Small Business Relief Resources
March 26th, 2020 the President of the United States just signed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). The CARES Act will provide significant financial relief to many small businesses, individuals and sectors fo the American economy that is struggling to get through COVID-19.
Title I of the CARES Act helps small businesses by, among other things, amending the Small Business Act to establish the “Paycheck Protection Program” which incentivizes workforce continuity during the pandemic by providing forgivable 7(a) loans to eligible businesses.
Small Business Eligibility for PPP
To be eligible a business must be either a small business concern (as defined by the Small Business Act), which were already eligible for 7(a) loans under the Small Business Act prior to the passage of the CARES Act, or (b) any business concern, nonprofit organization, veterans organization, or Tribal business concern employing not more than greater of 500 employees (full-time, part-time, or otherwise) or the size standard in the number of employees for the industry in which the entity operates as established by the Small Business Administration. The SBA’s size standards as published in August 2019 can be found on the SBA’s website. This test is based on the number of employees and does not consider revenue.
The CARES Act requires lenders to consider whether the borrower was in operation on February 15, 2020, and if the borrower either had employees to whom it paid salaries and payroll taxes or paid independent contractors. Borrowers must certify to its lender that, among other things, a Loan is necessary in light of the economic uncertainty created by the COVID-19 pandemic.
The proceeds of Loans under the Program can be used for the following uses ONLY: payroll costs, group health care benefits during periods of paid sick, medical or family leave and insurance premiums, employee compensation, mortgage interest payments, rent, utilities and interest on debt incurred prior to February 15, 2020. Payroll costs expressly exclude: (a) compensation of an individual employee in excess of an annual salary of $100,000 as prorated for the Covered Period, (b) withholding taxes, (c) compensation of persons whose principal place of residence is outside of the US, and (d) qualified sick leave and family leave for which a credit is allowed under the “phase 2” bill.
Distinguishing Loan Terms
Probably one of the most important features of the Program is forgiveness of debt on eligible businesses’ loaned amount equal to the sum of payroll costs, mortgage interest, rent payments, and utility payments made by the borrower during the 8-week period beginning on the date of the origination of the loan. Forgiveness amounts will be considered canceled indebtedness by a lender and are not deemed income to the borrower. The amount of forgiveness available to the borrower will be reduced by both 9s) a percentage related to the number of employees laid off during the 8-week period as compared to either the period beginning February 15, 2019 and ending June 30, 2019 or during January and February 2020 (with a cure for employees rehired by June 30, 2020), and (2) an amount related to reductions in salaries and wages of employees in excess of 25% during the 8-week period (with a cure for salaries and wages restored by June 30, 2020). Borrowers must provide their lenders with complete documentation of the calculation of their forgiveness amounts. Additional details are available from the lender, your bank, and they supersede this article. Read the Actual Act HERE
If you haven’t heard from your insurance agent regarding your loss of business income please give us a call at 817-809-4522.