CARES Act for Small Business - Coronavirus (COVID-19)

CARES Act just passed Congress - How does this affect your small business?

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SECTION I - SBA.GOV - Loan Program

1. "Covered Period" - 03/01/2020 - 12/31/2020

2. Independent Contractors, Sole Proprietors, and Small Businesses with less than 500 Employees (private, public, non profit).

3. Lender Shall only consider a Small Business Borrower if : Had Employees whom the borrower paid Salaries and Payroll Taxes AND was operational on 3/1/2020

4. Eligible for a "Payroll Protection;" a deferred loan which will cover the period of 2/15/20 - 06/30/20.

5. Max loan amount lesser of :

A. $10,000,000 OR;

B. Following Formula (most common for average Small Business)

a. Average Monthly Payments for Rent, Mortgage, Payroll and Debt Obligations incurred during the 1 year period prior to loan is made

b. Multiple By 4

6. Example:

A. Rent - $5,000 Average

B. Payroll - $15,000 Average

C. Credit Card Payments - $2,000 Average

D. Monthly Loan Payments - $4,000 Average

E. Total Average Monthly Payments - $26,000

F. Multiple $26,000 * 4 = $104,000

G. Max Loan you can receive is $104,000

7. Loans can be refinanced and the bill states there is no recourse for non payments of payments UNLESS you use the funds for purposes not intended ( see Section II)

8. The Loan Repayment can be deferred for no less than 6 months and up to 12 months.

9. Interest on Loans is capped at 4%.

10. Prepayment Penalty is waived if an early payment is provided to lender.

11. Applications are set to be approved on or after the date of this act to be enacted

12. If you are not qualified in receiving a covered loan - Its okay because they have provided a Payroll Tax Credit AND deferring payroll taxes from 03/01/2020 to 12/31/2020, until end of 2021 and 2022.

Section II - Allowable Usage of Loan

1. Payroll Support for Paid Sick, Medical or Family Leave due to COVID-19

2. Employee Wages

3. Mortgage Payments

4. Rent

5. Utilities

6. Any other Debt Obligations

7. NOT ALLOWED:

A. Personal Payments

B. Bridging the loan for personal purposes C. Investments D. Owners increased Salaries, Bonuses, Dividends, Distributions

Section III - Loan Forgiveness

1. Eligible recipient shall be eligible for forgiveness of indebtedness on a covered loan in an amount equal to the cost of maintaining payroll continuity between 03/01/2020 - 06/01/2020

2. Payroll Costs Shall NOT include:

A. Compensation of an INDIVIDUAL Employee in excess of $33,333 in covered period

B. Qualifying Sick Leave Wages for which a credit is allowed under section 7001 the Families First Coronavirus Response Act C. or Qualifying Family Leave Wages for which a credit s allowed under section 7003 the Families First Coronavirus Response Act

3. Shall be considered canceled indebtedness by lenders

4. Limits on amount of Forgiveness: Amount of Loan Forgiveness shall NOT exceed the sum of :

A. Total Payroll Costs incurred by the Eligible recipient during period AND

B. The amount of payments made during the covered period on debt obligations that were incurred before period.

Section IV - Businesses suffered losses in eligible disruptions for Loan Forgiveness

1. Any Business are eligible for Loan Forgiveness, who have suffered in losses in:

A. Supply chain disruptions

B. Quality and lead time

C. Technology

D. Staffing challenges or

E. A decrease in gross receipts or customers, or a closure

2. Covered period - 03/01/2020 - 06/30/2020

3. Loan Forgiveness would apply to :

A. Cost of continuing payroll through covered period

B. Any payment on Rent or Utility Payment

C. Interest on Mortgage Payment (not principal or prepayment)

4. This includes seasonal workers as well as tipped workers - as long as workers covered under forgiveness could not be making more than $100,000 in 2019.

5. Must provide documentation of payrolls, expenses and etc.

Section V - Emergency "Economic Injury Disaster Loans" (EIDL) Grants

1. Covered period - 01/31/2020 - 12/31/2020

2. Eligible if Independent Contractors, Sole Proprietors, and Small Businesses with less than 500 Employees (private, public, non profit)

3. Grants issued in increments not greater than $10,000 and can be used for:

A. Providing paid sick leave for employees affected by Covid-19

B. Maintaining Payroll to retain employees during business disruption or large slow downs C. Rent or Mortgage Payments

D. Repaying obligations that cannot be met due to revenue losses

E. Meeting increased costs to obtain materials which applicant can not find due to disruption in the supply chain.

4. KEY POINT - There is no repayment requirement for these grants, even if you were denied for a loan previously.

5. If you receive a grant under this program, it will be subtracted from loan forgiveness you may receive for payroll purposes

Please contact us today to discuss more how the CARES Act can help you!