COVID-19 News

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  • 27 Jul 2020 1:25 PM | Myron Rau (Administrator)

    SBA Outlines PPP Forgiveness Process

    A July 23 SBA procedural notice outlines the process by which PPP lenders must review loan forgiveness applications and notes that lenders may begin submitting loan forgiveness decisions to SBA on August 10. Dealerships with PPP loans should review the SBA notice with their lenders and, as necessary, with outside advisors such as CPAs and attorneys. Note: additional PPP loan forgiveness information is available from NADA’s Coronavirus Hub, including Guidance on the Use and Forgiveness of PPP Loan Proceeds, a recent webinar and CARES Act FAQs.

    The loan forgiveness process begins when a PPP borrower files a forgiveness application(or EZ forgiveness application) with its PPP lender. A PPP borrower may file its application after it has used all loan proceeds for which it seeks forgiveness. The best time to file a forgiveness application will reflect a careful consideration of several factors related to maximizing loan forgiveness and ensuring that all required supporting documents are available. PPP lenders must review forgiveness applications in good faith and in accordance with specified procedures and must work with borrowers to resolve any errors or omissions they identify.

    A PPP lender has 60 days after receipt of a completed forgiveness application to issue a decision to SBA. A lender may approve an application in full or in part, deny it (in which case the lender must immediately notify the borrower), or deny it pending SBA review. SBA has 90 days after it receives a complete, error-free forgiveness decision to remit any loan forgiveness to the lender. The lender must then notify the borrower of the forgiveness amount, indicating when the borrower’s first payment is due for any loan amount not forgiven. Loan amounts not forgiven must be treated by both borrowers and lenders as a PPP loan.

    SBA may decide on its own to review any lender decision to deny a forgiveness application. In addition, a borrower has 30 days to request that its lender ask SBA to conduct such a review, in which case the lender has five days to notify SBA of the borrower’s review request. If SBA declines to conduct such a review, it must notify the lender. If it agrees to conduct such a review, it must notify the lender and the borrower of the outcome.

    SBA may, at its discretion, decide to review any PPP loan to determine if a borrower was eligible to apply for a PPP loan, for the loan amount borrowed or for the forgiveness amount sought. SBA will notify the lender of any decision to conduct such a review, after which the lender has five days to both notify the borrower and to submit certain documents to SBA. SBA’s procedural notice does not set a deadline for the conduct of such reviews but does indicate that borrowers will have a right to appeal unfavorable outcomes.

  • 18 May 2020 1:18 PM | Myron Rau (Administrator)

    SBA, Treasury Issue PPP Loan Forgiveness Information

    Documents Include Application, Instructions and Worksheets

    Last night the Small Business Administration and the Treasury Department issued a Paycheck Protection Program (PPP) Loan Forgiveness Application, along with detailed instructions and worksheets. 

    Dealership PPP borrowers will use the application to apply to their lender for forgiveness of costs properly incurred and payments properly made in conjunction with their eight-week forgiveness-covered period. Applications for PPP loan forgiveness generally will be made after (and maybe well after) a borrower's eight-week covered period; unless the forgiveness reduction provisions of the PPP are not at issue for a particular dealer, it is expected that forgiveness applications will not be filed until after June 30, 2020. 

    The new application, instructions and worksheet provide clarity on several, but by no means all, PPP loan forgiveness issues.  For example, the new documents do not address the question of whether any floorplan interest payments will be forgivable.  However, and importantly, SBA is expected to soon issue rules and guidance to further assist PPP loan forgiveness applicants and their lenders. NADA intends to issue comprehensive guidance and conduct a webinar on PPP loan forgiveness after the expected SBA rules and guidance are issued. 

    The application, instructions and worksheets are designed to reduce compliance burdens and to simplify the forgiveness application process by including: 

    • An alternative option for calculating payroll costs using an "alternative payroll covered period" that aligns with a borrower's regular payroll cycle.
    • Flexibility to include eligible payroll and non-payroll expenses paid or incurred during a borrower's eight-week covered forgiveness period.
    • Step-by-step instructions on how to perform the calculations required by the CARES Act to confirm eligibility for loan forgiveness.
    • Borrower-friendly implementation of the statutory exemptions from loan forgiveness reductions, including a "safe harbor" based on rehiring employees by June 30, 2020.  
    • Addition of a new exemption from the loan forgiveness reduction for borrowers who have made good-faith, written offers to rehire workers that were declined or who have other former employees who departed under certain conditions.
    • A description of many of the documents that will need to be submitted in support of a forgiveness application.

    PPP loan forgiveness will vary with the facts and circumstances of each individual loan and borrower. Consequently, NADA encourages dealership PPP borrowers to provide the application and accompanying documents to their legal and accounting advisors for careful review. (Again, note that additional forgiveness guidance will be forthcoming.) Considering the May 18, 2020, safe harbor deadline, borrowers with loan amounts of $2 million or more may wish to have these documents reviewed by their expert advisors sooner than later. See NADA's Certification Clarification.

