid. 
 
The interest rate on the EIDL: For Profits: 3.75% Non-Profits: 2.75%
Can borrow up to $2,000,000.
Amortization Period: 30 years
Does need to demonstrate ability to repay and have collateral.
Personal guarantees required.
 
Apply through your bank or visit: https://covid19relief.sba.gov/#/
SBA Debt Relief Program
The SBA Debt Relief program will provide a reprieve to small businesses as they overcome the challenges created by this health crisis.
Under this program:
o   The SBA will also pay the principal and interest of new 7(a) loans issued prior to September 27, 2020.
o   The SBA will pay the principal and interest of current 7(a) loans for a period of six months.
 
SBA Express Bridge Loans
 
Express Bridge Loan Pilot Program allows small businesses who currently have a business relationship with an SBA Express Lender to access up to $25,000 with less paperwork. These loans can provide vital economic support to small businesses to help overcome the temporary loss of revenue they are experiencing and can be a term loans or used to bridge the gap while applying for a direct SBA Economic Injury Disaster loan. If a small business has an urgent need for cash while waiting for decision and disbursement on Economic Injury Disaster Loan, they may qualify for an SBA Express Disaster Bridge Loan.
 
Terms
  • Up to $25,000
  • Fast turnaround
  • Will be repaid in full or in part by proceeds from the EIDL loan
 
Common Issues Small Businesses May Encounter:
  • Capital Access – Incidents can strain a small business's financial capacity to make payroll, maintain inventory and respond to market fluctuations (both sudden drops and surges in demand). Businesses should prepare by exploring and testing their capital access options so they have what they need when they need it. See SBA’s capital access resources.
  • Workforce Capacity – Incidents have just as much impact on your workers as they do your clientele. It’s critical to ensure they have the ability to fulfill their duties while protected.
  • Inventory and Supply Chain Shortfalls – While the possibility could be remote, it is a prudent preparedness measure to ensure you have either adequate supplies of inventory for a sustained period and/or diversify your distributor sources in the event one supplier cannot meet an order request.
  • Facility Remediation/Clean-up Costs – Depending on the incident, there may be a need to enhance the protection of customers and staff by increasing the frequency and intensity by which your business conducts cleaning of surfaces frequently touched by occupants and visitors. Check your maintenance contracts and supplies of cleaning materials to ensure they can meet increases in demand.
  • Insurance Coverage Issues – Many businesses have business interruption insurance; Now is the time to contact your insurance agent to review your policy to understand precisely what you are and are not covered for in the event of an extended incident.
  • Changing Market Demand – Depending on the incident, there may be access controls or movement restrictions established which can impede your customers from reaching your business. Additionally, there may be public concerns about public exposure to an incident and they may decide not to go to your business out of concern of exposing themselves to greater risk. SBA’s Resources Partners and District Offices have trained experts who can help you craft a plan specific to your situation to help navigate any rapid changes in demand.
  • Marketing – It’s critical to communicate openly with your customers about the status of your operations, what protective measures you’ve implemented, and how they (as customers) will be protected when they visit your business. Promotions may also help incentivize customers who may be reluctant to patronize your business.
  • Plan – As a business, bring your staff together and prepare a plan for what you will do if the incident worsens or improves. It’s also helpful to conduct a tabletop exercise to simulate potential scenarios and how your business management and staff might respond to the hypothetical scenario in the exercise. For examples of tabletop exercises, visit FEMA’s website at: https://www.fema.gov/emergency-planning-exercises
 
SBA Products and Resources
Access to Capital
 
SBA provides a number of loan resources for small businesses to utilize when operating their business. For more information on loans or how to connect with a lender, visit: https://www.sba.gov/funding-programs/loans.
  • 7(a) program offers loan amounts up to $5,000,000 and is an all-inclusive loan program deployed by lending partners for eligible small businesses within the U.S. States and its territories. The uses of proceeds include: working capital; expansion/renovation; new construction; purchase of land or buildings; purchase of equipment, fixtures; lease-hold improvements; refinancing debt for compelling reasons; seasonal line of credit; inventory; or starting a business.
  • Express loan program provides loans up to $350,000 for no more than 7 years with an option to revolve. There is a turnaround time of 36 hours for approval or denial of a completed application. The uses of proceeds are the same as the standard 7(a) loan.
  • Community Advantage loan pilot program allows mission-based lenders to assist small businesses in underserved markets with a maximum loan size of $250,000. The uses of proceeds are the same as the standard 7(a) loan.
  • 504 loan program is designed to foster economic development and job creation and/or retention. The eligible use of proceeds is limited to the acquisition or eligible refinance of fixed assets.
  • Microloan program involves making loans through nonprofit lending organizations to underserved markets. Authorized use of loan proceeds includes working capital, supplies, machinery & equipment, and fixtures (does not include real estate). The maximum loan amount is $50,000 with the average loan size of $14,000.
 
