First and foremost, we hope you and your family, friends, and employees are healthy and free of the Coronavirus.
The Coronavirus pandemic has brought the US economy to its knees. The crisis has had a very negative financial impact on small businesses and threatens the livelihood of the employees of small businesses.
FEDERAL AID TO SMALL BUSINESSES
On March 18, 2020, the Families First Coronavirus Response Act was enacted into law. The Families First Act provides significant relief for businesses and employees who are negatively affected by the Coronavirus.
The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) legislation negotiated by both parties in the Senate with participation by the House of Representatives and the White House contains numerous overhauls to the business and employee provisions in the Families First Act, and adds new assistance to employees and companies including small business provisions that could directly benefit you. The final CARES Act legislation could change the benefits for small businesses as agreed by the Senate on March 25, 2020, but we do not anticipate that.
The following is a summary of those benefits.
Loans
Fast track loans would be made available to small business through the Small Business Administration – the SBA. The types of businesses eligible include corporations, limited liability companies, sole proprietorships, and independent contractors.
To be eligible, the small business must: 1) not have a current SBA loan; 2) have fewer than 500 employees; 3) have been in operation on February 15, 2020; 4) have had payroll expense on that date; and 5) demonstrate that it was substantially negatively impacted financially by the COVID19 crisis.
The loan cannot exceed $10,000,000 and can be used for payroll costs, mortgage payments, rent, insurance premiums and any other “debt obligations”. We believe debt obligations means business operating expenses. SBA “express loans” would be available up to $1,000,000.
The time period during which the CARES Act small business loans would be available begins on February 15, 2020 and ends on December 31, 2020. It is critically important to apply for the loan as soon as possible. $350 billion has been allotted to this program and it is given out on a first come, first serve basis.
Loan Forgiveness
One of the greatest benefits for small business under the CARES Act legislation would be the eligibility for loan forgiveness in an amount equal to the amount spent by a small business during an eight-week period after the origination date of the loan on the following items:
- Payroll costs;
- Interest payment on any mortgage entered into prior to February 15, 2020;
- Payment of rent on any lease in force prior to February 15, 2020; and
- Payment on any utility for which service began before February 15, 2020.
The amount forgiven would be reduced in proportion to any reduction in your workforce compared to the prior year and to the reduction in pay of any employee beyond 25% of his or her prior year compensation.
Small businesses that rehire workers previously laid off will not be penalized for having reduced payroll at the beginning of the period.
Other benefits
The Families First Act greatly increased unemployment benefits for affected workers. In addition, employers will receive reimbursement for extended periods of paid sick leave for employees who contract the COVID19 virus and, as a result, are not able to report to work, for those employees who must care for children due to school closure, and for those employees who must care for a loved one who is affected by the coronavirus.
Next Steps
Remember, once the funds allocated by Congress for small businesses under the CARES Act are used up, the program will end. Therefore, there is a high sense of urgency to apply now.
The SBA loan application is submitted online. To initiate the loan process, click here. You may also contact your bank if it is an SBA lender.
Please contact us for any assistance you need to understand the small business benefits and if you need help applying for the SBA benefits.
