Webinar presented by TMA SoCal featuring panelists from Business Capital, Midcap Financial and Robins Kaplan with perspectives on borrowing, lending and legal implications during the COVID-19 crisis.
Bitcoin, Block chain, Cryptocurrency, and ICO's: A Legal PerspectiveRoger Royse
A full overview of topics surrounding the emerging cryptocurrency Industry. Topics include blockchain use, crowdfunding, ICO's taxation, and federal regulations
How to Prep for Venture Capital Funding Part 2: Venture Capital Termsideatoipo
Getting venture capital funding is the ultimate yet often elusive goal of many Silicon Valley startups. Venture capital funding dramatically improves a startup's chances of having a big IPO or buy out exit. Most startups at their inception have the hope, if not the expectation, that they will eventually receive venture capital funding.
In the current environment, venture capital funding has become more competitive, but it is still available. This presentation is the second of two parts and will cover typical venture capital deal terms and points, negotiating with venture capitalists and what to expect in the current environment.
Corporate and startup attorney Roger Royse will discuss:
1) Should you be approaching venture capitalists now
2) How (and when) you should value your startup for venture capitalists
3) What are typical venture capital financing terms
4) What terms you may negotiate and what terms are standard
5) How to protect yourself from dilution, freeze outs and forfeiture of shares
6) How to manage your investors after the close
7) Planning for a venture capital backed exit
8) What to do when things go wrong
9) Troubled company terms, down rounds and recaps
10) How to access and leverage funding sources during a global economic crisis
and more!
Bitcoin, Block chain, Cryptocurrency, and ICO's: A Legal PerspectiveRoger Royse
A full overview of topics surrounding the emerging cryptocurrency Industry. Topics include blockchain use, crowdfunding, ICO's taxation, and federal regulations
How to Prep for Venture Capital Funding Part 2: Venture Capital Termsideatoipo
Getting venture capital funding is the ultimate yet often elusive goal of many Silicon Valley startups. Venture capital funding dramatically improves a startup's chances of having a big IPO or buy out exit. Most startups at their inception have the hope, if not the expectation, that they will eventually receive venture capital funding.
In the current environment, venture capital funding has become more competitive, but it is still available. This presentation is the second of two parts and will cover typical venture capital deal terms and points, negotiating with venture capitalists and what to expect in the current environment.
Corporate and startup attorney Roger Royse will discuss:
1) Should you be approaching venture capitalists now
2) How (and when) you should value your startup for venture capitalists
3) What are typical venture capital financing terms
4) What terms you may negotiate and what terms are standard
5) How to protect yourself from dilution, freeze outs and forfeiture of shares
6) How to manage your investors after the close
7) Planning for a venture capital backed exit
8) What to do when things go wrong
9) Troubled company terms, down rounds and recaps
10) How to access and leverage funding sources during a global economic crisis
and more!
Distressed Startups: Legal, Business, and Financing Strategiesideatoipo
Launching a startup - or starting a business - is challenging and is fraught with pitfalls. This is even more so in the midst of a pandemic and a global recession.
Veteran Silicon Valley attorney Roger Royse will discuss strategies for building and operating a successful business or startup during troubled times.
Roger will discuss:
1) What should you expect from your vendors, customers and financiers?
2) How can startup founders protect themselves from predatory creditors during a bad economy?
3) What will financing terms look like now?
Is startup investment capital even available?
4) What are some tax traps to avoid when working out debt obligations with investors and creditors?
5) Can startups still get federal stimulus grant money or loans?
6) What will venture capital terms look like now?
7) For existing startup companies -- how can you get venture capitalists to step up and continue funding your startup company?
8) How viable is crowdfunding and other alternative sources of funding in 2021?
9) If you lost your job or have been furloughed, how do you get started doing gig work in a gig economy?
What are the legal traps and restrictions for gig workers?
10) What other strategies and tactics should entrepreneurs deploy during a downturn?
Startups, Venture Capital and Angel Funding in a Reopened Economy ideatoipo
Recorded 6/22
Covid has changed almost all aspects of our lives and the way we do business, including the startup ecosystem. As the country re-opens and companies adjust to the new normal, many startup founders have had to pivot to meet the new realities.
Join us for as discussion of how the pandemic has changed the startup landscape and how startups must do business, especially if they want to attract angel and venture capital investors.