Exporting Assistance
 
SBA provides export loans to help small businesses achieve sales through exports and can help these businesses respond to opportunities and challenges associated with trade, such as COVID-19. The loans are available to U.S. small businesses that export directly overseas, or those that export indirectly by selling to a customer that then exports their products.
  • Export Express loan program allows access to capital quickly for businesses that need financing up to $500,000. Businesses can apply for a line of credit or term note prior to finalizing an export sale or while pursuing opportunities overseas, such as identifying a new overseas customer should an export sale be lost due to COVID-19.
  • Export Working Capital program enables small businesses to fulfill export orders and finance international sales by providing revolving lines of credit or transaction-based financing of up to $5 million. Businesses could use a loan to obtain or retain overseas customers by offering attractive payment terms.
  • International Trade loan program helps small businesses engaged in international trade to retool or expand to better compete and react to changing business conditions. It can also help exporting firms to expand their sales to new markets or to re-shore operations back to the U.S.
 
Government Contracting
 
SBA is focused on assisting with the continuity of operations for small business contracting programs and small businesses with federal contracts. For more information on federal contracting, visit https://www.sba.gov/federal-contracting/contracting-guide
 
More specifically:
 
  • 8(a) Business Development program serves to help provide a level playing field for small businesses owned by socially and economically disadvantaged people or entities, and the government limits competition for certain contracts to businesses that participate. The 8(a) program offer and acceptance process is available nationwide, and the SBA continues to work with federal agencies to ensure maximum practicable opportunity to small businesses. 8(a) program participants should stay in touch with their Business Opportunity Specialist (BOS).
  • HUBZone program offers eligibility assistance every Thursday from 2:00-3:00 p.m. ET at 1-202-765-1264; access code 63068189#. Members of the HUBZone team answer questions to help firms navigate the certification process. For specific questions regarding an application, please contact the HUBZone Help Desk at hubzone@sba.gov.
  • Women-owned Small Business firms who have questions, please visit www.sba.gov/wosbready or write to wosb@sba.gov.
  • Current Express lenders in NJ are (doesn’t include all national lenders, just ones who have made at least 15 SBA loans YTD): 
  • 1st Colonial Community Bank
  • 1st Constitution Bank
  • BCB Community Bank
  • Columbia Bank
  • Cross River Bank
  • Crown Bank
  • Financial Resources FCU
  • First Bank
  • First Commerce Bank
  • Fulton Bank
  • Kearny Bank
  • Lakeland Bank
  • Magyar Bank
  • Manasquan Bank
  • M&T
  • New Millennium Bank
  • Parke Bank
  • Peapack-Gladstone Bank
  • PNC
  • Provident Bank
  • Regal Bank
  • Santander Bank
  • Sturdy Savings Bank
  • TD Bank
  • The First National Bank of Elmer
  • Unity Bank
  • Wells Fargo
 
Any Questions, please call or email your Local Lender Relations Specialist:
Claudia Yarborough / LRS: Claudia.Yarborough@sba.gov or 973-645-3572 covers North Bergen, Essex, Hudson, Morris, Passaic, Sussex, and Union Counties
 
Loan Deferment Notice for all lenders:
 
Summary and Tips on Loan Deferments for 7(a) Lenders, 504 program Certified Development Companies (CDCs), and Microloan Intermediaries
 
