Your Guide to the Coronavirus Aid, Relief, and Economic Security (CARES) Act
The Coronavirus Aid, Relief, and Economic Security (CARES) Act was recently signed into law. Hundreds of billions of dollars have been set aside to help your business survive these uncertain times. The text of the law itself is hundreds of pages of long. To try and help, we have prepared a basic guide to the most important provisions of the law as far as your business is concerned: the Paycheck Protection Program; Economic Injury Disaster Loans and Emergency Economic Injury Grants; Small Business Debt Relief Program; Small Business Tax Provisions; and Small Business Counseling. For more detailed information about any of these topics, or the CARES Act generally, be sure to visit the Small Business Administration’s website at https://www.sba.gov.
Paycheck Protection Program
This program provides cash-flow assistance through federally-guaranteed loans to employers who maintain their payroll during this emergency. Many loans will be forgiven in full. Here are the basics:
- What businesses are eligible?
- Any for-profit, nonprofit, sole proprietorship, or independent contractor that was in operation on or before February 15, 2020 and employs fewer than 500 people.
- What costs are eligible?
- Compensation (e.g. salary, wage, commission, tips)
- Paid vacation, parental, family, medical, or sick leave
- Allowance for dismissal or separation
- Payment required for the provisions of group health care benefits, including insurance premiums
- Retirement benefits
- Payment of state or local taxes assessed on the compensation of employees
- How is the loan size determined?
- Loan amounts are determined by whether your operations during 2019, if any:
- If you were in business between February 15, 2019 – June 30, 2019, your maximum loan amount is equal to 250% of your average monthly payroll costs during that time period.
- If you were not in business between February 15, 2019 – June 30, 2019, your maximum loan amount is equal to 250% of your average monthly payroll costs between January 1, 2020 and February 29, 2020.
- The maximum loan any business may receive is $10 million.
- Loan amounts are determined by whether your operations during 2019, if any:
- What are the loan terms, interest rate, and fees?
- The maximum term is 10 years
- The maximum interest rate is 4%
- There are no loan fees or prepayment fees
- How does loan forgiveness work?
- Certain loans may be eligible for complete forgiveness, calculated based on a formula of expenses over an eight-week period of covered time. You must apply for forgiveness through your specific PPP lender. Any amounts not forgiven will be carried forward per the terms above, for a maximum of 10 years at no more than 4% interest.
- How do I apply?
- The Small Business Administration (SBA) has a lender match service to help you find a lender. Visit https://www.sba.gov/funding-programs/loans/paycheck-protection-program-ppp to prepare an application. The SBA also publishes more detailed guides to the Paycheck Protection Program.
- When can I apply?
- Applications will be accepted as soon as April 3, 2020. Applications are currently due no later than June 30, 2020.
- You should contact your bank directly for applications and instructions to provide supporting documentation.
