The following are answers based on the CARES Act as we have interpreted it. These are subject to change at any time based upon guidance from the SBA and the U.S. government.
Am I ELIGIBLE?
Per the Chamber of Commerce you are eligible if you are:
- A small business or 501(c)(3) with fewer than 500 employees
- A small business that otherwise meets the SBA’s size standard
- An individual who operates as a sole proprietor
- An individual who operates as an independent contractor
- An individual who is self-employed who regularly carries on any trade or business
Important Note: The 500-employee threshold includes all employees: full-time, part-time, and any other status. Additional “affiliation” rules apply which could affect the availability of funds to organizations owned or controlled by venture capital, private-equity or whose owners control multiple businesses.
What will lenders be looking for?
When looking at your eligibility, lenders will generally look for a few things. First, were you in business and operating prior to February 15, 2020? Second, they will look to see if you had paid employees or independent contractors on whom you paid payroll taxes. Third, lenders will look that you certify in good faith that you meet the following criteria:
- That the current economic condition or the uncertainty of the current conditions makes this loan necessary to support ongoing business operations.
- That the borrower will use the loan to maintain employees or make payments to the mortgage, lease or utilities.
- That the borrower does not have a duplicative application or pending application with another lender.
- That the borrower has not received a loan for duplicative purposes or amounts between February 15, 2020, and December 31, 2020.
Are any personal guarantees required?
How much can I borrow for payroll?
The loan can be up to 2.5 times the borrower’s average monthly payroll cost (as defined in the Act) and must be less than the $10 million max.
What documents should I have during the loan process?
See the SBA’s sample application form at the link below. Your lender may require additional documentation in support of the amount of your loan request. You should anticipate needing to gather basic information such as key organizational documents (Articles of Incorporation, By-laws, Operating Agreements), payroll cost support for the last 12 months, tax identification numbers, and employee headcount.
Will this loan be forgiven?
The Payroll Protection Program loans are eligible for loan forgiveness as long as you adhere to certain provisions of the Act.
How much of the loan will be forgiven?
The amount that is eligible for forgiveness is equal to how much you spent on payroll cost, mortgage interest, rent and utilities (electricity, gas, water, transportation, telephone, or internet) for 8 weeks from the loan origination date.
‘’Put simply your first 8 weeks’ worth of expenses after you get the loan that falls into these categories above are eligible for forgiveness.
Could I receive less forgiveness or have it reduced?
Yes, if you reduce the number of employees or you reduce the amount you pay your employees by more than 25%, you could have your forgiveness amount reduced. Below is guidance from the Chamber of Commerce on calculating a reductions.
Can I use any of this program if I have already had to let people go?
The simple answer is yes, you can apply for this program and, if eligible, receive funding.
There may however be some restrictions on loan forgiveness based on the percentage of employees who were retained and percentage of salaries maintained as of June 30, 2020 in comparison to levels as of February 15, 2020. Potential reductions in the forgiveness amount can be avoided for rehiring employees.
What if I bring back employees or restore wages?
A reduction in employees or wages that occur between February 15, 2020 and 30 days post CARES Act enactment will not reduce the eligible amount of loan forgiveness IF you have rehired the number of employees or employees with wages equal to the previous amount by June 30, 2020. For more detailed guidance please contact the SBA; their number and email are in the resources section below.
What Should I do?
If you are already working with a tax professional or advisor you should consult with them on the options to see what might be most beneficial to your organizations. As your Partner, we would love to answer this question for you, however, each organization’s situation is different and there is no single right answer. Generally, we think this program will be helpful to youth sports organizations that are heavily impacted by COVID-19 and need some financial assistance to make it back into playing seasons.
We strongly recommend consulting with an advisor who has read the Act in detail if you choose to move forward so you understand all of the requirements. In the end, you know your organization the best and we are confident that the decision you make will best fit your organization.
When Can I Apply?
Starting April 3, 2020, small businesses and sole proprietorships can apply. Starting April 10, 2020, independent contractors and self-employed individuals can apply. If a loan is the right answer for business, then we encourage you to apply as quickly as possible because there is a funding cap and loans are expected to be processed in the order of applications received.
Can Stack Sports help me through this process?
We are happy to point you to the resources that can be used to help you navigate this process, however, we are unable to provide you legal or accounting advice. Please see the Resources section below for additional information.
Where can I go to ask additional questions about the CARES Act?
For questions, please contact the SBA disaster assistance customer service center at 1-800-659-2955 (TTY: 1-800-877-8339) or e-mail firstname.lastname@example.org.
How can I find more updates about COVID-19 and Youth Sports?
There is a Facebook Group available to you where youth sports organizations are sharing best practices and ideas for their businesses. This is a great place to ask other organizations how they are handling situations or see other questions being asked.
We have also created an Emergency Response Guide which may be helpful in navigating your current individual situation.