SBA 7(a) Loans
 
  • May use your own unilateral authority to provide temporary relief 7(a) Business Loans
  • Loan Not Sold on Secondary Market: Lenders may grant a deferment of up to six (6) consecutive months.
  • Loan Sold on Secondary Market: Lenders may grant a one-time unilateral deferment of up to 90 days without requiring prior investor consent. Lenders may make additional loan deferments only with prior investor consent.
  • Tip: Need to assess the viability of the Borrower post deferment. 
  • Tip: If granting to Borrowers that are already 60 days or more past due on loans make sure to document why this is warranted as this will receive greater scrutiny during a Purchase review by the SBA should the Borrower eventually default.
  • Tip: Payment deferments can either be deferments of principal only, or principle and interest. Please note that if interest is deferred then the Borrower will need to catch up on their interest payments post-deferment. The Borrower’s future payments most likely would be interest-only until they catch up or if the loan is re-amortized the Borrower’s monthly payments may likely increase when the loan is re-amortized. 
  • 7(a) COVID-19 language:  Under the CARES Act, 7(a) Borrowers are relieved of any obligation to pay the principal, interest and any associated fees that are owed on a 7(a) loan in a regular servicing status (including Community Advantage loans) for a 6-month period beginning with the first payment due on a loan after March 27, 2020. SBA will pay this first loan payment to the Lenders within 30 days of the first loan payment due date after March 27, 2020. If a Lender receives a loan payment from a Borrower after March 27, 2020, the Lender must inform the Borrower that it has the option of the Lender either returning the loan payment to the Borrower or applying the loan payment to further reduce the loan balance after application of SBA’s payment.
  • To make the first payment, SBA will need Lenders to provide the gross monthly loan amount due (that includes both the guaranteed and non-guaranteed portions of the loan) as soon as possible to the FTA. SBA will provide further guidance to Lenders on the method and the date by which Lenders must provide the gross monthly loan amount.
 
SBA 504 Business Loans
  • The amount deferred should not exceed six (6) cumulative monthly payments or 20% of the original loan amount, whichever is less. Unless SBA has purchased the Debenture, the CDC must notify the Central Servicing Agent (CSA) of any deferment in order to avoid acceleration of the Note and the need to purchase the Debenture.
 
SBA Microloans
  • Intermediaries may provide a deferment on a loan made to a small business to ensure full repayment of the Microloan. Microloan Intermediaries may make deferments for up to six (6) months. No deferment may cause the life of the Microloan to extend beyond the maximum six (6) year maturity.
 
 
Additional SBA Links to visit:
 
 
 
 
CARES ACT TO PROVIDE COVID-19 RELIEF FOR BUSINESSES
Courtesy of SAX, LLP
 
On March 27, 2020, President Trump signed the “Coronavirus Aid Relief, and Economic Security Act” (CARES Act), allocating $2.2 trillion in spending and tax breaks to increase liquidity in the economy, provide relief for individuals and businesses, as well as specific industries most seriously harmed by this pandemic.
 
Important tax provisions include deferrals of employer payroll tax liabilities coupled with an employee retention tax credit, rollbacks of TCJA limitations on net operating losses (NOLs), deferral of the business interest limitation under Section 163(j), and a technical correction on qualified improvement property (QIP) that benefits taxpayers.
 
Here are the key business tax provisions in the CARES Act:
 
Payroll Tax Delay
Employers and self‚€employed individuals can defer payment of the 6.2% employer share of Social Security taxes on employee wages from 3/27/2020 to 12/31/2020, with 50% deferral required to be paid by the end of 2021 and the remaining 50% by the end of 2022. Employers, who have indebtedness forgiven under the paycheck protection program will not qualify for this deferral.
 
During the payroll tax deferral period, all employment tax payments made by the applicable dates above will be treated as having been timely made.
 
Employee Retention Credit
Eligible employers could receive a 50% payroll tax credit on qualified wages each quarter to encourage the retention of employees who cannot work due to a COVID-19 related circumstance. If the requirements of qualified wages, qualified employees and qualified employers are met, the credit would be for wages paid or incurred from 3/13/2020 to 12/31/2020.
Eligible employers including non-profits are employers:
  1. Whose operations have been fully or partially suspended as a result of a government order limiting commerce, travel, or group meetings, or
  2. Who have experienced a greater than 50% reduction in quarterly receipts, measured on a year-over-year basis
Eligible wages:
  • For employers who had an average of 100 or fewer full-time employees in 2019, all employee wages are eligible, regardless of whether the employee is furloughed.
  • For employers who had more than 100 full-time employees in 2019, only the wages of employees who are furloughed or face reduced hours as a result of their employers’ closure or reduced gross receipts are eligible for the credit.
 
Wages are capped at the first $10,000 and includes health benefits. Wages do not include amounts taken into account for purposes of the payroll credits, for required paid sick leave or required paid family leave in the Families First Coronavirus Act, nor for wages taken into account for the employer credit for paid family and medical leave.
 