  • 08 May 2020 11:26 AM | Myron Rau (Administrator)

    Supporting your Necessity for the Paycheck Protection Program Loan

    In light of the media outrage that some larger companies received Paycheck Protection Program (“PPP”) loans at the expense of smaller businesses, the SBA made it clear that they would audit all PPP loans of over $2 million. To allow businesses a little more time to ruminate about their own situation (whether they truly needed the loan) the SBA has indicated that businesses who feel they do not meet the certification may return the funds by May 14, 2020 without consequences.

    When dealerships applied for the PPP loans they certified that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” This certification has come under greater scrutiny by the media and the SBA due to criticism that some publicly held companies and universities received PPP loans, potentially at the expense of other small business owners. The SBA guidance states that large companies should take into account, “their current business activity and their ability to access other sources of liquidity sufficient to support their ongoing operations in a manner that is not significantly detrimental to the business.” The guidance further indicates that the SBA will review all loans in excess of $2 million, in addition to other loans as appropriate, following the lender’s submission of the business’ loan forgiveness application.

    So, what can a dealership do now to prepare for inquiries regarding their need for a PPP loan? We recommend that dealers answer the following questions and gather supporting documents, such as financial statements, payroll records, termination/layoff notices, and return to work notices to assist in answering any inquiry or applying for forgiveness of their PPP loan.

    What Standards May be Applied in an Audit

    The application requires certification of the following standard:

    The loan request was necessary to support the ongoing operations of the applicant. The SBA Guidance expands this standard with a two-prong test, stating that a business should take into account:

    1. Their current business activity;

    2. Their ability to access other sources of liquidity sufficient to support their ongoing operations in a manner that is not significantly detrimental to the business.

    The Guidance then offers the following example: “For example, it is unlikely that a public company with substantial market value and access to capital markets will be able to make the required certification in good faith.”

    Proving your need for PPP funding:

    Dealerships should document the “economic uncertainty” that was in effect at the time of the dealership’s loan application. Consider the following:

    1. Reference that Wisconsin has been operating under a Safer at Home Order (“the Order”) effective March 25, 2020, impacting all Wisconsinites opportunities to work, shop, travel, go to school or use childcare facilities. What was the impact of the Order on your business?

    ï What was your sales volume as compared to your pre-COVID 19 sales volume?

    ï What was your service volume during this same time frame?

    ï What was your parts volume during this same time frame?

    ï Did you close down operations of any portion of your business?

    ï Did you lay off, furlough, or terminate any of your employees prior to applying for the PPP loan?

    ï Did you reduce employee pay or benefits?

    ï Were you forecasting layoffs, furloughs, or terminations of employees due to forecasts of lower sales/service?

    ï Were manufacturing plants closed, or planning to close? Was this impacting your forecast for inventory and parts.

    ï Did employees ask for leaves of absence due to illness, child care, or healthcare concerns?

    ï Did your dealership extend healthcare benefits to employees on temporary layoffs? If so, were you anticipating ending those benefits?

    2. Dealerships should identify/document how PPP loan proceeds will be or were used to support business operations and employees. Uses may include:

    ï Employee Retention

    ï Continuation of Benefits (health insurance, retirement benefits, ancillary benefits)

    ï Re-hiring employees

    ï Maintaining employee wages

    ï Paying rent, utilities, and other PPP-approved expenses

    3. How Did/How Will PPP Funds Affect Your Employees, Your Dealership, and Your Current Business Activity?

    ï But for the PPP loan, would your revenue support the number of employees you employ or have reinstated after layoff?

    ï Would you be anticipating future layoffs or changes to future benefits such as increasing employees’ share of health insurance but for the PPP loan?

    4. Were other sources of Liquidity available? Dealers should consider whether use of other lending or revenue sources would be significantly detrimental to the business. “Significantly Detrimental” is not defined in the SBA Guidance.

    However, it seems prudent for dealers to reference typical provisions in other lending agreements such as:

    ï Cross-collateralization/Cross-default provisions

    ï Personal guarantees

    ï Variable interest rates tied to indexes

    ï The effect that taking a loan that is collateralized by the dealership would have with your manufacturers.

    ï The additional burden of getting normal business operations back while saddled with higher debt load.

    Additionally, would the dealership use cash on hand? What would the consequence of doing so be, given “current economic conditions” both to the dealership and its employees?

    Undoubtedly, dealerships which applied for PPP loans did so to provide “Paycheck Protection” for employees during this financial crisis. These loans were provided with the understanding that they would be forgiven if used for specific purposes and businesses would be required to provide evidence that funds were used appropriately when they apply for forgiveness. The discussion above should help dealers provide relevant evidence and answer any questions raised by lenders or regulators.

