On October 7th, 2020, Governor Bill Lee announced the creation of the Supplemental Employer Recovery Grant (SERG) program. This program was designed to provide relief to eligible small business owners to reimburse direct expenses or business interruption costs due to the COVID-19 pandemic. The application window is currently open and will remain so until December 29th, 2020 or until the funds have been depleted, which are deployed on a first-come, first-serve basis. 10% of the total grants have been reserved for eligible diversity business enterprises classified as Minority Business Enterprise (“MBE”), Women Business Enterprise (“WBE”) or Service –Disabled Veteran Business Enterprises (“DSVBE”) and Enterprise owned by Disabled Persons (“DSBE”).
Eligible businesses are those with annual revenues of $10 million or less and that meet the following criteria:
· Must be a Domestic Business in Tennessee or an out of state business that primarily operates in Tennessee with at least one physical location in the state.
· Must not be a subsidiary of a business with consolidated annual revenues in excess of $10 million.
· Is either registered with the Secretary of State, Department of Revenue or files a federal Schedule C as of August 31st, 2020.
· Must be able to provide proof the business has been operational since April 1st, 2020 with exceptions for temporary closures due to COVID-19.
· Can provide proof of economic hardship due to interruption of business due to COVID-19 or has eligible direct business expenses due to COVID-19.
· Must not have engaged in an illegal activity per local, state or federal laws.
· Does not exist for partisan purposes or other political activities such as lobbying.
· Is a for-profit entity or a 501(c)(3) or 501(c)(19).
Further, the following types of businesses are ineligible for assistance:
· Lending and investment institutions
· Insurance companies
· Racetracks or gambling facilities
The program covers eligible expenses incurred between May 1st, 2020 and August 31st, 2020. Grants are capped at $30,000 with the exception for businesses operating in low to moderate income (“LMI”) census tracts, Opportunity Zones, or Promise Zones which will receive an additional $500 added to the maximum allowed. Eligible expenses are defined as those costs incurred by the business to meet public health requirements or recommendations enacted, adopted, required, or issued by the Tennessee Department of Health, the CDC, state or federal regulatory authorities, and/or local, state or federal executive authorities due to COVID-19. Examples of these costs include:
· Costs to create social distancing measures
· Costs to clean or disinfect areas due to COVID-19
· Personal protective equipment for employees or customers
· Contactless equipment
· Equipment, items or other expenses to screen employees or customers to ensure they are not positive for COVID-19
· Equipment or items designed to track employees or customers who have tested positive for COVID-19
· Necessary re-opening expenses
· Expenses to facilitate teleworking
Another qualifying use for these funds is business interruption. Specifically, a business may seek funds under this program to reduce the impact of COVID-19 had on their net income. To quantify this, businesses will need to show their net income for the same four-month period ending August 31st, 2020 compared to their net income for the same period in 2019. If net income is lower for the period ending in 2020 compared to 2019, the business may be eligible for SERG funds up to the amount this loss. From there, eligible expenses for the four-month period may include:
· Mortgage interest
· Payroll expenses
· Rent or lease payment for real or personal property used for business
· Utility payments for business properties
· Cost of critical business operations
Businesses are not allowed to receive reimbursement for both business interruption and eligible expenses incurred due to COVID-19 as defined above. They can only apply for the greater of the net loss from business interruption or eligible expenses. Only one application per business is permitted, however, individuals that own multiple businesses may apply for each business, provided it qualifies with eligible expenses or business interruption.
Businesses that have received other funds related to the COVID-19 pandemic may still be eligible for SERG payments under certain circumstances. For example, a business received a $50,000 forgivable loan under the Paycheck Protection Program (PPP) for a 10 week payroll period from 5/1 –7/15/20. For the purposes for the SERG program, those $50,000 expenses would be added back and any remaining eligible expenses would qualify for grant applications if they were related to the COVID-19 pandemic.
Information needed to apply for this program can be found on the following documents:
· Copy of most recently filed IRS Tax Return (1040 with Schedule C, 1120, 1120S, 1065, 990)
· IRS Form W-9 providing identifying information required for payment
· Bank statements for the periods May 1st to August 31st, 2019 and 2020 (“Expense Period”)
· Current and prior year Balance Sheet and Income Statement for the expense period
· Supporting documentation for eligible direct expenses and other business interruption expense as requested (invoices, canceled checks, proof of receipt, etc.)
· Ownership documents (Articles of Incorporation, partnership agreements, etc.)
· Proof of diversity of business enterprise eligibility (disability documentation, long-form birth certificate, etc.)
Applications can be prepared and submitted online at https://tncaresact.tn.gov/serg. As of this publishing, all funds have been have been used but new applications are still being accepted in the event more money is allocated or there are rejected applications. We would encourage all businesses that may qualify to still apply for the program.