We will cover new laws and how your startup can succeed and grow under the new rules. We will discuss:
1) How can startup protect themselves from post Covid liabilities?
2) What are best practices in the post-Covid world?
3) How has expanded government programs changed the startup world?
4) How can a startup position itself to succeed and avoid pitfalls?
5) What is new in venture capital investment terms?
How to Prepare Your Startup for Venture Capital Investment - Part 1ideatoipo
In the current environment, venture capital funding has become more competitive, but it is still available. This presentation will cover what a startup should do to prepare for venture funding, what essential steps to take, what venture capitalists expect and how to avoid venture capital deal breakers.
Corporate and startup attorney Roger Royse will discuss:
1) What types of startups are viable candidates for venture capital funding
2) What types of startups are being funded now
3) How much money is being deployed and where
4) The essential assets, traction and qualities that your startup must have to even have a chance at success when approaching a venture capitalist
5) How you can make your startup more attractive to venture capitalists
6) How (and when) you should value your startup for venture capitalists
7) How to get your startup in front of venture capitalists
8) How you can protect yourself against dilutive rounds, losing control and being removed from management
9) How to establish and maintain good relationships with venture capitalists
10) How to build a strong personal brand when dealing with venture capitalists -- and why this is critical
and more!
Medalist Diversified REIT (NASDAQ: MDRR) was founded in 2003 as a private equity company specializing in acquiring, owning, and managing commercial real estate in the Southeast. The Company’s strategy is to focus on value-add and opportunistic commercial real estate which is expected to provide an attractive balance of risk and returns. Medalist utilizes a rigorous, consistent, and replicable process for sourcing and conducting due diligence of acquisitions. The Company seeks to maximize operating performance of current properties by utilizing a hands-on approach to property management while monitoring the middle market real estate markets in the Southeast for acquisition opportunities and disposal of properties as considered appropriate.
MIT Enterprise Forum Get Smart SBIR presentationkmeetze
This is my portion of a training seminar given as part of the MIT Enterprise Forum's Get Smart Program. I have allowed it to be downloaded as the links to funding agencies are live, although they may not be up to date.
Medalist Diversified REIT (NASDAQ: MDRR) was founded in 2003 as a private equity company specializing in acquiring, owning, and managing commercial real estate in the Southeast. The Company’s strategy is to focus on value-add and opportunistic commercial real estate which is expected to provide an attractive balance of risk and returns. Medalist utilizes a rigorous, consistent, and replicable process for sourcing and conducting due diligence of acquisitions. The Company seeks to maximize operating performance of current properties by utilizing a hands-on approach to property management while monitoring the middle market real estate markets in the Southeast for acquisition opportunities and disposal of properties as considered appropriate.
Washington, DC Economic Partnership’s Doing Business in DC program on doing business with the government featuring Dave Wiggs from the U.S. Small Business Administration. SBA’s business development and contracting programs are explained. Learn more at http://www.wdcep.com/business-in-dc/doing-business-with-government/
DoingBusiness2.0 | July 2012 | Doing Business with the Government
How Your Company is Affected by the CARES Act and Related LegislationRoger Royse
"Idea to IPO" Webinar description:
The U.S. government is providing relief and stimulating the economy through the $2 TRILLION CARES Act of 2020 and other measures to help corporations, small businesses, and people laid off due to the COVID-19 crisis.
The speaker will discuss:
1) What is the CARES Act of 2020?
2) What does the CARES Act of 2020 hope to achieve?
3) Will there be follow up programs to come?
4) How can entrepreneurs and small businesses benefit from the CARES ACT of 2020?
5) How does one go about applying for grants and loans administered under the CARES ACT of 2020?
6) What are the new rules relating to sick leave and paid leave?
7) What COVID-19 related tax incentives are available to companies?
and more!
Distressed Startups: Legal, Business, and Financing Strategiesideatoipo
Launching a startup - or starting a business - is challenging and is fraught with pitfalls. This is even more so in the midst of a pandemic and a global recession.
Veteran Silicon Valley attorney Roger Royse will discuss strategies for building and operating a successful business or startup during troubled times.
Roger will discuss:
1) What should you expect from your vendors, customers and financiers?
2) How can startup founders protect themselves from predatory creditors during a bad economy?
3) What will financing terms look like now?
Is startup investment capital even available?
4) What are some tax traps to avoid when working out debt obligations with investors and creditors?
