This slide deck contains information on the COVID-19 related Loan

Options & Forgiveness Strategies and is the most up-to-date as of

July 23, 2020.

Changes are constant and additional guidance is on-going. We will

keep you posted on changes through our weekly webinar updates and

COVID-19 resource center. You can also reach out to your Sax

advisor for the most recent information.

Please visit our Resource Center at www.saxllp.com for on-going

updates, or email covid19@saxllp.com with questions.

Preparing for COVID-19 Recovery:

Loan Options & Forgiveness Strategies

Weekly Update: July 23, 2020

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Our firm provides the information in this webinar presentation for general

guidance only, and does not constitute the provision of legal advice, tax advice,

accounting services, investment advice, or professional consulting of any kind.

The information provided herein should not be used as a substitute for

consultation with professional tax, accounting, legal, or other competent advisers.

Before making any decision or taking any action, you should consult a

professional adviser who has been provided with all pertinent facts relevant to

your particular situation.

Meet Our Recovery Task Force

Todd W. Polyniak, CPA

Partner

Stephen J. Ehrenberg,

CPA, MBT

Partner

Josh Chananie, CPA

Partner

Today’s Agenda

• Introduction

• Updates

– Loan Application / EIDL Advance

– Capitol Hill

• Main Street Lending Program

– Non-Profit Organizations

• PPP Loan Forgiveness

– Forgiveness Application Timing

– FTE Rehire Exemptions

• Open Questions

Updates

UpdatesLoan Application Date / EIDL Advance

• Loan Application

– July 4th Presidential signature of bill S. 4116 extended the loan application date to

August 8, 2020

– Over $130B in funding still available

– SBA Lender Match online tool

• www.sba.gov/funding-programs/loans/lender-match

• EIDL Advance

– SBA announced that the advance program (up to $10K) is no longer available

UpdatesCapitol Hill

• Negotiations for next coronavirus bill have started this week

– July 31, 2020 ends the $600 expanded unemployment benefit

– PPP 2.0?

• Pressure to reach deal before August Congressional recess

– House of Representatives (HEROES Act): Unemployment, direct payments, enhanced

employee retention credit, worker aid & safety, community assistance, state and local aid,

increased testing, health coverage

– Senate: Liability protection, unemployment, direct payments, tax credits & business incentives,

education and safe opening for schools, testing and cleaning, PPE

– President: Payroll tax cuts

• Competing spending priorities

– House of Representatives: Funding in excess of $3T

– Senate: Funding of approximately $1T

UpdatesCapitol Hill (cont’d)

• Senate and House of Representatives Republican introduced legislation that would

provide businesses with refundable tax credits against payroll taxes

– Healthy Workplaces Tax Credit Act

– Refundable tax credit against payroll taxes for 50% of costs incurred by a business for:

• Increased testing

• PPE

• Disinfecting and extra cleaning

• Workplace reconfiguration

• Tax deductions for PPP fund expenses

Main Street Lending Program:

Non-Profit Organizations

Main Street Lending ProgramNon-Profit Organizations

• Intended to provide credit for small and medium-sized businesses in sound financial

condition prior to the COVID-19 outbreak until conditions normalize

– Loans are not forgivable!

• Federal Reserve launched program for for-profit entities on June 15, 2020

– $600 billion in funding associated with:

• Main Street New Loan Facility (“MSNLF”)

• Main Street Priority Loan Facility (“MSPLF”)

• Main Street Expanded Loan Facility (“MSELF”)

• Non-profit entities (amongst others) were ineligible for the program– Federal Reserve indicated that they may increase eligibility

• On July 17, 2020, final terms for two new loan facilities for Non-Profit Organizations after the

close of the comment period

– Non-Profit Organization New Loan Facility (“NONLF”)

– Non-Profit Organization Expanded Loan Facility (“NOELF”)

Main Street Lending ProgramNon-Profit Organizations

• Similar to for-profit businesses, the Special Purpose Vehicle (“SPV”) will

purchase 95% participations

– Lenders retain 5%

– SPV will stop purchasing participations on September 30, 2020

• Similar to for-profit businesses, Department of Treasury will make a $75

billion investment

• Program set to close on September 30, 2020

Main Street Lending ProgramNon-Profit Organizations

• Requirements & Conditions

– Has been in continuous operation since January 1, 2015

– 2% or greater ratio of adjusted 2019 earnings before interest, depreciation and amortization

(“EBIDA”) to unrestricted 2019 operating revenue

• Must use similar EBIDA ratio to that used prior to June 15, 2020

– At the time of origination

• Ratio (expressed as a number of days) of (i) liquid assets to (ii) average daily expenses over the

previous year, equal to or greater than 60 days

• Ratio of (i) unrestricted cash and investments to (ii) existing outstanding and undrawn available debt,

plus the amount of any loan under the Facility, plus the amount of any CMS Accelerated and

