The Senate has passed a bill that will provide up to US$350 billion in forgivable loans to small business concerns, non-profit and veterans organizations and self-employed individuals to cover their expenses during the COVID-19 crisis.
- Size test is the greater of (a) 500 employees or (b) the size standard by industry sector (NAICS code) established by the SBA
- Employees defined to include individuals employed full-time, part-time or other basis (includes gig economy workers)
- Small businesses that were not in business during 2019 can calculate monthly payroll costs using average from January 1, 2020 and February 29, 2020
- SBA regulations may require affiliated companies’ employees (and their portfolio companies) to be combined for purposes of eligibility. Implications to VC/PE backed companies.
- Maximum loan amount remains 250% of monthly payroll costs (including commissions) plus any amount outstanding on an Economic Injury Disaster Loan (EIDL) originated during the period from January 31, 2020 until the date of origination of the new loan
- Use of proceeds that are permitted now include interest payments on mortgages and/or other debts but not principal payments
- Previously originated EIDL loans may be refinanced into forgivable loans
- Eligibility considerations no longer include whether the applicant has been substantially impacted by public health restrictions related to the Coronavirus