CARES Act Contains SBA Loan Provisions Favorable to Most Dealerships

The Coronavirus Aid, Relief, and Economic Security (CARES Act) has been passed by both the Senate and House, and has been signed into law by President Trump. It contains provisions for $349 billion in Small Business Administration (SBA) loans, called Paycheck Protection Loan program (PPP).

Join Us April 1, 2020 For a Webinar

DHG Dealerships is pleased to announce that it will host two webinars around the CARES Act and how it impacts dealerships on Wednesday, April 1st at 10am EST and 3pm EST. Each session will be recorded. Highlights of the webinar will include:

  • SBA Loan Provisions & Options
  • Significant Tax Incentives & Opportunities
  • Interplay with Families First Coronavirus Response Act
  • State Tax Implications

The key highlights of the PPP that are potentially favorable to most dealerships include the following:

  • Eligible to companies with no more than 500 employees.
  • For most SBA loan programs, the 500-employee determination is made pursuant to an integrated-employer concept; however, this PPP program waives the 500-employee determination at the group level, and rather applies it at the franchise/location level provided that the particular original equipment manager (OEM) involved has an approved franchise registration number with the SBA.
  • As of yesterday, approximately one-third of the OEMs were registered with the SBA. Contact your OEM to urge them to apply for registration and approval if they are not already registered and approved. In fact, one OEM sent a letter to its Dealers late yesterday indicating that they had filed the necessary documents and applications with the SBA to become registered.
  • The maximum available PPP loan amounts are 2.5 times the average monthly payroll for the preceding 12 months, or $10 million, whichever is less.
  • The PPP, if utilized, eliminates the employee retention credits under the previous Emergency Sick and Emergency Medical Leave stimulus, as well as the payroll tax deferral also available under the CARES Act.
  • Loan proceeds may only be used for payroll, health benefits, mortgage interest, rent and utilities.
  • Certain amounts of the loan may be forgiven provided funds are used for the intended purposes and are subject to certain employee retention levels during the eight weeks after the loan is made. Such amounts forgiven will be non-taxable for federal income tax purposes.
  • Amounts not forgiven would be converted to an amortizable term loan for 10 years at interest rates not exceeding 4 percent.
  • The PPP calls for no personal guarantees and no collateral requirements.
  • Not all application requirements have yet been finalized.

It should be noted that the SBA must develop guidelines, processes, procedures, forms, etc., that will be disseminated to the SBA-approved banks, which could take five to seven days.

DHG Dealerships is developing a team of individuals to help with this process once the new law is enacted and the SBA has issued program requirements.

CONTRIBUTORS

Buddy Dearman
Managing Partner, DHG Dealerships
Buddy.Dearman@dhg.com
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