Advance Payments, that is greater than 55%

– Does not participate in other Main Street Programs, the Primary Market Credit Facility or the

Municipal Liquidity Facility

– Has not received specific support pursuant to the Coronavirus Economic Stabilization Act of

2020 (Subtitle A of Title IV of the CARES Act)

• PPP & EIDL recipients are eligible

Main Street Lending ProgramNon-Profit Organizations

• Requirements & Conditions (cont’d)

– Lenders required to conduct an assessment of potential borrower’s financial condition

– Borrowers required to make reasonable efforts to maintain payroll/retain employees during

loan period

– Similar lender and borrower certifications, covenants and restrictions to for-profit facilities

• Debt repayments

• Lines of credits

• Compensation, stock repurchase and capital distribution restrictions

• Eligibility in light of CARES Act conflict of interest prohibitions

• Fees

– Transaction Fee: Lender will pay the SPV a fee of 100 BPS at origination (may be passed on

to borrower)

– Loan Origination Fee: Borrower will pay the Lender an origination fee of up to 100 BPS (75

BPS for NOELF) at origination

– Servicing Fee: The SPV will pay the Lender an annual fee of 25 BPS of the principal

Main Street Lending ProgramNon-Profit Organizations - Chart

Proposed Main Street Lending Program

Non-Profit Loan Options Non-Profit New Loans Non-Profit Expanded Loans

Term 5 years

Minimum Loan Size $250,000 $10M

Maximum Loan SizeThe lesser of $35M, or the borrower's

average 2019 quarterly revenue

The lesser of $300M, or the borrower's

average 2019 quarterly revenue

Entity Type IRC Sec. 501(c)(3) or Sec. 501(c)(19)

Employee Min/Max 10 – 15,000

Revenue cap and source requirement 2019 Revenues less than $5 billion, with less than 40% sourced from donations

Endowment Cap $3 billion

Interest Rate LIBOR + 3%

Principal Repayment Principal deferred for two years; years 3-5: 15%, 15%, 70%

Interest Payments One year deferral

Location Created or organized in the United States or under the laws of the United States with

significant operations in and a majority of its employees based in the United States

PPP Loan Forgiveness

PPP Loan ForgivenessForgiveness Application Timing

• When should I apply for loan forgiveness?

– No rush to apply

• Why wait to apply?

1) Rules are still changing

a) Multiple versions of the forgiveness application have been released. Could there be more?

b) Will seasonal employers use a different application?

c) Can I use the 3508EZ?

d) Will the lenders have their own application?

2) 24-week Covered Period

a) Borrowers have more time to spend the funds

3) Timing to apply for forgiveness

a) Allowed to wait 10 months after the end of the Covered Period before applying

4) Financial statement and tax implications

5) Data access (third-party reports and templates)

6) Who wants to be the guinea pig for the SBA? You first.

PPP Loan ForgivenessFTE Rehire Exemptions

• FTE Employees terminated between February 15, 2020 – April 26, 2020

– Bring back by December 31, 2020

• What happens if I apply before this date?

• Good-faith, written offer to:

– Rehire individuals employed on February 15, 2020, but unable to rehire or hire similarly qualified

employees by December 31, 2020; or

– Restore any reduction in hours at the same salary or wages, but the offer is rejected

• Employees who were fired for cause, voluntarily resigned or voluntarily requested

and received a reduction in hours and the position was not filled by a new employee

– If the position was filled by a new employee, there shouldn’t be any impact to the FTE count

PPP Loan ForgivenessFTE Rehire Exemptions (cont’d)

• If you were unable to operate between February 15, 2020, and the end of the

Covered Period at the same level of business activity as before February 15, 2020

due to compliance with requirements established or guidance issued between

March 1, 2020 and December 31, 2020, by the Secretary of Health and Human

Services, the Director of the Centers for Disease Control and Prevention, or the

Occupational Safety and Health Administration related to the maintenance of

standards for sanitation, social distancing, or any other worker or customer safety

requirement related to COVID-19.

Open Questions

PPP Loan ForgivenessOpen Questions

The following questions are still unclear and need further guidance from the SBA:

1. How does the paid and incurred standard impact retirement benefit forgiveness?

2. Will the expenses be deductible for tax purposes?

3. How will the state taxing jurisdictions treat the forgiven funds?

4. Will the costs eligible for forgiveness be expanded?

5. What is the definition of a transportation utility?

6. Will there be a separate application for seasonal employers?

7. When will new guidance be released by the SBA and/or Treasury?

8. Are owners of multiple entities allowed to claim compensation for each entity?

9. How many more times will this application change prior to being submitted?

Upcoming Webinar

TBD – pending the release of new information

Weekly Recovery Update: COVID-19 Loan Options and Forgiveness Strategies

• For additional questions: Email Covid19@saxllp.com

• Visit Sax’s COVID-19 Resource Center found on Saxllp.com to register for

webinars and for on-going information and resources.

More Resources

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