Financial Assistance for Wisconsin Businesses During COVID-19; SBA Loans and WEDC Grants
With unprecedented uncertainty surrounding the economy due to COVID-19, the U.S. and Wisconsin governments are taking action to help support small businesses.
The U.S. government has passed a large stimulus law in the Senate entitled the Coronavirus, Aid, Relief, and Economic Security (CARES) Act. Included in the bill is a provision providing loans to small business to primarily help cover payroll costs, called the Paycheck Protection Program. It will be administered by the Small Business Administration (SBA).
In addition, the Wisconsin Economic Development Corporation (WEDC) is providing some relief for Wisconsin small businesses in the form of grants.
Both of these financial assistance programs are intended to allow businesses to keep their employees and help them recover when things return to normal. In addition, the small business loan provision will allow local vendors to support businesses affected by COVID-19. This article outlines some of the major features from both the SBA and the WEDC financial assistance programs.
Small Business Paycheck Protection Loans - Q & A
What kinds of organizations are eligible for a Paycheck Protection Loan?
All for-profit businesses concerns, non-profit organizations, veteran organization, or tribal business concerns that have 500 or less employees may be eligible for a loan. In determining eligibility, lenders will consider whether the borrower was in existence on February 15, 2020, and whether borrower had employees for whom borrower paid salaries and payroll taxes. These are the only considerations that are to be made in determining eligibility.
How much may an eligible borrower receive?
The maximum amount an eligible borrower can receive under the CARES Act is $10 million from local Small Business Administration (SBA) lenders. The amount a borrower will receive is determined by multiplying the average total monthly payroll costs multiplied by 2.5.
What may a borrower use a Paycheck Protection Loan for?
There are restrictions for how the borrower may spend the money. Allowable uses of the loan under section 7(a) of the Small Business Act include:
- payroll costs;
- payroll support (including paid sick leave), medical, or family leave, and costs related to the continuation of group health care benefits during those periods of leave;
- employees’ salaries, commissions, and similar compensation;
- mortgage interest payments;
- rent (including rent under a lease agreement);
- utilities; and
- interest on debt incurred before the covered period (February 15, 2020-June 30, 2020)
Is the Paycheck Protection loan guaranteed by the federal government?
Yes, the loan is fully guaranteed by the federal government.
Can payments for a Paycheck Protection Loan be deferred?
Yes, loan payments can be deferred. The CARES Act permits that loan payments can be deferred for a period of 6-12 months. Deferrals can be for the entire payment of principal, interest ,and fees (if any). Thirty (30) days after the CARES Act passed, the SBA Administrator shall provide guidance on the deferral process.
Can a Paycheck Protection Loan be forgiven?
Yes, a Paycheck Protection Loan may be forgiven, potentially up to the entire principal amount of the loan. In order for a borrower to be eligible for forgiveness, the borrower, in an 8-week period following receipt of the loan, must use the loan to pay for the following expenses:
- Payroll costs;
- Mortgage interest payment (or a mortgage entered into before February 15, 2020);
- Any payment on a rental obligation (any payment required under a leasing agreement entered into before February 15, 2020); and
- Utilities payments for which service began before February 15, 2020. (Utilities are defined as service for the distribution of electricity, gas, water, transportation, telephone, or internet access.)
The forgiven amounts will be excluded from gross income for tax purposes.
WEDC grants; a summary of what business owners should know
The WEDC is also administering a grant program called the Small Business 20/20 Program. The purpose of the program is to provide relief to Wisconsin small businesses in this time of uncertainty. For a Wisconsin business to qualify it must meet the following criteria:
- Current loan recipient in good standing as of March 1, 2020, with the approved Community Development Financial Institutions (CDFI), and its collaborating CDFIs;
- 20 or fewer PT/FT employees;
- Greater than $0 but less than $2 million in annual revenues; and
- Preference should be given to service and retail businesses.
If a business qualifies, it will receive up to a maximum of $20,000 for two (2) months of payroll (including covering paid leave that includes sick, family, and other leave related to COVID-19) and rent expenses. The two months must be during the duration of the funding period.
For more information, visit the WEDC here.
Attorneys assisting with COVID-19 business concerns
The attorneys at Murphy Desmond are available to help you and your business during the COVID-19 pandemic. Our employment law attorneys can assist with employment matters including the Families First Act, working from home and other personnel matters. Our business lawyers can aid you with business planning, contracts, creditor rights, real estate, financial assistance programs, and other legal concerns.
Please email us at firstname.lastname@example.org or call us at 608.257.7181. We have offices in Madison, Janesville, Appleton, and Dodgeville, Wisconsin.
Published March 30, 2020