5) Can startups still get federal stimulus grant money or loans?
6) What will venture capital terms look like now?
7) For existing startup companies -- how can you get venture capitalists to step up and continue funding your startup company?
8) How viable is crowdfunding and other alternative sources of funding in 2021?
9) If you lost your job or have been furloughed, how do you get started doing gig work in a gig economy?
What are the legal traps and restrictions for gig workers?
10) What other strategies and tactics should entrepreneurs deploy during a downturn?
Startups, Venture Capital and Angel Funding in a Reopened Economy ideatoipo
Recorded 6/22
Covid has changed almost all aspects of our lives and the way we do business, including the startup ecosystem. As the country re-opens and companies adjust to the new normal, many startup founders have had to pivot to meet the new realities.
Join us for as discussion of how the pandemic has changed the startup landscape and how startups must do business, especially if they want to attract angel and venture capital investors.
We will cover new laws and how your startup can succeed and grow under the new rules. We will discuss:
1) How can startup protect themselves from post Covid liabilities?
2) What are best practices in the post-Covid world?
3) How has expanded government programs changed the startup world?
4) How can a startup position itself to succeed and avoid pitfalls?
5) What is new in venture capital investment terms?
How to Prepare Your Startup for Venture Capital Investment - Part 1ideatoipo
In the current environment, venture capital funding has become more competitive, but it is still available. This presentation will cover what a startup should do to prepare for venture funding, what essential steps to take, what venture capitalists expect and how to avoid venture capital deal breakers.
Corporate and startup attorney Roger Royse will discuss:
1) What types of startups are viable candidates for venture capital funding
2) What types of startups are being funded now
3) How much money is being deployed and where
4) The essential assets, traction and qualities that your startup must have to even have a chance at success when approaching a venture capitalist
5) How you can make your startup more attractive to venture capitalists
6) How (and when) you should value your startup for venture capitalists
7) How to get your startup in front of venture capitalists
8) How you can protect yourself against dilutive rounds, losing control and being removed from management
9) How to establish and maintain good relationships with venture capitalists
10) How to build a strong personal brand when dealing with venture capitalists -- and why this is critical
and more!
Medalist Diversified REIT (NASDAQ: MDRR) was founded in 2003 as a private equity company specializing in acquiring, owning, and managing commercial real estate in the Southeast. The Company’s strategy is to focus on value-add and opportunistic commercial real estate which is expected to provide an attractive balance of risk and returns. Medalist utilizes a rigorous, consistent, and replicable process for sourcing and conducting due diligence of acquisitions. The Company seeks to maximize operating performance of current properties by utilizing a hands-on approach to property management while monitoring the middle market real estate markets in the Southeast for acquisition opportunities and disposal of properties as considered appropriate.
MIT Enterprise Forum Get Smart SBIR presentationkmeetze
This is my portion of a training seminar given as part of the MIT Enterprise Forum's Get Smart Program. I have allowed it to be downloaded as the links to funding agencies are live, although they may not be up to date.
Medalist Diversified REIT (NASDAQ: MDRR) was founded in 2003 as a private equity company specializing in acquiring, owning, and managing commercial real estate in the Southeast. The Company’s strategy is to focus on value-add and opportunistic commercial real estate which is expected to provide an attractive balance of risk and returns. Medalist utilizes a rigorous, consistent, and replicable process for sourcing and conducting due diligence of acquisitions. The Company seeks to maximize operating performance of current properties by utilizing a hands-on approach to property management while monitoring the middle market real estate markets in the Southeast for acquisition opportunities and disposal of properties as considered appropriate.
Washington, DC Economic Partnership’s Doing Business in DC program on doing business with the government featuring Dave Wiggs from the U.S. Small Business Administration. SBA’s business development and contracting programs are explained. Learn more at http://www.wdcep.com/business-in-dc/doing-business-with-government/
DoingBusiness2.0 | July 2012 | Doing Business with the Government
How Your Company is Affected by the CARES Act and Related LegislationRoger Royse
"Idea to IPO" Webinar description:
The U.S. government is providing relief and stimulating the economy through the $2 TRILLION CARES Act of 2020 and other measures to help corporations, small businesses, and people laid off due to the COVID-19 crisis.
The speaker will discuss:
1) What is the CARES Act of 2020?
2) What does the CARES Act of 2020 hope to achieve?
3) Will there be follow up programs to come?
