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On-Demand: COVID-19 | CARES Act, SBA Loans, and Payroll Relief Programs

Mar 31, 2020

Our speakers discuss COVID-19 and the update on the federal stimulus package. This includes eligibility requirements and the application process for the Small Business Administration (SBA), Economic Injury Disaster Loans (EIDL), and the Coronavirus Aid, Relief and Economic Security (CARES) Act.

*On 4/2/2020, The SBA came out with new guidance on the term and interest rate of the PPP loan. The maximum loan term is 2 years with a maximum interest rate of 1%. Payment on the loan is deferred for 6 months.


Alan Wink: Welcome. My name is Allen Wink and I lead our firm's COVID-19 response team. You wanted to start off this webinar with an understanding that this is an overview for all types of businesses. It is akin to an economic stabilization 101 program. We anticipate having a number of industry specific webinars that build upon this base of information and we hope that you join us for those as well. Our presenters today are Alan Wink, Tim Speiss, and Robert Katz. Alan, let me turn it over to you.

Alan Wink:Good afternoon, everyone. I hope that you and your families are all safe and sound. My name is Alan Wink. I'm the managing director of capital markets for EisnerAmper. I am joined as presenters on this webinar by Tim Speiss and Rob Katz. The biggest stimulus bill in U.S. history was signed into law last Friday. This two trillion dollar package will stabilize the economy by providing businesses and individuals with cash, saving jobs, and bailing out companies both large and small. The aid in the stimulus package was calculated to helps small businesses cover about eight weeks of payroll. That should be sufficient if the economy largely reopens by late May. This aid is about stabilization and it is just a start.

Two sections of the stimulus package we want to discuss today are number one, the paycheck protection program or PPP loans under the expanded authority of the existing 7(a) SBA program. And number two, the SBA economic injury disaster loans or the EIDL program. The EisnerAmper response team has received questions since Friday relating to both of these program. Many questions have been asked about the paycheck protection program loans, since a portion of this loan is initially forgiven, and we'll certainly discuss that more later on in the presentation. Applications for the SBA EIDL loans are currently available. However, the SBA guidance and regulations for the PPP loans I have not yet been issued as of this morning.

So, we're going to be covering two programs this morning, as I mentioned. The first is the CARES Act which is the Coronavirus Aid, Relief, and Economic Security Act. We're going to try to cover in detail the background, the eligibility, how much you can borrow, what the loan can be used for, lender requirements, how do you calculate payroll costs, how do you deal with seasonal and non-seasonal employees, how did we deal with loan forgiveness, what are the long terms, and what's the application process. The second program is the SBA economic injury disaster loans or the EIDL loans, and we're going to do a similar deep dive looking at the background, who's eligible, uses, barring limits, the emergency advanced program, loan terms, and once again the application process and requirements.

A portion of the CARES Act provides $350 billion to keep small businesses operating and to keep workers employed. It creates a new loan program called the paycheck protection program or PPL loans. Remember that term, since you're going to be hearing a lot about it over the next couple of months. The CARES Act provides increased loan amounts, more allowable uses and most importantly, possible loan forgiveness. All the loans under the CARES Act are 100% federally guaranteed and are administered by the SBA. All the loans will be issued by SBA designated private lenders. The application deadline is June 30th 2020. As previously mentioned, the PPP loan grant is not yet operational until the SBA issues its guidance.

Paycheck protection program. Paycheck protection program loan under the CARES Act. Small businesses and not-for-profits are eligible if they have less than 500 employees. Remember when you calculate head count, you must include all full-time and part-time employees. Also eligible for the paycheck protection program loans are sole proprietors, independent contractors and even self-employed individuals. There are some exceptions to the 500 employee rule. In the accommodation and food services sector, the 500 employee rule is applied on a per location basis, not in the aggregate.

