CARES Act Help For Small Businesses

Paycheck Protection Program

As part of the CARES Act, the Paycheck Protection Program (PPP) put in place provisions for loans to be issued that can cover payroll costs and a number of other costs. Congress passed several rounds of funding, with the third in the 1st Quarter of 2021. As of January 19, 2021 the SBA’s Loan Application Portal is open to First Merchants. Please prepare your loan application and documentation as described below.  Contact your Banker directly to submit your loan application.

On January 6, 2021, the SBA issued guidance regarding the new round of PPP funding and has since released loan application documents.  This is in line with the Economic Aid to Hard-Hit Small Businesses, Non-Profits and Venues Act (Economic Aid Act).  

We recommend you review the following documents and resources.

• For first time PPP borrowers:
  • Top-line Overview of First Draw PPP
  • Interim Final Rule on Paycheck Protection Program as Amended by Economic Aid Act.  Notably, page 13 begins Section B - What Do Borrowers Need to Know and Do? Page 71 begins Section D - What Do Both Borrowers and Lenders Need to Know and Do?
  • First Merchants PPP Loan document checklist for 1st Draw Borrowers
  • SBA has released guidance on calculating the Max Loan Amount for First-Draw PPP Loans.
  • Borrower Application Form for 1st Draw, revised as of January 8, 2021
• For PPP 2nd Draw borrowers:
  • Top-line Overview of Second Draw PPP
  • Interim Final Rule on Second Draw Loans.  Among other items, this includes guidance on new eligibility requirements, excluded entities, new eligible expenses, payroll cost calculations, application and documentation requirements, and loans to borrowers with unresolved first draw PPP loans.
  • First Merchants PPP Loan document checklist for 2nd Draw Borrowers
  • SBA issued FAQs on Revenue Reduction, Max Loan Amount Calculations for Second-Draw PPP Loans.
  • Second Draw Borrower Application Form, revised as of January 8, 2021
• Guidance on Accessing Capital for Minority, Underserved, Veteran and Women-Owned Business Concerns
• Attachments and addendums to form 2483:
  • Additional Ownership Information
  • Addendum A
  • Addendum B

Please consult with your legal, tax, accounting or financial advisors, as needed. 

The SBA has issued a number of interim final rules and FAQs since inception of the program.  The websites below may be valuable resources as you work through loan application and forgiveness.  

• The SBA PPP page
• The Treasury CARES Act small business resource page
  

PPP Flexibility Act

The The Paycheck Protection Program Flexibility Act went into effect on June 5, 2020 to provide greater flexibility for PPP borrowers.  Among other things, the bill:

• Extended the forgiveness period for all PPP loans from 8 to 24 weeks from the date of origination;
• Reduced the minimum amount that borrowers must devote to maintaining payroll from 75% to 60% in order to receive forgiveness;
• Allowed for maturity (i.e. 2 years) on previously made PPP loans to be extended by mutual agreement of the lender and the borrower;
• Modified the rules related to when loan payments would begin for that portion of a loan that is not forgiven.
  

PPP Loan Forgiveness

Clients whose PPP loan funded in 2020 from First Merchants Bank have entered the loan forgiveness period. Below are some requirements. You should gather your supporting documentation, and also determine which forgiveness application fits your situation. They are included here for your reference:

• The 3508 Full Forgiveness Application and 3508 Instructions
• The 3508EZ Forgiveness Application and 3508 EZ Instructions
• The 3508S Forgiveness Application and 3508S Instructions
• Soon to be released - based on the Economic Aid Act a new streamlined forgiveness application will be available to borrowers with PPP loans of $150,000 or less.

As you may be aware, the SBA offered 2 EIDL products: an EIDL loan (with a low interest rate and term up to 30 years), and an EIDL Advance (offered in $1,000 increments per employee with a maximum of $10,000). In accordance with the CARES Act, starting on October 2, 2020, the SBA began reducing the PPP forgiveness amount by the amount of the EIDL Advance. The EIDL Advance Deduction was later repealed on December 27, 2020, and as of December 29, 2020, the SBA no longer implemented those reductions. For loans where the SBA remitted a forgiveness amount that was reduced by an EIDL Advance, SBA will automatically transfer the reconciliation payments to First Merchants to be further credited to those borrowers. Borrowers do not need to apply for their funds.

At this time, if you received a PPP loan as well as an EIDL Advance, please review the SBA’s Guidance on Repeal of EIDL Advance Deduction Requirements.  

Additional Provisions in CARES Act

The CARES Act has several additional provisions that may be of particular interest to business owners.  First, it expanded the applicability of Economic Injury Disaster Loans.  Second, a number of changes to business taxes will also help ease the burden on businesses impacted by COVID-19, this includes adding an employee retention tax credit, delaying payroll tax payments, relaxing limitations on businesses with net operating losses, pulling ahead 2021 corporate alternative minimum tax credits, increasing business interest expense deductions, affording immediate write offs associated with improving facilities, and creating a temporary exception for the alcohol excise tax if use to produce hand sanitizer in 2020.  Both individual and business coronavirus tax relief measures can be found here. Business owners should contact their accountant to understand the full scope of these modifications.  Third, the act put in place changes to the Families First Coronavirus Response Act.  These changes affect paid sick leave and paid FMLA coverage. You can find all CARES ACT information on the Treasury page here.

Financial Assistance and CARES Act for Individuals

As we continue to navigate the COVID-19 situation together, we know that you may have questions about how First Merchants is prepared to support our personal banking clients during this unprecedented time. Know that your bankers are here to help. Read information related to financial assistance initiatives that we’re offering as well highlighting important parts of the CARES Act.