4) How can entrepreneurs and small businesses benefit from the CARES ACT of 2020?
5) How does one go about applying for grants and loans administered under the CARES ACT of 2020?
6) What are the new rules relating to sick leave and paid leave?
7) What COVID-19 related tax incentives are available to companies?
and more!
What Is Life After Coronavirus? How To Claim SBA Disaster & CARES Act LoansRea & Associates
While the COVID-19 crisis continues to impact businesses large and small, government entities and lending institutions are working tirelessly to provide the relief necessary to maintain operations, maintain a workforce, and overcome the crisis. We continue to receive minute-by-minute updates from government officials and others who are trying to help streamline the process and provide you with the funds you need to stay in business.
We understand how difficult the application process is for those looking to take advantage of the assistance being offered by the Small Business Administration, which is why our SBA Loan Task Force will provide you with a presentation designed to help you understand the resources now available through the SBA disaster loan program, as well as the new resources that are becoming available as a result of the pending CARES Act legislation.
This presentation will help you determine:
Whether your business is eligible to receive funds.
How to apply.
What information you will need to complete the loan process.
Best practices and resources to help you along.
This presentation is presented by Paul McEwan, CPA, MTax, AIFA, principal and director of benefit plan services at Rea & Associates; Matt Long, CPA, MT, principal and director of client advisory services at the firm; and Scott Moyer, CPA, principal and director of oil & gas services.
Paul, Matt, and Scott have stepped up to lead the Small Business Administration's Disaster Loan Task Force. Not only have they studied the topic and are actively updating their knowledge base as events continue to unfold, but this team also works directly with clients who are currently trying to navigate the process.
Check the various FAQs answers here about the implementation of the Paycheck Protection Program (PPP) Loans, established by section 1102 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act or the Act). CARES Act is the largest economic relief bill in United States history which will support individuals and businesses affected by the COVID-19 pandemic.
CARES Act Update - What you Need to Know Heading into 2021Citrin Cooperman
During this webinar we focused on the interplay between the different CARES Act provisions, in particular PPP loans, Provider Relief Funds, and Medicare Advanced Payments, and how they may impact 2020 year-end planning and 2021 forecasting.
PPP Loan Forgiveness and Tax Considerations For the Construction IndustryWithum
Withum’s Construction Services Team is partnered up with New Jersey Subcontractors Association and New Jersey Land Improvement Contractors of America to host a forum regarding Paycheck Protection Program (PPP) Loan Forgiveness and Tax Considerations for the Construction Industry.
Coronavirus Financial Assistance ProgramsMark Gottlieb
[Attorneys of All Disciplines] Under The Caption - "Must Be Shared" - Download our PowerPoint Presentation discussing the various Coronavirus Financial Assistance Programs. Many of you are also eligible. Call us if you need further assistance.
[퐀퐭퐭퐨퐫퐧퐞퐲퐬 퐨퐟 퐀퐥퐥 퐃퐢퐬퐜퐢퐩퐥퐢퐧퐞퐬] 퐔퐧퐝퐞퐫 퐓퐡퐞 퐂퐚퐩퐭퐢퐨퐧 - "퐌퐮퐬퐭 퐁퐞 퐒퐡퐚퐫퐞퐝"- Download our PowerPoint Presentation discussing the various Coronavirus Financial Assistance Programs. Many of you are eligible. Call us if you need further assistance.
Company Valuation webinar series - Tuesday, 4 June 2024FelixPerez547899
This session provided an update as to the latest valuation data in the UK and then delved into a discussion on the upcoming election and the impacts on valuation. We finished, as always with a Q&A
An introduction to the cryptocurrency investment platform Binance Savings.Any kyc Account
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How to Implement a Real Estate CRM SoftwareSalesTown
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Building Your Employer Brand with Social MediaLuanWise
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Digital Transformation and IT Strategy Toolkit and TemplatesAurelien Domont, MBA
This Digital Transformation and IT Strategy Toolkit was created by ex-McKinsey, Deloitte and BCG Management Consultants, after more than 5,000 hours of work. It is considered the world's best & most comprehensive Digital Transformation and IT Strategy Toolkit. It includes all the Frameworks, Best Practices & Templates required to successfully undertake the Digital Transformation of your organization and define a robust IT Strategy.