What size loan can my small business qualify for? There are exceptions, but basically the loan amount is calculated as two and a half times your average monthly payroll cost months calculation is made. The maximum loan amount you can qualify for is capped at $10 million. A quick example. For example, if you had a loan that was made on April 1st of 2020 and your average monthly payroll costs for the 12 months leading up to that loan or the period April 1, 2019 to April 1st, 2020, and your average monthly payroll costs was $1,500,000, your maximum loan amount would be $3,750,000. If your business was not operating in 2019, the amount of your loan is calculated at two and a half times your average monthly payroll costs for January and February this year. If you are a seasonal employer, your loan amount is calculated at two and a half times your average monthly payroll costs for the 12-week period beginning either February 15th, 2019 or March 1st, 2019 and ending June 30th, 2019.

Rob Katz:Wait, Alan. This is Rob Katz and the lookback period is a year from when the loan is made.

Alan Wink:Thanks, Rob. Thanks for clarification. Lenders who are providing the capital do have some responsibility in dealing with borrowers under the CARES Act. The lender must determine that the borrower was actually in business before February 15th, 2020 and had paid employees, paid payroll taxes, or paid independent contractors. Borrowers must also provide good faith certification to lenders that this loan is necessary to support ongoing operations because of the uncertain economic conditions related to COVID-19. They must also certify that the loan proceeds will be used to retain workers, maintain payroll, and make either mortgage or lease payments and utility payments.

Rob Katz:I just also wanted to make a comment that the loan proceeds are not to be used specifically for growth capital and expansion, and it's a very important condition of receiving these proceeds. Alan, I'm sorry to interrupt.

Alan Wink:Thanks, Rob. In addition, the borrower must certify that he has no application pending or has received other disaster recovery loans or economic stabilization loans under a COVID-19 stimulus package. And also, the borrower has not received a similar loan of the purpose and amounts applied for here. Very important. What the lender does not have to do is interesting. Borrower has to provide no personal guarantees, no collateral guarantees. Borrower has to show no ability to repay the loan, and the borrower does not have to disclose that they were unable to obtain credit elsewhere. I now want to turn the presentation over to Tim Speiss, who'll be discussing the approved uses for the loans under the CARES Act. Tim, take it away.

Rob Katz:This is Rob Katz and I will be a substitute for Tim momentarily, for short order. So again, the applications must include documentation verifying the full-time equivalence. So again, it's salary, wages, commissions, payments for vacation, separation pay, payments for pension plans, health care, retirement benefits, state and local taxes assessed, and the last bullet on slide 14 is sole proprietors, independent contractors, self-employed wages, et cetera, not more than a hundred thousand dollars. So the act ... It was very important as part of the stimulus that it includes contractors like Uber, Lyft drivers who basically have lost their clients through no fault of their own as well as that they are 1099s. So that was really important as the act was developed, giving to those people that opportunity and support.

And a number of the questions that have come up is on the very last thing; whether if you have an employee making over $120,000 ... or, I'm sorry, over 100,000. So if you have $150,000 employee, right now the interpretation is that the first 100,000 is included in this and everything over a hundred is exempt. And that's one of the points that everybody is waiting for specific clarification, but as you read the act right now, that's the way it sits. And by the way, we've been told on two occasions on a bigger picture that the government is doing everything to deploy the capital as quickly as possible and so they're looking for additional entities beyond banks to deploy it. We've also been told that the application process is hopefully to be done by the end of this week, early next week. And by way of quick background, the EIDL which I'll talk about shortly is a standard loans. So they've been able to take the applications they've had and modify it, where the PPP is he a brand new package or brand new program, so it's going through the development phases sort of in a real-time format.

Sliding to slide 15, and this again specifically is what is not considered a payroll cost. So it's anything in excess of 100,000 prorated. Payroll taxes, retirement taxes, and income taxes. The payroll cause if you're outside the U.S. and qualified sick leave and family leave. And so what becomes an important calculation in determining the payroll is if you take into account a salary where if a standard unemployment is five to six hundred dollars per week, the government is giving an extra 600. So if you earned around $1100 a week or 50 to 60 thousand dollars a year, a furlough may be a better alternative for everybody, because with a furlough, the company still gets the ultimate benefit and their employees are generally getting their full salaries as well. And so you just have to understand the very nuances between a furlough and a layoff. It's really important. We had a call over the weekend we're a layoff was made and it turns out they were asking or going back to their attorneys to determine if they could unwind the layoff and make it a furlough. So with that, and that again goes to the excluded acts of payroll. So we'll go to slide 16.