The credit is not available to employers receiving Small Business Interruption Loans. No credit is also available with respect to an employee for any period for which the employer is allowed a Work Opportunity Credit.
 
Net Operating Losses (NOLs)
The law temporarily suspends the 80% taxable income limitation on utilizing NOLs through taxable years beginning before January 1, 2021.
 
Additionally, the law also allows for a 5-year carryback of NOLs arising in years 2018, 2019 and 2020. These provisions apply to individuals, estates and trusts as well.
 
Limitation on Business Interest 163 (j)
The new law relaxes the limitation on the deduction of business interest from 30% of adjusted taxable income (ATI) to 50% ATI, for taxable years beginning in 2019 or 2020.
 
In anticipation that the 2020 income will be lower than 2019, the CARES Act also provides for an election whereby the taxpayer can use their 2019 ATI to calculate the 2020 limitation. In the case of a taxpayer who had 2019 as a short year, income should be annualized to 12 months.
 
Considering that most partnership returns for 2019 have already been filed, the law provides for a special rule for them. The increase in the ATI limitation to 50% will apply to the 2020 tax year.
 
For partners that don’t elect out, any excess business interest disallowed in 2019 will be treated as follows:
  1. 50% of the excess business interest will be treated as paid or accrued by the partner in the partner’s first tax year beginning in 2020 and will not be subject to Section 163(j) limitation.
  2. The balance of 50% of the excess business interest will be subject to the limitations of Section 163(j). In other words, it will remain suspended until the partnership allocates excess taxable income or excess interest income to the partner.
Taxpayers may elect out of the increase, for any tax year. Once made, the election can be revoked only with IRS consent. For partnerships, the election must be made by the partnership and can be made only for tax years beginning in 2020.
 
Technical Correction: Qualified Improvement Property (QIP)
A correction to a drafting error in the Tax Cuts & Jobs Act (TCJA) now allows Qualified Improvement Property (QIP) to be treated as 15-year property. This will allow taxpayers to apply 100% bonus depreciation to eligible QIP retroactively for assets acquired and placed in service after 12/31/17.
Qualified improvement property includes any improvement made by the taxpayer, to a building’s interior, provided such improvement was placed in service after the building itself was placed in service. However, improvements do not qualify if they are attributable to:
  • the enlargement of the building;
  • any elevator or escalator; or
  • the internal structural framework of the building.
 
Charitable Contributions
The law increases the limitation of qualifying charitable contributions (QCC) made in 2020 from 10% to 25% of corporation’s taxable income. QCC are contributions made in the form of cash and not made to donor advisor funds or non-operating private foundations.
 
Also Included in the CARES Act for Businesses:
  • The taxable income limitation on the deduction for food inventory has also been increased from 15% to 25%.
 
For loan incentive programs available for businesses through the CARES Act, visit: https://www.saxllp.com/new-loan-incentive-programs-available-to-businesses-through-the-cares-act/     
 
New Loan Incentive Programs Available to Businesses Through the CARES Act
 
Due to the unfortunate Coronavirus pandemic, bi-partisan Congressional efforts have been in full force to support and encourage economic relief for individuals and businesses hard hit during this ongoing crisis. There have been a number of benefits passed via the Phase 1, Coronavirus Preparedness and Response Supplemental Appropriations Act and the Phase 2, Families First Coronavirus Response Act.
 
However, the most significant benefits package to date, the Phase 3 Coronavirus Aid, Relief, and Economic Security Act (“CARES Act or Act”) has recently been passed by Congress and signed into law by the President. The Act delivers over $2 trillion in economic stimulus aimed at providing relief for individuals and businesses, as well as specific industries most seriously harmed by this pandemic.
 
There are a number of beneficial provisions available in the Act, but we specifically wanted to inform you of two key provisions surrounding loan programs available for small businesses. While both programs are administered by the Small Business Administration (“SBA”), there are important eligibility, loan amount and debt forgiveness features and differences between the two that applicants must consider.
 