  • 02 May 2020 2:38 PM | Myron Rau (Administrator)


  • 16 Apr 2020 12:22 PM | Myron Rau (Administrator)
    • Please note the following with respect to the SBA/Treasury Paycheck Protection Program (PPP):


      1. NADA has posted a new document entitled PPP Loans: Use of Proceeds and Forgiveness NADA Preliminary Guidancewhich provides valuable insights into important issues involving the forgiveness elements of the PPP loan program.  To the extent that a PPP loan is forgiven, it effectively becomes a grant from the federal government to the borrower.  Please note that, as the document stresses, this information is preliminary and does not reflect the additional guidance NADA expects to obtain from SBA/Treasury, which will be circulated as soon as it is received.
      1. Also, please note that, as of this morning, the SBA has closed both the PPP and its EIDL program to new applications.  Simply put, the funds for both loan programs have been depleted.  NADA has signed on to a letter to Congress and is pushing hard for additional PPP funding.  Additional funding is important for dealers who have yet to apply for a PPP loan or have applied for one but have yet to be approved and funded.
    1. Regarding other PPP and CARES Act issues, please see the updated version of NADA’s FAQ and Treasury’s PPP Loan webpage.  Lastly, for other dealer-related Covid-19 information, please regularlyvisit NADA’s Coronavirus Hub.
  • 14 Apr 2020 2:36 PM | Myron Rau (Administrator)

    New NADA Driven Guide: Safely Operating your Dealership During a Pandemic

    The COVID-19 pandemic has upended the way we live and the way we do business. A Dealer Guide to Safely Operating Your Dealership During a Pandemic aims to assist dealers in maintaining their essential operations while minimizing unnecessary risks. The guide provides information from such reliable sources as the Centers for Disease Control and Prevention (CDC) on keeping employees and customers safe during the pandemic; cleaning and disinfecting dealership facilities and vehicles; and safely handling service and sales operations.
    Source: NADA

  • 05 Apr 2020 3:58 PM | Myron Rau (Administrator)

    NADA Issues FAQs on SBA Paycheck Protection Program

    Late last night the Small Business Administration issued an interim final rule (IFR) on the implementation of the Payroll Protection Program (PPP) of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). This IFR offers guidance on and outlines the key provisions of the PPP. As this is an interim final rule, this guidance is effective immediately. Importantly, this guidance has confirmed that PPP loans will be made first-come, first-served, with funds available until they are exhausted. Dealers interested in PPP funding should contact their lenders as soon as possible to secure funding before the appropriated money has been exhausted. 

    Today NADA released CARES Act FAQs that include information on the PPP. The FAQs incorporate the new guidance on PPP loans and information on SBA Economic Injury Disaster Loans, tax provisions and changes to unemployment assistance.  

    Additional guidance from the SBA on the affiliation rules under the PPP is pending. NADA will continue to work with the SBA and Department of Treasury to implement the provisions of the CARES Act and will update these FAQs as more information becomes available. 

  • 31 Mar 2020 11:56 AM | Myron Rau (Administrator)

    National Automobile Dealers Association

    For updates on the coronavirus and its impact on local dealerships, visit NADA’s Coronavirus Hub.

  • 29 Mar 2020 4:11 PM | Myron Rau (Administrator)

    The Department of Labor has just issued an updated version of its FAQs on the emergency paid sick and childcare leave provisions of the Family First Coronavirus Response Act (FFCRA). Reminder: these emergency leave mandates do not take effect until April 1 and do not apply retroactively. 

    For now, please note the following five items. 

    1. What do I have to show to qualify for the under 50 hardship exemption? The DOL will address this in regulations issued next month. The DOL is not requiring that anything be submitted to it. See, DOL FAQ 4. 

    2. What information should employees have to show to qualify for leave? The DOL details what information employees must provide in order to demonstrate that they are qualified for emergency paid sick or childcare leave. See, DOL FAQs 15 and 16. The DOL also notes that employees requesting emergency leave must show that they “cannot work or telework.” See, DOL FAQs 17-19. 

    3. Can qualified employees take emergency leave “intermittingly”? Generally, yes. See, DOL FAQs 20-22. 

    4. Are employees eligible for emergency leave due to federal, state or local “shut-down” or “stay at home” directives or because the dealership partially or fully closed or laid off employees “voluntarily”? No. See, DOL FAQs 23-28. 

    5. May employees collect both unemployment and emergency leave pay? No. See, DOL FAQ 29. 

    NADA intends to issue an updated version of its emergency leave FAQs later today to reflect these clarifications and other new info on DOL’s website. Stay tuned: we fully expect both DOL and the IRS to issue additional clarifications prior to the April 1, 2020, effective date.

    National Automobile Dealers Association

  • 29 Mar 2020 4:09 PM | Myron Rau (Administrator)

    U.S. House Passes CARES Act

    Today the U.S. House passed Covid-3, the Coronavirus Aid, Relief, and Economic Security (CARES) Act, clearing the $2.2 trillion measure; the President is expected to sign the bill into law promptly. Congress acted with extraordinary speed: the measure was drafted in the Senate and approved by the entire Congress in just over a week. 

    The bill contains NADA-supported provisions which we have previously summarized, such as the new guaranteed loan program for small businesses and the extensive tax relief for individuals and businesses. One aspect of the bill is especially noteworthy for dealers: in general, the new small business loan will be limited to businesses with 500 or fewer employees.  However, as explained in the attached memo, the bill includes a provision that will enable certain franchised dealers to qualify for a waiver of the affiliation rules that typically apply for SBA loans. 

    Thanks to the many dealers, NADA directors and state and metro association executives who worked in support of this bill and the provisions favorable to dealers.

    National Automobile Dealers Association

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