All right, then I'll keep rolling on. So then we get into the CARES Act loan forgiveness, and these bullet points outline generally what is forgivable and what is not. So, foreign debt will not be recognized. Borrowers are eligible to have a portion of their loan forgiven. I think when situations like this and panic and nervousness is tight, sometimes we'll talk about later, the pragmatic approach is lost. So just understand when ... If the loan here where it says forgiving, because basically people have asked, "What's the difference? How will we know whether it's forgiven or have to be paid back?" And when an entity, whether it's a lender or a government, supplies a loan, if it's forgiven, it means you have no ability to pay it back and you're going to as a business have to certify that. So to be conservative, I think when you take it out, again as the rules are being developed, you want to think that you're going to have to pay it back over time. It's a generous repayment period, but if it's forgiven, it becomes a bonus.

The third bullet again, it talks about entitled to being loan forgiveness for the amount spent on the following during the eight week period. This is where you can spend the money; on your payroll, your interests, your rent, utilities, additional wages paid to tipped employees. What I have had some conversations with clients over the last four days is you want to make sure that what you're using it for fits into this kind of box. Trying to expand the box and trying to do a quote unquote "end around" is something that the government will not look favorably upon.

Alan Wink:And Rob, to add one thing to that, just to clarify, it is interest on mortgage obligations and not principal.

Rob Katz: Correct, and it's a good point, and Tim and Alan raise that point. So again, it's very, very specific. And we'll talk about documentation, but you may have to provide the difference to show that it was interest versus a principal pay down. You'll not be responsible for the interest accrued, and the loan forgiveness may reduce based on the reduction employee headcount or wages. And again, it outlines the reduction of the head count. And so somebody raised the question again, if you've been in business for more than a year and you have the lookback period, somebody said, "If I cut my salary or reduce or forgo my salary for the next two months, will that be included or am I penalizing myself?" And if you think about it, if you forgo it for two months ... because again, the 12 month lookback is after the loan's been issued, so for 10 months you've gotten your full salary, and the last two months you're saving money and you have the reduction.

And we're on now slide 18, where the employees not earning more than a hundred who have their pay reduced during the eight week period by more than 25%. Again, it gives you a range to work within and the forgiveness amount will be reduced by the amount of reduction that exceeds 25% of the employees pay for the quarter. It does a very nice simple example below that you can see where if you have 25 employees, salaries are reduced by 30%, and the reduction turns out to be 125, so the forgivable amount is the million less the 125. And the U.S. commerce department as well as just put out a very nice synopsis as well that can be looked at in not detail, but in a way to give you a frame of reference. And then finally, the reduction in forgiveness amount for the reduction in wages is in addition to the reduction for the head count. Tim?

Tim Speiss: Rob, thank you. Yes. Applying for loan forgiveness. All borrowers seeking forgiveness must file an application with the lender. We should point out that the SBA programs and protocol to actually submit applications, and this I believe was mentioned earlier, are not quite up and running yet and everyone probably knows that the SBA works with individual lenders, affiliates, banks, financial institutions and so forth. Regarding decisions on forgiveness, those must be within 60 days after the lender received the completed application. The documentation and the verification, this is where it gets ... It's very important. And where we have been very successful and being able to assist relationships in the past and prior programs, you can see that there's verifications for full-time equivalent. There's the requirement to include IRS payroll tax filing, state and local payroll as well as insurance and unemployment filings.

You should also be remember and recollect that the IRS also can provide the T 4506 and with that, tax returns because lenders are looking to document income. And lenders are also using Equifax, so there's a lot of data at their disposal in the context of verification and then applying for loan forgiveness. Continuing certification by buyer representatives that information is accurate and true and that the loan proceeds were used for permissible purposes, and it's still to be determined the more precise documentation that the SBA determines is necessary. But Rob and others on the team, having gone through the application before, do have a very good sense of what's been requested in the past.