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2. 2
Today’s Presenters
Bianca Barredo has been with MidCap
Financial for four years focusing on
originating and structuring asset-backed
financing solutions of $10 and $500 million
for public and private companies. Bianca
has provided financing for middle market
companies in the west coast for 15 years.
Prior to joining MidCap, she was Senior
Vice President at GE Capital, Corporate
Finance Group, where she was responsible
for sourcing and originating cash flow, ABL,
and unitranche transactions. Bianca holds
an M.B.A. from UCLA Anderson School of
Management and a B.S. from USC Marshall
School of Business.
bbarredo@midcapfinancial.com
(213) 222-8962
Bianca Barredo
Managing Director –
Asset Based Lending
Heads a national corporate restructuring
practice representing corporate debtors,
creditors, committees, equity holders and
acquirers in distressed financial situations
with the goal of creating and structuring
transactions that maximize value for his
clients.
His current practice focuses primarily on
counseling owners and fiduciaries for small
and mid-size business concerns and serving
as lead Committee counsel in corporate
chapter 11 cases.
SGautier@RobinsKaplan.com
(310) 229-5812
Chair, Restructuring and Business
Bankruptcy Group
Scott Gautier
Founded Business Capital in 2002 and is
the Managing Director, heading up the firm's
Investment Committee. He has nearly 30
years of experience in the financial industry
and holds a Certified Turnaround
Professional (CTP) designation. Chuck’s
primary responsibilities include the
development, review and analysis of client
strategies, sourcing and structuring hyper
growth, distressed & non-distressed
transactions that involve the investment of
Business Capital resources.
Currently President-elect of the Secured
Finance Network NorCal, a member of the
Boards of TMA NorCal and SoCal, and the
National Board of the Boston-based non-
profit, Team Impact.
cdoyle@bizcap.com
(415) 989-0970
Chuck Doyle
Managing Director
3. 3
Table of Contents
I. Current Challenges: Lenders
II. Current Challenges: Companies
III. The Legislative Solution: The SBA Loan Programs
IV. The Paycheck Protection Plan
V. Implementation: Regulation
VI. SBA Epilogue
VII. Q&A
5. 5
The most critical is for businesses to have ample liquidity to weather the next 60-90 days
Less focus on performance covenants in the short-term with more immediate focus on weekly cash
collections and borrowing base availability
Performance covenant defaults will be with March or April reporting packages so not until end of
April and May
Weekly dialogues with Borrowers most affected and monitoring of:
1) Liquidity
2) Sales
3) Cash collections
4) Cash disbursements to vendors, employees, etc.
5) Inventory balances and mix
6) Quality of receivables: aging, turns, concentrations
Liquidity is King
B
6. 6
Corporate Borrowers Recent Draw Downs
Company Max
Borrowings
Draw Down Availability Year
End
Availability Post
Draw Down
Advanced Auto Parts $1Bn $500MM $1Bn $500MM
Best Buy $1.25Bn $1.25Bn $1.25Bn $0
BJ’s $250Bn $88.9MM $88.9MM $0
Carnival Corporation $3Bn $3Bn $2.8Bn $0
CEC Entertainment $114MM $105MM $105MM $0
Dollar Tree $1.25bN $750MM $1.11Bn $363MM
Grocery Outlet Holding $100MM $90MM $96.4MM $6.4MM
Kirkland’s Inc. $75MM $40MM $75MM $35MM
McDonald’s Corporation $1Bn $1Bn N/A $0
Regis Corporation $295MM $183MM $213.5MM N/A
Rent-A-Center $300MM $183MM $213.5MM N/A
Restaurant Brands Int’l $1Bn $1Bn $998MM $0
Shake Shack $50MM $50MM $50MM $0
Sysco Corporation $2Bn $1.6Bn $1.15Bn N/A
US Foods Holding Corp. $1.25Bn $1Bn $552MM N/A
Vail Resorts $500MM $400MM $231.4MM $19MM
WW Grainger, Inc. $1.25Bn $1Bn $750MM $250MM
YUM! Brands $1Bn $950MM $998.7MM $50MM
1) CreditIntel 4/1/2020
b
8. 8
Diligence Risk
How do you diligence a new opportunity?
− In-house field examiners for off-site exams
− Desktop inventory appraisals from known appraisals with good experience in industry or
known to the company.
How do you meet and evaluate a management team?
