In this post we would like to address some of our clients frequently asked questions regarding the Payment Protection Program, a loan forgiveness program created by the CARES Act (Coronavirus Aid, Relief, and Economic Security Act).
In response to the Coronavirus pandemic, the United States government recently passed a bill providing emergency financial relief to individuals, families, and small businesses. As you know, the majority of states nationwide have issued stay-at-home orders requiring the public to avoid all nonessential outings and stay at home as much as possible. Non-essential businesses have also been ordered to close their facilities to the public until further notice. Essential businesses have been allowed to continue to operate such as grocery stores, pharmacies, health care facilities, banking, law enforcement, and other emergency services.
One of the main provisions of the bill, known as the CARES Act (Coronavirus Aid, Relief, and Economic Security Act), allocates billions of dollars in loans to small businesses who are feeling the economic impact of the stay-at-home orders. The CARES Act specifically authorized the Small Business Administration (SBA) to create the Payment Protection Program for the purpose of providing financial assistance to small businesses nationwide that have been adversely impacted by the COVID-19 crisis. SBA lenders began accepting loan applications from small business owners on April 3, 2020. Applications will continue to be accepted until June 30, 2020. It is important for business owners to apply for these loans as soon as possible.
- What is the Payment Protection Program?
In a nutshell, the Payment Protection Program is a loan forgiveness program that allows small businesses (of 500 or fewer employees) to apply for loans of (1) $10 million or (2) 2.5x the average total monthly payments of the company’s payroll costs, whichever is less.
Loans under this Paycheck Protection Program (PPP) will be 100 percent guaranteed by SBA, and the full principal amount of the loans will qualify for loan forgiveness provided that:
(1) the business was in operation on February 15, 2020 and either had (a) employees for whom you paid salaries and payroll taxes or (b) paid independent contractors as reported on Form 1099;
(2) all employees are kept on the payroll for 8 weeks and;
(3) the money is used for payroll costs, rent, mortgage interest, or utilities (at least 75% of the forgiven amount must have been used for payroll).
If employees are not kept on the payroll for the requisite period, or payroll costs decrease, the amount of loan forgiveness may be reduced.
It is important to note that loan payments under this program are deferred for six months, and there are no collateral or personal guarantees required to obtain the loan.
For more details about the Payment Protection Program and other financial assistance alternatives for small businesses click here.
- I am a business owner and a foreign national. Can I apply for a loan under the Payment Protection Program? Can I apply for the Payment Protection Program if I am on an E-2 or L visa?
Yes. E-2 visa holders may apply for a loan under the Payment Protection Program. In fact, any small business owner with non-immigrant visa admission can apply. There are no restrictions on visa holders to obtain the benefits of this loan. It goes without saying that business owners who are permanent residents are also eligible to apply. You do not need to be a U.S. Citizen to take advantage of this loan.
At this time, it is unclear whether additional requirements may apply to visa holders in order to obtain the loan. From our research we have not found any evidence to indicate that the application process will be made more difficult for visa holders.
We recommend that you speak with a qualified SBA lender to determine whether any guarantee or collateral requirements apply for non-immigrant visa holders. Many of these details are still being hammered out given that the legislation has just been passed.
Regardless of the borrower’s immigration status, the borrower must make certifications to demonstrate that they meet the lending criteria and to establish borrower eligibility for the qualifying loan amount.
For example, borrowers must submit such documentation as is necessary to establish eligibility such as payroll processor records, payroll tax filings, or Form 1099- MISC, or income and expenses from a sole proprietorship. For borrowers that do not have any such documentation, the borrower must provide other supporting documentation, such as bank records, sufficient to demonstrate the qualifying payroll amount.
Additionally, borrowers must provide basic business information on the loan application itself such as business structure, business’s legal name, address, tax identification number (FEIN/SSN), average monthly payroll amount, number of employees, owner name, title, ownership, tax identification number, address, etc.
We recommend that business owners apply for this loan as soon as possible given the limited amount of funds available and high demand for these funds. Applications are currently being processed by SBA approved lenders who serve as intermediaries for the SBA. You may click here for a list of SBA lenders near you.
- Can I still apply for the Payment Protection Program if I am a Sole Proprietor?
Absolutely. You may apply for the Payment Protection Program even if you are an individual who operates under a sole proprietorship, or as an independent contractor or eligible self-employed individual, so long as you were in operation on February 15, 2020.
- Are there any other loans that may be available to me? Can I apply for them even though I am a visa holder or permanent resident?
Yes. Aside from these loans, there are numerous existing loan programs administered by the Small Business Administration that provide temporary financial assistance to small business owners. Please read our post here which discusses alternative loan programs in more detail.
It is worth noting that the most beneficial loan for small business owners aside from the Payment Protection Program is the SBA’s Economic Injury Disaster Loan. This type of loan allows a small business owner suffering economic injury as a result of COVID-19 to request an emergency loan advance in an amount of up to $10,000 which does not need to be repaid. This loan is most beneficial during times of economic crisis because the application process is quick, and the applicant can seek a loan advance after submitting the application. Additionally, a borrower can apply for an Economic Injury Disaster Loan directly on the SBA website, without the need for an intermediary lender. Loan advances are also issued very quickly—within just three days of an approved application.
The SBA Economic Injury Disaster Loan application does not expressly state that you must be a U.S. citizen or a Green Card holder to be eligible to apply. Based on our research, we believe that it is reasonable to infer that business owners on visas (for example E-2 or L visas) or green cards can apply for this loan.
We recommend for business owners to apply for this loan first, and then the payment protection program. As stated previously, you can apply for the Economic Injury Disaster Loan directly on the SBA website.
- What about the Public Charge rule? If I apply for a Stimulus loan as an E-2 visa holder, will there be any Public Charge consequences?
We understand that many clients are nervous about applying for a stimulus loan due to the public charge rule that went into effect on February 24, 2020.
The short answer is no. Applying for a stimulus loan is not one of the prohibited public benefits outlined in the public charge rule and is not one of the factors considered as part of the public charge analysis.
To give you further peace of mind, the public charge rule expressly exempts disaster relief from the public charge analysis, therefore obtaining a stimulus would not be considered in the public charge assessment.
In addition, even if the public charge rule did not expressly exclude disaster relief from the public charge assessment, receiving a loan would be just one of many factors the government would consider under the “totality of the circumstances” test mandated by the public charge rule. This means that in making a public charge assessment the government must take into account all of the factors (negative and positive) before making an adverse determination. A single negative factor would not on its own result in an adverse public charge assessment. It is self-evident that an adverse public charge assessment would be made only where there are other substantial negative factors present in an individual application.
Moreover, the public charge rule in general applies to people, not business entities. Therefore, it is highly unlikely that an application for a loan on its own would be taken into account in a totality of the circumstances public charge analysis, especially in the absence of negative factors.
- What if I am a Green Card holder and I apply for a Stimulus loan? Will there be Public Charge consequences?
If you have already received your green card and want to apply for this loan, you do not need to worry about any public charge analysis because the public charge rule only applies to individuals in the process of applying for a green card, not those who have already received their green card.
We highly recommend our readers to read more about other resources available to small businesses during COVID-19 by clicking here.
You can also find further immigration information related to COVID-19 by visiting our Immigration and COVID-19 Resource Center here.