Okay. Regarding loan terms, as you see, the maximum loan term is 2 years (updated 4.1.2020), fixed interest of 1% (updated 4.3.2020). There are no personal or collateral guarantees and it has to be ascertained that the borrower was not receiving nor requested funds from another SBA program for identical uses. Fees that would otherwise apply under the SBA are waived and loan payments are deferred for a period of six months from the origination date (updated 4.1.2020). As I mentioned earlier, it was mentioned earlier in the webinar, the SBA will be issuing guidance to lenders shortly for the processing and disbursement of loans. They're focused on the underserved markets, rural, veteran owned, socially and economically disadvantaged individuals, and we have a code citation there for you. Women owned and controlled enterprises and businesses operating for less than two years.

Rob Katz:I was going to say, again, the loan proceeds are not to be used for startup businesses. And if you think about it, the program like this where the government has made it available, they are highly, highly motivated to have funds dispersed. Right? Nothing is better than to say, "We have a new program and we funded loans or triple Ps." Having said that, though, so it's going to be funding early, documentation a little behind. But if you take the money, you just have to make sure that your documentation is razor, razor detailed and deep, and you have the information and the documents available, and that is one of the things that we're positioned to help with.

Alan Wink:And Rob, just to add to that about the startup phase, just remember when you're thinking about eligibility, you do need to certify that these funds are really necessary to support your business because of what happened to your business as a result of COVID-19. It's not meant to assist businesses acquire other businesses or growth capital.

Rob Katz:It's a great point that is always worth repeating. If you think about the SBA is a program, right? The SBA is generally speaking a lender of last resort. So you've exhausted all your other funds, all your other joint ventures, your venture backed money, your private equity money if you've gone public. So the last thing they're looking for when they're setting up a fund for a stimulus for businesses and restaurants that are going out of business, to have somebody use it for growth or an avenue that wasn't part of the very specific designation.

Tim SpeissI think we're ready now. Can move on to the venture backed enterprises? Alan, did you want to speak to these topics?

Alan Wink:Sure. Thanks, Tim. I guess we've had a lot of questions about whether venture backed companies are eligible for PPP loans. The existing 7(a) SBA program which was expanded by the CARES Act really includes affiliation rules that could complicate the ability of VC backed companies to access the paycheck protection program loans. VC backed companies could be considered under common control with other portfolio companies, owned by their investors and therefore would exceed the small business size limit. The SBA previously has ... when they consider affiliations, have looked at things like control 50% or more of voting stock, control of a large block of voting stock. There's widely held stock, common management of affiliates which you're going to see in a lot of VC backed situations. An individual or firm, substantially identical business or economic interests, joint venture relationships, contractual relationships.

The National Venture Capital Association is actually lobbying Steve Mnuchin, the treasury secretary, in an attempt to exempt 7(a) SBA loans from the affiliation rules and therefore allow them to access capital under the PPP loans. As we said earlier, the SBA is required to issue regulations and guidance within 30 days of the enactment of the CARES Act, which was March 27th. we've spoken to a number of SBA lenders this week already, and the hope is that that that guidance will be authored by later this week or possibly by Friday. So we'll certainly keep everyone abreast of that information.

Rob, do you want to handle the SBA economic injury disaster loans?

Rob Katz:I will. And just one more comment again, because venture backed has always been a hot topic and the SBA has a document that just talks about affiliated companies and it in itself is 28 pages. So it's very, very specific prior to the CARES Act about what fits in and what doesn't, and just one edification. It says March on the last bullet on slide 22. It says March 27th, 2010, and that should be 2020.

So then the other program is the economic injury disaster loan or EIDL, and this provides ... Slide 24 is up to two to $2 million per borrower in working capital loans for small business not-for-profits. There's been 50 billion made available and those have been in areas that had been declared disaster areas by the SBA. And for the most part, most States have been declared that way, and you can check the SBA website. Including the provision may advance up to $10,000 grant to each applicant paid within three days if they're completing the loan application to the SBA. And again, you're certifying under penalty of perjury that the information that you're presenting is accurate. So, never think about 10,000 is basically free money without justification.

