COVID-19: Government Programs That Help Commercial Tenants Pay Their Rent

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Summary

The Federal Government will pay your commercial lease rents for two months, if you take the time to fill out the necessary paperwork.  The funds are limited, and will be given out on a "first come, first served" basis.  The government calls it a "loan" but do not be fooled by that name because the loan will be subject to "full forgiveness" if you use the loan for the proper purposes and meet other requirements, which essentially turns the loan into a gift to you.  The loan is called a "Paycheck Protection Program loan" (or "PPP loan" for short).

Links to various government programs relating to relief for Small Businesses appear near the bottom of this page.

A More Detailed Explanation: Government Programs Available to Small Businesses

There are two loan programs that are very well suited for small businesses impacted by the COVID-19 pandemic.  One is called a "Paycheck Protection Program loan" (or "PPP loan"), and it does NOT need to be repaid under certain circumstances.  The other type of loan is called an "Economic Injury Disaster loan" (or "EID loan").

WARNING: A business cannot apply for both types of loans -- it must choose which type of loan is best, and then only apply for that type.

A third loan program disburses what is called an "EID Advance Loan" in the amount of $10,000. (To be taken directly to that section of this webpage, click here: EID Advance Loan.)

PPP Loans

The PPP loan was created by legislation approved on Friday, March 27, 2020, with a focus on allowing small businesses to meet payroll obligations.  Of all the loan types offered by the federal government for the COVID-19 disaster, a PPP loan may be the best option for many small businesses.

PPP loans are forgivable, which means that the small business is not required to repay the loan if certain criteria is met.  Borrowers will be eligible for "loan forgiveness" to the extent that the loan proceeds are used, during an eight-week period after the "date of the origination" of the loan, for the following expenses: (1) paying rent on a commercial lease that was entered into prior to February 15, 2020; (2) payroll costs; (3) group health care benefits; (4) interest payments on any mortgage incurred prior to February 15, 2020; and (5) payments for utility services to the business (provided the service began before February 15, 2020).  But, a reduction in payments for employee labor after the loan, as compared with before the COVID-19 disaster, can result in a reduction in the amount of forgiveness of the loan.

The "date of the origination" of a loan is usually the date when it is approved for funding, however the SBA regulations specifically defining this term have not yet been issued in the context of PPP loans.

Some websites are reporting that businesses that lay off or terminate employees before accepting the loan will not be subject to forgiveness penalties for those employees, and that if those businesses rehire employees after accepting the loan, they will receive credits to cover wages.  Until the SBA issues its regulations, it will not be known to what extent that will be accurate.

To the extent that a loan is not forgiven, the interest rate will not exceed 4% and there will be up to 10 years to repay the loan, so even if rules for full forgiveness are not met, it is still a very favorable loan for most businesses.

The PPP loan program is available to a variety of common forms of businesses, and specifically includes sole-proprietors, independent contractors, and other self-employed individuals.

Unlike other SBA loans, an applicant for a PPP loan does not need to show that they cannot obtain credit elsewhere.

On Tuesday afternoon, March 31, 2020, the Treasury Department published a loan application however the SBA website continues to only have a sample loan application posted.  The Treasury Department has also announced that existing SBA-certified lenders will be given delegated authority to process PPP loans.  It is not clear whether a business located in California needs to use an SBA-certified lender that is located in California.  Until that issue is clarified, it is highly recommended that you file your application using a California based lender.

The SBA will start accepting loan applications (submitted through a certified lender) on two different dates, deprnding on what type of business is involved.  Applications from small businesses and sole proprietorships will be accepted starting on April 3, 2020.  Applications from independent contractors and self-employed individuals will be accepted starting on April 10, 2020.  However, DO NOT WAIT until those dates!  It is highly recommended that you start your application AS SOON AS POSSIBLE with a California based SBA-certified lender.

Funds for the PPP loan program are limited and they will be given out to those who apply first.  Therefore, it is important that potential applicants IMMEDIATELY select an SBA-certified lender and IMMEDIATELY call that lender, before the funds are depleted.

For those who want to see the exact language of the portions of legislation that created PPP loans and the rules for loan forgiveness, please click on this link: Sections 1102 and 1106 of HR 748.

For those who want to see the exact language of the entire legislation, please click on this link: HR 748 Text.

WARNINGS: (1) If you search for PPP loans on the internet, watch out that you do not end up researching a loan involving a "Public-Private Partnership" which also uses the name "PPP loan."  (2) The new PPP loans are a type of loan known as a "Section 7(a)" loan, but do not get confused when researching them because there are a lot of websites (including the SBA website) that discuss the EXISTING Section 7(a) loans -- the new PPP loans will have different application requirements.