How do you underwrite lasting effects of COVID-19? What industries or sectors are COVID-
proof?
b
10. 10
Affected Industries
COVID-19 impact to industries is wide-spread and
1st Degree Impact
Restaurants
Retail
O&G
Auto
Aerospace
2nd Degree Impact
Consumer spending
Sole through retail or grocery channels (if not deemed essential)
Non-essential healthcare
3rd Degree Impact
Facility closures
Unable to pivot to a work from home
11. 11
Liquidity
Borrowers are doing what they can to boost liquidity:
Negotiating with lenders
Drawing down on revolvers
P&I deferrals
Re-negotiating liquidity covenants or blocks
Deferrals & other actions
Stretching terms with vendors
Rent payment deferrals (under executive order or abatement programs, if available)
Selling slow-paying receivables
Operating measures
Employee furloughs and layoffs
Salary reduction
Reduction or elimination of overtime
Reducing or eliminating capital expenditures
Additional Capital
Equity
Loan-to-Own
13. 13
SBA Programs: New and Expanded
New SBA Programs
SBA Subsidies: $17Bn
Pays existing SBA loan payments for next 6
months or 6 months after deferment
Effectively a grant that does not need to be
repaid
Relief “should be” automatic with no need to
apply or request relief
Loans in good standing may leave some
unsure of what to do
SBA Payroll Protection Program: $349 Bn
Up to $10 million per business
Eligible business < 500 employees
“Affiliation Rules” apply for all except hospitality
and restaurant business (NAICS ‘72’) and
businesses with financial assistance from SBIA
Expanded SBA Programs
SBA Emergency Disaster Loans
Added up to a $10,000 “grant” payable within
24 hours
Expanded eligibility (not for sex, gambling,
illegal activity, lobbyists and agriculture)
Expanded limit to $2 million through
December 31, 2020
Can get BOTH an EIDL and PPP, but not to
cover same expenses
SBA Express Loans
36 hour approval
Increased from $350,000 to $1 million
Increased limit available through December
31, 2020
14. 14
TERMS ELIGIBILITY
EMERGENCY DISASTER LOANS (EIDL)
Up to $2 million up to $10,000 advance ‘grant’
in 24 hours
3.75% int. rate (2.75% for non-profits)
Up to 30 year maturity
“Working capital” loan – not to replace
revenues, lost sales or profits
Available at increased limits up to December
31, 2020
Lenders make underwriting decisions, gov’t
provides minimum guidelines
Can approve based solely on credit score
Expanded to most businesses <500
employees, sole proprietors, individual
Contractors
But not for illegal, sex, gambling, lobbyists or
agriculture
Waiver of typical SBA requirements such as
less than1yr. in business, no personal
guarantee < $200K, no need to seek money
elsewhere first
No waiver of “Affiliation Rules”
Available in conjunction with a PPP, but NOT
for same purpose (payroll)
You can use your PPP to repay portion of
prior EIDL used for payroll
15. 15
KEY HIGHLIGHTS USES
EXPRESS LOANS
Approved within 36 hours, available in 90 days
Increased the limit from $350,000 to $1 million
50% guarantee by SBA
Also, Express “Bridge” Loans - $25,000 cash
in 36 hours, typically a bridge to an EIDL
Working Capital
Property, Plant & Equipment; Inventory; Raw
Materials; Supplies
Construction and renovation costs
Acquisitions
Debt Refinancing
17. 17
PAYCHECK PROTECTION PROGRAM
WAIVER OF MANY SBA LOAN REQUIREMENTS FOR LENDERS
Lenders MUST comply with the applicable lender obligations set forth in the interim
final rule (rule is subject to change)
Lender does not need to comply with section 120.150 “What are SBA’s lending
criteria?”
Lenders may significantly decrease diligence and rely on certifications of the borrower
in order to determine eligibility of the borrower and use of loan proceeds
Lenders may rely on specified documents provided by the borrower to determine
qualifying loan amount and eligibility for loan forgiveness
Lenders will be held harmless for borrowers’ failure to comply with program criteria
18. 18
PPP: ELIGIBILITY
You are eligible for a PPP loan if you have 500 or fewer employees whose principal place of
residence is in the United States, or are a business that operates in a certain industry and
meet the applicable SBA employee-based size standards for that industry, and:
You are:
− A small business concern as defined in section 3 of the Small Business Act (15 USC 632), and subject to
SBA’s affiliation rules under 13 CFR 121.301(f) unless specifically waived in the Act;
− A tax-exempt nonprofit organization described in section 501(c)(3) of the Internal Revenue Code (IRC), a
tax-exempt veterans organization described in section 501(c)(19) of the IRC, Tribal business concern
described in section 31(b)(2)(C) of the Small Business Act, or any other business; and
You were in operation on February 15, 2020 and either had employees for whom you paid
salaries and payroll taxes or paid independent contractors, as reported on a Form 1099-MISC,
including individuals that operate:
− under a sole proprietorship; or
− as an independent contractor; or
− as an eligible self- employed individual.