So then on slide 25, we have business concerns that the entity can't have more than 500 employees. It does include sole proprietors or independent contractors in the Uber or schedule C example. Cooperatives. Again, having under 500 employees work. ESOPs again are included. Again, the 500 employees you can see throughout is the real consideration. And the eligibility for the period is currently from February 15th through the end of the calendar year. And again, the very latest check on this slide; it cannot be used to refinance long-term debt. Again, the look is to put the money to work to preserve your business, not necessarily just to provide current refinancing.

So then what can you use them for? Basically you can use them for your standard operations for the business, to meet ordinary, necessary financial obligations that cannot be met because of COVID-19. So you have operating, payroll, rents, your debt, high interest debts, and again, but it is very specific that the EIDL cannot be used for lost profits or to finance any type of business expansion. On slide 27, it asks you to consider, and the SBA, what this slide really tells you is it has the ability to make special considerations, but those are the parameters. And just my sense is that they are not looking for exceptions, right? It's really designed for the purpose of going out and for the ... I'll call it the norm and not the exceptions.

So, what about the application process? You must log in and get credentials. What would I will tell you is that I know people. I've tried to fill out the SBA site and it can be a frustrating process. What banks have said to me and to others is we're looking to take care of our current clients. And if you think about it from the lender's perspective, if they get money for a current client, it shores up the client's balance sheet but it also shores up the bank's balance sheet, because it makes their customer better structured with more capital. So that's the first place the current lenders are going to look, and they have said just from being pragmatic, we're looking to our larger customers first. So if you have a lender, and it may not be the SBA, it may not be an SBA loan, but most large banks have an SBA division.

And so what you want is to go through your current lender, to have EisnerAmper help you assemble a complete package so that you have a champion to get you through the process. And if you go on to the SBA's website, you will see that one of the most if not the most reason that loans are denied or slowed down is because it's an incomplete package. It's amazingly critical to make sure that the package is complete and your current lender within SBA department has the ability to know what needs to be. And so you can see here the documents that are required. Again, you're asking the lender, the SBA, so you're going to have to apply balance sheet income statements as well as two years business tax returns, and you'll see personal financial statements for anybody that owns over 20% interest.

So then what are the term loans? Again, the rates are 30 years, 3.75%, no prepayment penalties. Above 200,000, there is a personal guarantee and the pledging of collateral were available. So it's very similar to a normal business loan. What I've said to people, if your business is well-positioned, right? And I had this call with a publicly traded venture backed firm over the weekend where your best place may be your current lender, because in the next 60 days when the environment and culture is in this kind of upheaval, most banks are not looking to take on new customers that they have no history with. Your best way to expand your loan base, which is what everybody's interested in from the lending standpoint, is with your current clients. So you may be able to get similar terms with your current lender, and it never hurts in this point to begin those discussions. So again, these are the emergency advance options, and again the $10,000 is there, but the focus is to try and get money in place and deployed as quickly as possible. But the downside of the EIDL program, again, it is very, very similar to a normal loan. Again, whether it's a normal SBA loan or whether it's a general loan that you would go to your lender.

Alan Wink:
And Rob, just to add one thing to that with the emergency advance loans, they are paid 72 hours after you file your application for the SBA EIDL loans. And once again, you certify that you are eligible for those loans. In the event you do not receive an EIDL loan, I believe the emergency advance is a grant and does not have to be repaid.

Rob Katz:And again, we're going to be open to questions and answers in another couple minutes. And again here, applying for a PPP loan and an SBA loan is businesses are not permitted to use EIDL for again, same expense covering. You can't use both loans for the scene period. If you have a current EIDL loan, then you can borrow, can refinance it and may be subject to forgiveness. And again, I have a client that's involved in that and we made sure we asked the current SBA lender if you apply for the EIDL loan, will that shed any bad light on your current SBA loans? And they said absolutely not. And the last bullet is the remaining portion for the purposes other than in the loan forgiveness terms for a PPL loan would remain an outstanding loan.

And so, some final thoughts and considerations. It's important and it's very difficult to do this. We understand, and everybody does, but there's again a pragmatic and realistic point of view or view to keep. And again, when I talk about the difference between forgiveness and deferral, those are the type of things making sure are you truly eligible? So if you're one of my clients where you supply food to supermarkets, the likelihood is their business is improving due to the tougher times. So you're not going to be able if you show growth to apply for these proceeds. And being able to keep that perspective as you're winding through the morass is really worth doing.

