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CARES Act Help For Small Businesses

Learn About Government Loan Programs and CARES Act

Main Street Lending Program

Within the CARES Act, the Federal Reserve and the Department of the Treasury established a provision for an additional lending program called the Main Street Lending Program (MSLP).  Lenders will be able to enhance support to small and mid-sized businesses that were in good financial standing before the COVID-19 crisis, by offering 5-year loans of between $250,000 and $300 million.  These businesses must commit to make a reasonable effort to maintain payroll and retain workers.  Additionally, firms that have taken on a PPP loan may also take out Main Street loans.  You can find details on the program at the Federal Reserve Bank of Boston website.  The program has been opened up by the Fed, and First Merchants Bank is an Eligible Lender.  Please contact your banker to discuss your interest in the MSLP.  

Paycheck Protection Program

The Paycheck Protection Program (PPP) within the CARES Act puts in place several provisions to support small businesses.  Specifically, the PPP provides for loans to be issued that can cover payroll costs and a number of other costs. Congress initially approved $349 billion for the program, intending to fund requests through June 30, 2020. Funds were exhausted on April 16th, and a second round of funding, totaling $310 billion was passed on April 23rd. Congress subsequently passed a bill to extend this program through August 8th, tapping into over $130 billion of unfunded PPP.  At this time, we are no longer accepting applications to the Paycheck Protection Program.

PPP Flexibility Act

Congress recently passed the Paycheck Protection Program Flexibility Act that provides greater flexibility for PPP borrowers.  Among other things, the bill:

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

Who Qualifies for PPP

Generally, any SBA qualified small business can get a loan. However, here are the details of expanded qualification criteria: 

  • A small business that meets the SBA size requirements
  • A small business with less than 500 employees
  • A non-profit with fewer than 500 employees
  • An individual who operates as a sole proprietor
  • An individual who operates as an independent contractor
  • An individual who is self-employed and as a regularly operating business
  • A Tribal business concern that meets the SBA size standard
  • A 501(c )(19) Veterans Organization that meets the SBA size standard
  • A food services organization with less than 500 employees per location
  • Affiliation rules do not apply if you operate a franchise or receive financial assistance from an approved Small Business Investment Company.

PPP Loan Forgiveness
If you have received funding for a PPP loan from First Merchants Bank, we want you to be aware of some loan forgiveness requirements.  While we are not yet ready to accept PPP loan forgiveness applications, the SBA recently released a revised version of the forgiveness application, as well as a new, streamlined application that can be utilized by borrowers who meet one of three criteria described on that application and its instructions.  As you consider whether your loan forgiveness “covered period” will be 8 weeks or 24 weeks, you should gather your supporting documentation, and also determine whether you are eligible to submit the streamlined EZ Forgiveness Application or if you will be required to submit the Full Forgiveness Application.  You can also reference the instructions for the EZ Forgiveness Application and instruction for the Full Forgiveness Application from the SBA. We are making final preparations for accepting applications and anticipate receiving SBA guidance soon. 

The SBA has also issued two interim final rules, which describe details on lender and borrower responsibilities and the loan forgiveness process, including: 

  • Lenders are expected to perform a good-faith review, in a reasonable time, of the borrower’s calculation and supporting documents, then i) notifying the borrower if there is material lack of substantiation and ii) working with the borrower to remedy the issue.
  • The lender has 60 days from application submission to notify the SBA.
  • The forgiveness process rule includes details on several technical questions related to employee status, payroll calculations and forgiveness-eligible non-payroll expenses.

Should you have any questions please reach out directly to your banker. 

7(a) Borrower Payments and Loans

The CARES Act provides for the SBA to make loan payments for current 7(a) borrowers for a period of 6 months.  This covers any principal, interest and any associated fees.  Payments from the SBA are to begin no later than 30 days from the first payment due date.  The law specifically states that all current borrowers will be eligible, but we’re awaiting guidance from the SBA to be issued.  Additionally, SBA Express Loan maximums are increased from $350,000 to $1 million until 12/31/2020. Learn about the array of SBA lending options here.

Additional Provisions in CARES Act

The CARES Act has several additional provisions that would be of interest to business owners.  First, it expands 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.  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.  

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.