The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”)
$350 billion allocated to Paycheck Protection Program
Provides relief for small businesses (fewer than 500 employees) impacted by the economic downturn caused by the COVID-19 pandemic to cover payroll and other expenses from February 15 to June 30, 2020. Small businesses may take loans up to $10 million–limited to a formula tied to payroll costs—and cover employees making less than $100,000 per year. Loans may be forgiven if the business uses the loan for payroll, interest payments on mortgages, rent and utilities. Loan forgiveness would be reduced proportionately by the reduction in employees retained compared to the prior year and a greater than 25 percent reduction in employee compensation. The amount of loan forgiveness is not included in the taxable income of the taxpayer.
Learn how to apply HERE.
Click here for the APPLICATION.
When can you apply? Beginning Friday April 3, 2020 small business and sole proprietors can apply. Starting Friday April 10, 2020 independent contractors and self-employed individuals can apply.
How long is it open? The program is open until June 30, 2020, you will want to apply as soon as you can.
How many loans can you take out under this program? You can take out only one loan of this type. This currently does not appear to conflict with the EDIL loans provided by the SBA
Where can you apply? You can apply through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. Other regulated lenders will be available to make these loans once they are approved and enrolled in the program.
How can you apply? All businesses qualify if you have under 500 employees (This would include Schedule C, Schedule E (including rental entities if provide payroll), 1120, 1120S, 1065, 990 (501c3), and 1041 if business is owned by a trust). For this program, the SBA’s affiliation standards (grouping for 500 employee test) are waived for small businesses (1) in the hotel and food services industries; or (2) that are franchises in the SBA’s Franchise Directory or (3) that receive financial assistance from small business investment companies licensed by the SBA.
How much can I borrow and how is that determined? You can borrower 2.5 times your average monthly payroll costs for 2019 (For seasonal businesses, the Applicant may elect to instead use average monthly payroll for the time period between February 15, 2019 and June 30, 2019, excluding costs over $100,000 on an annualized basis for each employee. For new businesses, average monthly payroll may be calculated using the time period from January 1, 2020 to February 29, 2020, excluding costs over $100,000 on an annualized basis for each employee), up to $10 million dollars.
Specific documentation on this will be addressed by lender. However, should include 2019 employee payroll records. 2019 Federal 941 and W-2’s.
What are the repayment terms and interest rates? Of the amount of the loan that Is not forgiven, the terms are 2 years at a .5% interest rate. All payments are deferred for 6 months; however, interest will accrue during this period. There are no prepayment penalties.
How much will be forgiven? For the amount of payroll costs (see borrower fact sheet attached for this description), mortgage interest incurred before 2/15/20, rent under lease agreements incurred before 02/15/20, and Utilities for which service began before 02/15/20. These costs will be based on payments made for the 8-week period after the loan is funded. The loan forgiveness amount will be reduced if you reduce the number of full-time employee staff and the level of payroll by more than 25% for any employee who made more than $100,000 in 2019. You have until 6/30/20 to restore full time employees or salary levels for any changes made between February 15, 2020 and April 26, 2020.
Collateral Guarantee and Other There is no collateral or personal guarantee for this loan. See borrower fact sheet on the matters to certify. Note on certification one I believe all businesses will be impacted by this whether now or later in the next 12 months.