CARES Act Help For Small Businesses

Learn About Government Loan Programs and CARES Act

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 subject to availability from the SBA and were exhausted on April 16th.  A second round of funding, totaling $310 billion was passed on April 23rd. 

Who Qualifies

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

  • A small 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.

Prepare to Apply for the Paycheck Protection Program

If you’re a current First Merchants business client:

If you’re not currently a First Merchants business client:

  • Contact your primary bank.
    • Due to the nature of the program, it will be faster for you to work with your primary bank to submit an application for a Paycheck Protection Program loan. 

Get Your Documentation Ready

Here are the documents you’ll need to apply (see Paycheck Protection Program printable checklist):

  • 2019 IRS 940, 941 or 944 payroll tax reports (1099 Sole Proprietorship or Independent Contractors)
  • Loan amount justification and supporting documents such as:
    • Loan amount calculator* 
    • Salary, wage, commission, or similar compensation 
    • Payment of cash tip or equivalent 
    • Payment of vacation, parental, family medical or sick leave 
    • Allowance for dismissal or separation 
    • Health care benefits, including insurance premiums 
    • Any retirement benefits 
    • State or local tax assessed on the comp of employees 
    • Payments or any compensation to independent contractors or sole proprietorships that is a wage, commission, income, net earnings from self-employment or similar compensation
    • Compensation of an individual employee in excess of an annual salary of $100,000 
    • Federal employment taxes imposed or withheld under Chapter 21, 22 or 24 of the IRS
    • Qualified sick and family leave wages for which a credit is allowed under Family First Coronavirus Response Act, plus any compensation of an employee whose principal residence is outside of the US
    • Articles of Incorporation/Organization or other Resolutions
    • Bylaws/Operating Agreements
    •  Current identification of all individual Borrowers and Owners

* FMB Calculator may be provided as needed.
**While the Paycheck Protection Program states that Borrowers who choose to use an agent (eg accounting firm, law firm, etc.) will have agent fees paid by the lender, First Merchants will not process any application where the Borrower expects First Merchants to pay an agent fee.

Ready to Apply for the Paycheck Protection Program?

We’re currently accepting applications to the PPP from existing First Merchants Bank customers.  This is subject to funds availability through the SBA, which has an approved $310 billion for round two. If you have a loan or deposit account with us, and you have gathered your documentation, you’re well on your way. Just call your Relationship Manager or Banking Center Manager to apply.  Your banker will advise you regarding next steps.  Information on your application will NOT be available through a Banking Center or Customer Service.

Please check this page often for up-to-date information about the PPP.  To apply for PPP with us, you must have a business deposit or lending relationship with First Merchants as of March 31 2020, due to customer verification requirements that apply under applicable rules. We recommend speaking with your primary bank for further assistance.

Using a PPP Loan

These loans can be used for any payroll costs and other additional costs detailed here.  The costs included are: salary, wage or commissions, payment of cash tips 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/local taxes assessed on employee compensation and finally the sum of payments to a sole proprietor/contractor.  Salary compensation cannot exceed $100,000, prorated, and these payments cannot be used for payroll taxes, railroad retirement taxes, income taxes, an employee residing outside the U.S., or qualified sick leave wages for which a credit is allowed under section 7001 or 7003 of the Families First Coronavirus Response Act. 

Additional Program Details

The maximum loan amount is 2.5 times monthly payroll costs, as incurred during the prior year, or $10MM, whichever is less.  These loans are 100% guaranteed by the federal government, but you will need to certify that you need the loan due to uncertain economic conditions, you’ll use the loan proceeds as required, and you don’t have duplicative loan applications with regard to these purposes.  Additionally, the interest rate will be set at 1.0%, with a 2 year term, and no personal guarantees are required.  Another major topic is whether these loans can be forgiven.  While the answer is yes, it’s critical that business maintain good records of how they use the loans in order to qualify for forgiveness.  Additionally, forgiveness can be reduced if wages paid to employees are reduced by 25% or more. 

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.  Please read the attached document, which contains important information. The SBA has now made the loan forgiveness application available, which can be found here. We are awaiting final guidance from them before we're able to accept your application, but you can begin gathering documentation now. 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.