As described in previous blog posts, the CARES Act provided relief to small businesses in the form of two loan programs: the Paycheck Protection Program (PPP) and an enhanced Economic Injury Disaster Loans (EIDLs). Here is the latest news on each program.
EIDL Grants Limited to $1,000 per Employee
Perhaps the most striking enhancement to the EIDL program that resulted from the CARES Act was the addition of a loan advance of up to $10,000 that would not have to be repaid. However, there was no guidance on how the amount of a grant would be determined.
This week, EIDL applicants received an email from the SBA with the following language:
To ensure that the greatest number of applicants can receive assistance during this challenging time, the amount of your Advance will be determined by the number of your pre-disaster (i.e., as of January 31, 2020) employees. The Advance will provide $1,000 per employee up to a maximum of $10,000.
Furthermore, as of today, we have not heard of any reporting or anecdotal evidence that anyone has received an EIDL loan or loan advance.
Sole Proprietors Are Eligible for Loan Forgiveness Under PPP Based on 2019 Net Income
Sole proprietors and independent contractors are eligible for PPP based on their 2019 self- employment income. However, it was not clear how a sole proprietor would qualify for loan forgiveness if there was no self-employment income during the 8- week period following the receipt of the loan proceeds.
This week, the SBA finally issued guidance on this issue. When determining forgiveness for a self-employed taxpayer, the lender will forgive 15.38% (8/52) of 2019 net self-employment income.
However, it is still unclear if a sole proprietor will also be eligible for loan forgiveness for non-payroll costs, such as rent and utilities. The SBA guidance provides conflicting information on that issue. My guess is those expenditures will be eligible for forgiveness.
As more information becomes available, we will keep you informed.