There continues to be a lot of confusing and contradictory information circulating out there about the CARES Act and SBA support to startups. At Burkland, we have reviewed the latest information and summarize the new critical developments here.
Should Independent Contractors Be Included in the PPP Loan Calculation? No.
A lot of questions about the CARES Act were clarified last week, such as whether independent contractors should be included in the Paycheck Protection Program (PPP) loan calculations (they shouldn’t). Affiliation, though, remains a major hurdle for many companies in our orbit – those with investors that own more than 20% on a fully-diluted basis still run the risk of being disqualified for an SBA loan.
What is the Latest Treasury Ruling Concerning Majority Ownership?
There has been a Treasury update, and this is a good review of where things stand from Cooley. Efforts reportedly continue in Congress to simplify the control question to majority ownership. At Burkland, we are watching this issue closely and will keep you updated.
Where Can My Startup Apply for a Loan?
As far as applying for a PPP loan, the consensus emerging since last week is that the fastest way to apply will be through your current bank. Many banks are struggling to handle the crush at the moment, but they’ll get there. While it’s important to move fast, don’t worry about being left out in the cold – we think Congress will appropriate additional funds to the PPP program if necessary.
Fundera has published a pretty detailed list of banks accepting PPP applications, along with links to their respective pages. You can also apply through Fundera, who says they can “direct your application to the lender with the most bandwidth.” This might be a good option if your bank is not participating or taking too long to get up to speed.
The Treasury department also posted a helpful update and FAQ on PPP loans today, 4/7/20.
About Regular & Important Updates from Burkland
We continue to keep the Burkland COVID-19 Master Google doc we distributed in early March current with useful updates, links, interpretations, and clarifications on a wide variety of topics related to the CARES Act, including an expanding list of banks participating in the PPP loan program. Other recent updates include:
- Added the new application and fact sheet reflecting U.S. Treasury’s Interim Final Rule released April 2.
- This guidance clarified PPP loan Payroll Costs DO NOT include independent contractor/1099 payments. Several websites & calculators out there continue to include 1099s into the PPP loan calculations, and this looks to be increasingly incorrect.
- Important PPP loan application opening dates:
- April 3: Small businesses and sole proprietorships
- April 10: Independent contractors and self-employed individuals
- Added a new SBA link to a consolidated page hosting their COVID-19 Small Business Guidance and Loan Resources.
This Burkland COVID-19 Master Google doc is being updated at least daily – so along with Burkland’s website, it’s an excellent one-stop source of comprehensive information. Please continue to check in to the Burkland COVID-19 Resource Center as we will be updating and clarifying information as it is available.