19. 19
PPP: PROCEEDS
How much can I borrow?
The following methodology, is one of the methodologies contained in the Act:
Aggregate payroll costs (defined in next slide) from the last twelve months for
employees whose principal place of residence is the United States.
Subtract any compensation paid to an employee in excess of an annual
salary of $100,000 and/or any amounts paid to an independent contractor or
sole proprietor in excess of $100,000 per year.
Calculate average monthly payroll costs (divide the amount from Step 2 by 12).
Multiply the average monthly payroll costs from Step 3 by 2.5.
Add the outstanding amount of an Economic Injury Disaster Loan (EIDL)
made between January 31, 2020 and April 3, 2020, less the amount of any “
advance” under an EIDL COVID-19 loan (because it does not have to be
repaid).
20. 20
QUALIFIED PAYROLL COSTS
Payroll costs consist of compensation to employees (whose principal place of
residence is the United States) in the form of:
Salary, wages, commissions, or similar compensation;
Cash tips or the equivalent (based on employer records of past tips or, in the absence
of such records, a reasonable, good-faith employer estimate of such tips);
Payment for vacation, parental, family, medical, or sick leave; allowance for separation
or dismissal;
Payment for the provision of employee benefits consisting of group health care
coverage, including insurance premiums, and retirement;
Payment of state and local taxes assessed on compensation of employees; and for an
independent contractor or sole proprietor—wage, commissions, income, or net
earnings from self-employment or similar compensation.
21. 21
EXCLUDED PAYROLL COSTS
Is there anything that is expressly excluded from the definition of payroll costs?
The Act expressly excludes the following:
Any compensation of an employee whose principal place of residence is outside of
the United States;
The compensation of an individual employee in excess of an annual salary of
$100,000, prorated as necessary;
Federal employment taxes imposed or withheld between February 15, 2020 and June
30, 2020, including the employee’s and employer’s share of FICA (Federal Insurance
Contributions Act) and Railroad Retirement Act taxes, and income taxes required to
be withheld from employees; and
Qualified sick and family leave wages for which a credit is allowed under sections
7001 and 7003 of the Families First Coronavirus Response Act (Public Law 116–127).
22. 22
COMMON QUESTIONS
Do independent contractors count as employees for purposes of PPP loan calculations?
No, independent contractors have the ability to apply for a PPP loan on their own so they do not
count for purposes of a borrower’s PPP loan calculation.
What is the interest rate on a PPP loan?
The interest rate will be 100 basis points or one percent. Note that the Act provides for a maximum of
4%, BUT the Rules are determinative.
What will be the maturity date on a PPP loan?
The maturity is two years. While the Act provides that a loan will have a maximum maturity of up to
ten years from the date the borrower applies for loan forgiveness, the Administrator determined that a
two-year loan term is sufficient.
Can I apply for more than one PPP loan?
No eligible borrower may receive more than one PPP loan. While the Act does not expressly provide
that each eligible borrower may only receive one PPP loan, the Administrator has determined that a
one loan per borrower limitation is necessary.
23. 23
COMMON QUESTIONS CONTINUED
Can my PPP loan be forgiven in whole or in part?
The actual amount of loan forgiveness will depend, in part, on the total amount of payroll
costs, payments of interest on mortgage obligations incurred before February 15, 2020,
rent payments on leases dated before February 15, 2020, and utility payments under
service agreements dated before February 15, 2020, over the eight-week period following
the origination date of the loan. However, not more than 25 percent of the loan
forgiveness amount may be attributable to non- payroll costs.
What happens if PPP loan funds are misused?
If you use PPP funds for unauthorized purposes, SBA will direct you to repay those
amounts. If you knowingly use the funds for unauthorized purposes, you will be subject to
additional liability such as charges for fraud. If one of your shareholders, members, or
partners uses PPP funds for unauthorized purposes, SBA will have recourse against the
shareholder, member, or partner for the unauthorized use.
