State of Montana Guide for Small Businesses for the CARES Act

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Coronavirus Relief Federal Stimulus

The Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020 is an approximately $2 trillion bipartisan economic stability and revitalization package that was signed into law on March 27th, 2020. The Act includes several important provisions to help small businesses maintain or restart operations in light of the coronavirus, or COVID-19, disease pandemic emergency.

The following document is intended to clarify and provide easy access to the programs for Montana’s small businesses.

Small Business Loan Programs:

SBA 7a Loans are an existing loan program that received an injection of approximately $350 billion. These loans are 100% guaranteed by the federal government, which should simplify the borrowing process considerably. The loans also have provisions that allow for their entire principal to be forgiven. The loans can

Who’s eligible? Small businesses, not for profit organizations, tribal businesses, and veterans organizations with 500 or fewer employees. This includes sole proprietors, independent contractors, and those who are self-employed. Businesses that have separate but affiliate location (for example, chains that operate under an umbrella corporation) have additional exclusions. Those companies in the portfolio of a private equity or venture capital firm should inquired with their attorney regarding affiliation rules. Please contact your attorney with any questions.

How much can I receive? No greater than $10 million, or 2.5 times the businesses average total monthly payments including payroll incurred during the previous year. The interest rate has been set at 1% with a 2-year term, if it’s not eligible for forgiveness.

Requirements? There are not credit, collateral, or personal guarantees required for the 7a loan program. Loans cannot be obtained to pay the same costs as those covered by an EIDL loan (see below).

How can I use the funds? Funds may be used to cover payroll costs (including salaries, commissions, and other flexible compensation structures), group healthcare coverage, sick leave, family leave, mortgage and rent payments, utility costs, and interest on debt incurred before Feb. 15th, 2020. Payroll costs cannot exceed an annual salary of $100,000.

Can these loans be forgiven? Yes, loans are eligible for forgiveness in entirety of the amount spent during an eight-week period after origination for payroll costs, mortgage interest, rent payments, and utility payments. If employees are laid off or have salaries lowered, lower rates of forgiveness apply. At least 75% of funds must be used for payroll in order for the loan to be forgiven.

Can loan payments be deferred? Yes, 7a loans can have payments deferred for up to 6 months.

How can I apply? Applications for 7a loans may be made to any SBA-certified lender. Most banks, credit unions, and other financial institutions are SBA-certified. Please call your bank or credit union to get started.

SBA Economic Injury Disaster Loans (EIDL) are available for small businesses in all 56 counties in Montana. This program received a $10 billion expansion under the CARES Act, and allows the SBA to provide a cash advance to the applying business within three days of the application. Full funding is currently taking 4-8 weeks, though the SBA is working to respond as rapidly as possible to the needs of businesses.

Who’s eligible? EIDL funds are only available to businesses that have suffered substantial economic injury as a direct result of the COVID-19 disaster. Small businesses, private not for profit organizations, agricultural cooperatives, cooperatives, tribal businesses, and employee stock ownership plans, all with 500 or fewer employees. This includes sole proprietors, and independent contractors. Those companies in the portfolio of a private equity or venture capital firm should inquired with their attorney regarding affiliation rules. Please contact your attorney with any questions.

How much can I receive? No greater than $2 million, though this cap can be waived for businesses that are a major source of employment. The loan amount is limited to the economic injury that has been sustained. An advance of up to $10,000 can be given, with receipt of that amount within three days. The interest rate is 3.75% for small businesses, and 2.75% for non profits. The term of the loans is up to 30 years.

Requirements? There are not credit, or personal guarantees required for the EIDL program for loans of up to $200,000. Collateral requirements for loans of greater than $25,000 may apply.

How can I use the funds? Funds may be used for working capital to allow the business to resume normal operations. Under the CARES Act, this includes payroll costs, sick leave, costs associated with interrupted supply chains, rent and mortgage payments, and debt coverage. EIDL funds may not be used to refinance debt incurred prior to the disaster, pay loans owed to the federal government, pay fines, repair physical damage, or pay dividends or other disbursements to owners.

Can these loans be forgiven? No, there is no forgiveness provision for EIDL funds.

Can loan payments be deferred? No, EIDL payments may not be deferred.

How can I apply? Applications are made to the SBA directly. Please visit the following website to apply: https://www.sba.gov/disaster/apply-for-disaster-loan/index.html

Unemployment Benefits:

State of Montana Unemployment Benefits: Governor Steve Bullock authorized emergency rules to streamline access to unemployment benefits for Montanans who have been laid off due to the COVID-19 emergency. Workers who must self-quarantine, or who are taking care of a family member due to COVID-19 are eligible for unemployment benefits. Governor Bullock also waived the one week waiting period, and job search requirements. Furthermore, COVID-19 related unemployment claims will not be charged to individual employer accounts.

How can I apply? If you have been laid off, or are unable to work due to COVID-19, you may apply for unemployment benefits by visiting https://montanaworks.gov/, or calling 406-444-2545.

Federal Unemployment Benefits: In addition to expanded unemployment benefits put into place by Governor Bullock, the CARES Act provides for expanded unemployment compensation from the Federal government. Those who have been laid off, or are unable to work due to COVID-19 are broadly eligible for these benefits. This includes worker classes that have historically not been eligible, such as gig-workers, freelancers, sole-proprietors, and other independent contractors. Specifically, unemployed workers are eligible for an additional $600 per week, even if this payment takes them above their pre-unemployment earnings level. The CARES Act also provides an additional 13 weeks of unemployment edibility, for a total of 39 weeks of eligibility.

How can I apply? The CARES Act supplements state unemployment programs. You may apply for unemployment benefits by visiting https://montanaworks.gov/, or calling 406-444-2545.

Direct Payments: Most Americans earning less than $75,000 per year ($150,000 for married couples who file taxes jointly) in one of the prior two tax years will receive a direct payment of $1,200 per adult. There is an additional payment amount of $500 per child. Those earning more than $75,000 per year will receive a direct payment that phases out linearly until it disappears entirely at $99,000 ($198,000 for married couples filing jointly).

How can I apply? There is no need to apply for these funds. The checks or direct deposits will be made using the information on file with the IRS or Social Security Administration.

The CARES Act provided $1.25 billion for the state of Montana to use in combatting the COVID-19 emergency. These funds have not been disbursed yet, and additional guidance will be forthcoming soon regarding how the state will utilize the funds.

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