EID Loans

EID loans are available to small businesses that have been adversely impacted by the COVID-19 pandemic.  Many sources state that the interest rate is 3.75%, and that there is no payment for a year.

For the EID Loan application, click here: COVID-19 EID Loan Application.

EID Advance Loan ($10,000)

A page on the SBA website is offering an emergency $10,000 "advance."  As of this writing, the SBA website states:

"In response to the Coronavirus (COVID-19) pandemic, small business owners in all U.S. states, Washington D.C., and territories are eligible to apply for an Economic Injury Disaster Loan advance of up to $10,000.

"This advance will provide economic relief to businesses that are currently experiencing a temporary loss of revenue. Funds will be made available within three days of a successful application. This loan advance will not have to be repaid."

Disclaimer

The above is merely a summary gleaned from multiple sources.  The exact terms of each type of loan program need to be carefully reviewed before applying for any loan.

Links Specifically Related to Obtaining Relief from the SBA

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"Paycheck Protection Program Application Form" from the Department of the Treasury.

(According to the Treasury Department's webpage "How the Treasury Department is Taking Action" this is the actual application form -- not a draft.)

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Department of the Treasury's "Paycheck Protection Program (PPP) Information Sheet (For Borrowers)"



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Department of the Treasury's "Paycheck Protection Program (PPP) Information Sheet (For Lenders)"

(Take Away: "All existing SBA-certified lenders will be given delegated authority to speedily process PPP loans.")

• 

COVID-19 EID Loan Application



• 

SBA's PPP Loan Webpage (contains a link to only a sample application).



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SBA's Economic Injury Disaster Advance Loan ($10,000).



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Does Your Business Qualify: SBA's Maximum Size Requirements.

This resource is easier to use if you know the NAICS Industry Code (also known as a "Business Activity Code") for your type of business.  (NOTE: That code appears on some tax forms, for example: (1) Schedule K, line 2a, of Form 1120, if you are a corporation; (2) Line B of Schedule C to Form 1040, if you use Schedule C to file for your business; (3) Line B of Form 1120S, if your business is a subchapter S corporation; and (4) Line C of Form 1065 if your business is a partnership, or an LLC that has elected to be treated as a partnership.)

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Top 40 SBA Lenders in Northern California (Date Unknown).



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Top 50 SBA Lenders in the San Francisco area as of August, 2017.



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Sacramento Area SBA Lenders as of 2019.



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Contact SBA's San Francisco area office



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Contact SBA's Sacramento area office



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US Bank's PPP online contact form.

(NOTE: US Bank has California offices.)

Links to Non-Government Websites Explaining Recent Legislation

Below are links to resources that may be helpful to commercial tenants during the COVID-19 pandemic.

• Article: "Comparison of EIDL and Paycheck Protection Programs" [Posted March 31, 2020.]

• Washington Post Article: "Here's how to get a small business loan under the $349 billion coronavirus aid bill" [Posted March 30, 2020 at 1:05 p.m. PDT.]

• Article: "What Businesses and Lenders Need to Know About the CARES Act, SBA Lending, and Loan Forgiveness" [Posted March 30, 2020.] (This article contains an explanation of the so-called "Phase 3" Coronavirus Aid, Relief and Economic Security Act, or "CARES Act" which was signed by the President on Friday, 3/27/2020.)

• Inc. Article: "How Paycheck Protection Loans Are Different Than Traditional 7(a) SBA Loans" [Posted March 29, 2020.] (This article contains an explanation of the differences between a PPP loan and a traditional SBA loan.)

• Forbes Article: "Paycheck Protection Program - Devilish Details - Some Uncertainty" [Posted March 28, 2020 at 10:23pm EDT.] (This article contains a general explanation of the PPP loans, and has a link to a US Bank pre-application.)

• From PNC Financial: Paycheck Protection Program (PPP) Small Business Administration Loan Application - Required Document Check List (PNC does not appear to have any California branches, and therefore it is unknown if they can loan to a California business.)

• Web page on PPP Loans from Live Oak Bank (North Carolina) (Live Oak Bank does not appear to have any California branches, and therefore it is unknown if they can loan to a California business.)

• Article: "US Legislative Response to COVID-19 and Loan Forgiveness" [Posted March 25, 2020.] (This article contains an explanation of the three phases of the federal legislation.)


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