Again, when I talk about underlying thoughts and considerations or when we do other approaches and opportunities, again look towards your current lender. If you're a good customer, they're looking to deploy more money and they may be willing and probably would be willing to expand the other loans. And then how can we help? In maximizing the cash flow considerations, and as well as helping put the packages together, making sure the affiliations are all understood, and that you're ready to go very, very timely. And one of the questions and then we'll stop that people have asked generally is where does it make sense ... If you have limited resources, which of the two loans programs is best? For most, and again it depends on your specific business, but the PPP has no loan conditions. That's based on payroll. And to get the money out once the applications are completed, where the EIDL is just going to be a longer and somewhat more cumbersome process. And with that, Melody, I think it's now back in your hands unless Tim or Allen and Alan, anything else to add as we start to open it for Q and A.

Tim Speiss:Yeah, my observation is, and this team has spoken about this, feels like a week but let's just say all week, but the documentation accumulation process at this point is probably the most important undertaking to begin with because it can be voluminous. You're going to want the information reviewed before it's submitted. There are examples of packages on both the SBA website and under the various programs that we've spoken about, and there's lists of information. Certain information will not be available quickly. I mentioned earlier transcripts of certain documents, tax returns, all of which will be requested. You mentioned the Equifax, the credit check as well. The SBA anticipates anywhere from 50,000 to 75,000 applicants for this multi-program endeavor. So, while acceleration of applications is important, one of the things I believe we're emphasizing is just the completeness and of course making sure that the information is robust and appropriate.

Allen Wilen:
And I did want to ... It's Alan Wilen. I just wanted to emphasize to those on the call that we have a Thursday a webinar this week dealing with the tax implications of the CARES Act, because there are a number of implications there for people that will affect their businesses, including things like net operating loss carry back, some real estate implications, some corporate alternative minimum tax relief, and a number of other items. So that, you will find on our firm's ... on our website in the coronavirus knowledge page as well, so that may also intrigue those who are on this call as to how those items could help them. Tim or Rob, anyone want to go through the question list and pick stuff out that makes sense? That they're picking up on? I apologize, but we have close to 800 questions that have come in. To the extent that we can't get to your questions, we will be putting in our coronavirus knowledge center an FAQ page for those who are interested with some of those questions being answered.

Rob Katz:I'm just trying to go through them. They keep moving quicker than I can find them. One of the questions is the EIDL site did not request two years of personal financial statements. And again, the fact that they didn't ask for them now, it doesn't mean you won't have to produce them. And so again, you're going to ... As Tim said, with 50,000 applicants or applicants that having the complete package is going to be very, very important.

Allen Wilen:So there is one other item that keeps coming up and I'm going to ... Layoff versus furlough, and can you give me an example? Rob or Alan, run with that?

Rob Katz:I will. This is Rob, and we were on the call over the weekend, myself, Alan Wilen, and one of our other partners, Lisa Knee with a company. Again, if you lay off somebody, calling them back and especially whether you have a union agreement or not, becomes a cumbersome, cumbersome process. With a furlough, it's temporary and you have more flexibility. Again, if you have a business that's just you ... Let's say we hope soon that the economy returns to some normality. Right? Then you can bring them back for a couple days a week versus the layoff which is much more difficult and less flexible. Also, again, if you choose on a furlough to pay for the benefit expenses, that becomes part of the credit. Versus if it's a layoff, you generally have to go through COBRA, which again is a much more difficult process.

Alan Wink:Let me chime in on that also because I think most companies applying for the PPP loans are probably better off in a furlough position than a layoff position. And I guess the important thing is if you are going to furlough your employees, you want to bring them back by June 30th in order to get full forgiveness under the PPP loan package. So remember, employers have eight weeks to spend the loan. So, furloughs after the eight week period will not count against the loan forgiveness.