Paycheck Protection Program
Section 1102 of the CARES Act offers a $349 billion program to aid small businesses via federally guaranteed loans. Provided certain criterion are met, a portion of these loans are eligible for forgiveness such that qualifying small businesses would have access to cash without future repayment requirements or federal cancellation of indebtedness income recognition. Specific items to keep in mind include:
  • Eligibility is predicated solely on the number of full-time, part-time or other employees in both for-profit and non-profit small businesses.
  • Generally, the employee limit is 500, but there are exceptions for the accommodation and food service industry, affiliated groups and certain businesses in SBA-designated industries.
  • Sole proprietorships, self-employed individuals and independent contractors are eligible as well.
  • Ability to repay the loan is not an eligibility requirement.
  • Maximum amount of the loan is the lesser of:
  • 2.5 times the average total monthly Payroll Costs incurred during the 1-year period before the date the loan is made; plus
  • Refinance-eligible loans that were made from January 31, 2020 through the date the Paycheck Program Protection Loan is received; or
  • $10,000,000.
  • Note that special rules exist for businesses that were not in existence from February 15, 2019 – June 30, 2019.
  • Payroll Costs up to $100,000 in annual compensation (pro-rated from February 15, 2020 – June 30, 2020) include:
  • Salary, wages, commissions or similar compensation, including cash tips;
  • Vacation, parental leave, family leave, medical or sick leave;
  • Severance payments;
  • Group healthcare payments;
  • Retirement benefits; and
  • State or local tax assessed on the compensation of employees.
  • Loan proceeds can be used for:
  • Payroll Costs;
  • Group healthcare benefits, including health insurance premiums, sick leave, medical leave and/or family leave;
  • Mortgage or other interest on debts incurred prior to February 15, 2020; and
  • Rent and utilities.
  • The SBA plans to grant banking institutions with the authority to work directly with the businesses on application submission.
 
Loan Forgiveness
While there are a number of nuances that still need to be worked out, an area of great interest surrounds the debt forgiveness aspect. In particular, loan proceeds used for the expenditures listed above for an 8-week period beginning on the date the loan is received are eligible for 100% forgiveness. Amounts eligible for forgiveness will be proportionately reduced to the extent there is a year-over-year reduction in retained workers, although qualifying small businesses will be allowed to rehire previously terminated personnel without penalty.
 
To the extent loan proceeds are used outside this 8-week period and/or are used for ineligible expenditures, the interest rate is capped at 4% and the loan maturity period is up to 10 years. Additionally, there would be no borrower and/or lender fees and collateral and/or personal guarantees would not be necessary. Lastly, the loan payments can be deferred for 6 – 12 months.
 
Economic Injury Disaster Loans
While the SBA already had a program in place in the event of economic disaster and injury, Section 1110 of the CARES Act expands eligibility requirements for impacted small businesses while easing some of the documentation and collateral requirements.
 
Key criterion for applicants to consider under the Economic Injury Disaster Loan (“EIDL”) program are listed below. However, the most significant difference to applicants likely surrounds the debt forgiveness component, as loans under this program, other than potential $10,000 advances, are not eligible for forgiveness.
  • EIDL eligibility has been expanded to include small for-profit and non-profit businesses, as well as cooperatives and ESOPs, with 500 or fewer employees.
  • Certain SBA-designated business industries may also be eligible despite headcount in excess of 500 employees
  • Eligible applicants include businesses directly and indirectly impacted by the pandemic, as well as businesses that provide services and/or products to impacted businesses.
  • The SBA qualifying criteria and information requests, in comparison to the Paycheck Protection Program, can be more stringent, as repayment capabilities are factored into the SBA acceptance process.
  • Expanded program runs retroactively from January 31, 2020 – December 31, 2020.
  • Loan proceeds may be used for:
  • Payroll and certain types of sick/medical leaves;
  • Mortgage or rent payments;
  • Debts that could not be repaid due to decreased or lost revenue; and
  • Other expenses needed to operate the business
  • The maximum loan amount is $2,000,000 and interest rates range from 2.75% for non-profit entities to 3.75% for all other entities.
  • The loan term can be up to 30 years.
  • Whereas the SBA has empowered banking institutions to work directly with applicants as part of the Paycheck Protection Program, EIDL applicants are required to apply on the SBA website.
  • Collateral requirements exist for loans in excess of $25,000, although applicants will not necessarily be rejected strictly for lack of collateral.
  • Applicants must apply via the SBA website.
For the key tax provisions for individuals in the CARES Act, click here. https://www.saxllp.com/cares-act-to-provide-covid-19-relief-for-individuals/
 
The following is a chart comparing the two loan programs that have been introduced (or modified) by the CARES Act