24. 24
USE OF PROCEEDS & FORGIVENESS
How can PPP loans be used?
The proceeds of a PPP loan must be used for:
insurance payroll costs (as defined in the Act and in 2.f.);
costs related to the continuation of group health care benefits during periods of paid
sick, medical, or family leave, and premiums;
mortgage interest payments (but not mortgage prepayments or principal payments);
rent payments;
utility payments;
interest payments on any other debt obligations that were incurred before February
15, 2020; and/or
refinancing an SBA EIDL loan made between January 31, 2020 and April 3, 2020.
However, at least 75 percent of the PPP loan proceeds shall be used for payroll
costs to be forgiven.
25. 25
ROLE OF LENDERS
What do lenders have to do in terms of loan underwriting?
Each lender shall:
Confirm (i) receipt of borrower certifications; (ii) information demonstrating employees and
prior payroll; and (iii) dollar amount of average monthly payroll costs
Follow applicable Bank Secrecy Act (BSA/AML) requirements:
PPP loans for existing customers will not require re- verification under applicable BSA
requirements, unless otherwise indicated by the institution’s risk-based approach to
BSA compliance.
For new or existing customers who are eligible borrowers under the PPP, establish an
anti-money laundering (AML) compliance
Also understand the nature and purpose of their PPP customer relationships to
develop customer risk profiles.
Each lender’s underwriting obligation under the PPP is limited to the items above
and reviewing the “Paycheck Protection Application Form.”
26. 26
ROLE OF LENDERS CONTINUED
Can lenders rely on borrower documentation for loan forgiveness?
Yes. The lender does not need to conduct any verification . . . The Administrator will
hold harmless any lender that relies on such borrower documents and attestation
from a borrower.
What fees will lenders be paid?
SBA will pay lenders fees for processing PPP loans in the following amounts:
Five (5) percent for loans of not more than $350,000;
Three (3) percent for loans of more than $350,000 and less than $2,000,000; and
One (1) percent for loans of at least $2,000,000.
27. 27
PAYCHECK PROTECTION PROGRAM
Can SBA purchase some or all of the loan in advance?
Yes. A lender may request that the SBA purchase the expected forgiveness amount
of a PPP loan or pool of PPP loans at the end of week seven of the covered period
. . . .
The Administrator will purchase the expected forgiveness amount of the PPP
loan(s) within 15 days of the date on which the Administrator receives a complete
report that demonstrates that the expected forgiveness amount is reasonable.
Note that the 7 week waiting period was added by the Rules (at the 11th hour).
29. 29
PPP Implementation Issues
• Compressed Rule Making Process –
• Rules govern and modify the legislation
• Banks are penalized for non-compliance
• Banks asked to put out an enormous sum - $325 billion
• Typical rule-making and comment process 90-180 days
• Compressed to 5 days for rule-making, 0 days for comments and questions
• Changes to the Legislation, 12 hours before going “live”
• 4% interest changed to 1%
• 10 year changed to 2 year
• 15 day sell back changed to 7 weeks
• AML guidelines apply
• Looking Forward To The Backlash
• Banks will be blamed – government will point the fingers
• There will not be enough money to go around
• Banks have final decision-making/underwriting authority
• Banks will profit handsomely
31. 31
SBA Programs: Epilogue
Distributions to Date:
EIDL – unknown
Express Loans – unknown
Subsidies – unknown
PPP - $38 billion on 130,000 new loans as of 4/6 at 5pm ET
- Large % of processed applications are from small banks
- Represents avg. loan/grant of $290,000
- Indicates only smallest businesses being approved (approx. 14-25 employees)
- Majority of filed applications have not been processed
- Largest SBA lender in the Country is not participating
- Predictions ?? Money runs out, disappointed expectations, backlash ?
32. 32
SBA Programs: Epilogue
Are SBA Programs “The Answer”?
- What will be the corresponding cost of bailout for big business
- How does PPP help businesses that cannot operate over the next 8 weeks
- What % of 30 million small businesses can benefit? (approx. 10%)
- Band-aids do not cure trauma
Predictions / Ideas For Office Betting Pools
- Money runs out (how many days)
- Funding For Next Round
- Market reaction to disappointed expectations
- When and how steep a drop?
- Backlash to Banks