Allen Wilen:Correct. The other part that I think is really intriguing and interesting and I give a real world example is if you have a large number of employees who are for example even administrative employees who make less than, and it depends on the state because the unemployment max in most of the states is different. New York and New Jersey even have a $200 difference between them. But let's say you have a New Jersey employee making 75, 80 grand, thousand dollars a year, they may get 650 to 700 dollars a week in unemployment benefits. On top of that, they're going to get the $600 government benefit performance, so that employee will make pretty close to what they were making when they're working for you after you've laid them off, or furlough them should I say, is the right word. You'll pick up the medical benefit costs mostly likely for that employee as well. You don't have to pay out PTO if there is any. That can just sit there and accumulate. And the employee's not in a position where they have to go and pick up COBRA costs which for a laid off employee is extremely difficult. But your employee is not injured or harmed in the process necessarily and you're able to pull them back in a month or two or three whenever things come back to normal. It gives you that flexibility, and that was the intention behind the program.

Alan Wink:And I guess Allen, also, when you talk about wage reduction, if you reduce the wages by 25% or less, you're also not penalized in the forgiveness formula. So think about that as an option also.

Allen Wilen:Correct. Other questions that continue to come up are things related to ability to repay and what that means.

Alan Wink:So, Allen, just to address that, as you remember for the PPP loans, you do not have to show ability to repay. For the SBA EIDL loans, it's like a normal credit facility and you have to show the ability to repay the loan.

Allen Wilen:This is Rob and again, that is one of the key elements that is still being finalized as part of the application. But early interpretations by almost everybody we've spoken to, lenders, lawyers, et cetera believes it's the first hundred thousand, not an employee making more than that.

Tim, you're probably the best one for this question. Is a sole proprietor eligible for this?

Tim Speiss:Yes, absolutely. Yeah, there's some very good guidance on that in the preambles and commentary around the legislation, but the answer is yes.

Rob Katz:Yeah, and this is Rob. It's also whether you are a schedule C 1099 K1. Not a K1, but it doesn't matter what type of compensation. So whether again you're an Uber driver or your own schedule C, you are included in eligible.

Allen Wilen:Okay. We have a question here; if we have a business that has not had revenue yet, has filed tax returns, they're an early stage development company, have not generating profits but have filed tax returns showing losses, would they still be eligible for any of the forgivable loan programs?

Alan Wink:Allen, this is Alan Wink. There's nothing in the PPP loan program that stipulates either revenues or profitability. I remember there's no ... You have to show no ability to repay the loan.

Allen Wilen:Do any of the state programs preclude you from taking the federal program? That question, I think at this point in time, I think the answer to that it going to be, it's a state by state, program by program analysis. We have done at the firm a state by state analysis for about seven or eight states at this point in time on some of the programs that are being offered, and new ones are being offered every day. And it's going to be a question that you're going to have to look at each state's guidelines for the programs they have.

Alan Wink:There's another question here as well. I don't know if it was addressed. ESOPs. ESOPs are eligible with 500 or fewer employees.

Allen Wilen:There's somebody here who's asked us if we could go back through the venture capital affiliation rules, explaining a little bit better as to how those interact and fall in place. Alan, is that something you could run with?

Alan Wink:Sure. I think as of today, until the guidance comes down from the SBA, I think VC backed companies are taking the position that they are not eligible for the PPP loans due to the affiliation rules under the existing a SBA 7(a) regulations. As I mentioned, I think a number of organizations around the country including the National Venture Capital Association are trying to get those affiliation rules changed so VC backed companies would be eligible for loans under this process. We should know more about that over the next ... hopefully sometime this week if that guidance does come down, and we can certainly get back to our VC backed companies about that.

Allen Wilen:Okay, great. At this point in time unless there's a question somebody else wants to answer real quickly, I do want to respect everyone's time for the one hour we allotted for this program. I want to thank everyone for joining us today, and you'll see on our screen in a minute the coronavirus knowledge center. There's actually a ... You can run your phone over it and take a picture on the screen and our COVID-19 response email which should be on there as well. You can also run your phone over it, take a picture of the QR code and send us additional questions. If we didn't get to your question today, we will be putting together an FAQ document on our knowledge center, so please go back and look there. You will also find the tax seminar I mentioned earlier with some of the CARES Act tax benefits. So with that, I say thank you to everyone for joining us.

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