Main Street Lending Program
The Federal Reserve recently launched its Main Street Lending Program (MSLP) to support employment during a time where many businesses are struggling. MSLP is an alternative to the much talked about Paycheck Protection Program (PPP). Where the PPP was created through the CARES Act and is run by the Small Business Association, the MSLP is offered through the Federal Reserve (Fed).
The MSLP is not forgivable like the PPP, but businesses that receive funds can repay the loan at a low interest rate. Originally, the MSLP was aimed towards mid to large sized companies. However, in support of small businesses, the Federal Reserve lowered the minimum loan amount from $500,000 to $250,000. The repayment term has been changed from four years to five, with a deferral of principal payments for up to two years and of interest payments for one year.
Businesses who may be eligible for a MSLP loan:
- has 15,000 or fewer employees, or
- had revenues of $5 billion or less in 2019.
The Fed and the Treasury are also looking to expand the program to allow for nonprofit organizations to borrow as well. Refer to the Fed’s Main Street Lending FAQ document for more information. If you have further questions or need assistance on choosing between the MSLP and the PPP for your business, please contact your AHP professional.
Paycheck Protection Program
On Tuesday, June 16, 2020, the SBA released a new, PPP loan forgiveness application that reflects recent changes made with the Paycheck Protection Flexibility Act. They also released a new, streamlined EZ forgiveness application.
The applications and instructions are available in the links below:
- Revised PPP Loan Forgiveness Application and instructions
- EZ PPP Loan Forgiveness Application and instructions
The release of these forgiveness applications follows a new interim final rule published late on June 16, 2020 that clarifies payroll calculations under the new 24-week period. The new rule increased the maximum employee compensation allowed under the 24-week model by prorating the $100,000 annual compensation limit by 24 weeks, or $46,154 (previously set at $15,385 for an eight-week period). This was not fully expanded for self-employed individuals, defined as Schedule C and Schedule F filers, for which compensation will be capped at the lower of $20,833 or 2.5/12ths of 2019 profit. Further, an S Corporation shareholder is limited to $20,833, the 2.5 month equivalent of $100,000 annual compensation limit if they use a 24-week period or 2.5/12ths of their 2019 compensation, whichever is lower.
More resources can be found on the SBA Paycheck Protection Program Resources page of AICPA’s website, including a loan forgiveness calculator. If you have any questions, please contact your AHP professional.
Any accounting, business, or tax advice contained in this communication, including attachments and links to outside sources, is not intended as a thorough analysis of specific issues, nor a substitute for a formal opinion, nor was it written to be used to avoid tax related penalties.
