CARES ACT CAN GET SMALL BUSINESSES CASH

Here is the latest news on the Coronavirus Aid, Relief And Economic Securities Act (CARES). The CARES Act provides approximately $2 Trillion in immediate cash relief for employees, a lending program for businesses, targeted relief for certain devastated industries, and spending to confront Coronavirus.

Congress is about to enact a significant economic bailout as part of the third phase of the COVID-19 emergency stimulus bill. It will shortly be on its way to the President’s desk for signature.

The legislation is complex. Division A, Title I is the topic of this update which concerns the SBA’s Business Loan Program and the Paycheck Protection Program.

DIVISION A: KEEPING WORKERS PAID AND EMPLOYED, HEALTH CARE SYSTEM ENHANCEMENTS, AND ECONOMIC STABILZATION

TITLE I
KEEPING AMERICAN WORKERS PAID AND EMPLOYED ACT

The CARES Act expands the Small Business Act (SBA) and the SBA’s Business Loan Program to include participation in THE PAYCHECK PROTECTION PROGRAM (the “Covered Loan”) for the period January 31, 2020 – December 31, 2020.

The CARES Act deems all states and their subdivisions to have sufficient economic damage to small business concerns to qualify for assistance under this loan program. A loan made under the SBA Disaster Loan Program on or after January 31, 2020, may be refinanced as part of the Covered Loan under the CARES ACT.

PRIORITIES
• Small businesses concerns,
• Nonprofit organizations
• Tribal business concerns
• Entities in underserved and rural markets,
• Veteran organizations,
• Small minority owned businesses,
• Women, and
• Businesses in operation for less than two years.

PURPOSE
An eligible applicant will certify in good faith:
• That the uncertainty of current economic conditions makes it necessary to request the loan to support ongoing operations.
• Acknowledge that the funds will be used to retain workers and maintain payroll or make mortgage payments, rents and utility payments.
• That no other loans under this Act were applied for the same purpose.
• That during the period beginning February 15, 2020 and ending December 31, 2020 that it has not received amounts under this Act for the same purpose.

ELIGIBILITY
Small businesses, nonprofit organizations, veterans’ organization and tribal business concerns that either:
• Employ not more than 500 employees, or
• For the accommodation and food services (NAICS Sector 72), employ not more than 500 employees per physical location, or
• The size standard # of employees established by the Administration for the industry in which the business conducts operations.
 
Includes eligible self-employed, independent contractor or sole proprietorship, and eligible self-employed individual means:
• Regularly carries on a trade or business within the meaning of Sect. 1402 of Internal Revenue Code, and
• Would be entitled to paid leave during the taxable year from Emergency Paid Sick Leave Act.

In evaluating the eligibility of the applicant, lenders shall consider whether the applicant:
• Was in operation on February 15, 2020, and
• Had employees for who the borrower paid salaries and payroll taxes, or
• Paid independent contractors, as reported on a Form 1099-MISC.

MAXIMUM LOAN AMOUNT
The maximum loan amount has been amended to be either $10 million....
-OR-
• 2.5x the average total monthly payroll costs incurred during the 1 year period before loan is made (or for seasonal businesses the average monthly costs for the 12 weeks beginning February 15, 2019 or March 1, 201p to June 30, 2019), plus
• The outstanding amount of a loan made under the SBA’s Disaster Loan Program between January 31, 2020 and ending on the date the covered loan is made.
-OR-
For businesses that were not in existence during the period from February 15, 2019 to June 30, 2019:
• 2.5x the average total monthly payroll costs from January 1, 2020 to February 29, 2020, plus
• The outstanding amount of a loan made under the SBA’s Disaster Loan Program between January 31, 2020 and ending on the date the covered loan is made.

ALLOWABLE USES OF COVERED LOANS
Recipient may use the covered loans for all reasons originally covered by a SBA 7(a) loan plus the following:
• Payroll costs,
• Costs related to continuation of group health care benefits and insurance premiums,
• Employees’ salaries, commissions or similar compensation,
• Payment of interest on any mortgage obligation (not to include payment or prepayment of principal on a mortgage obligation),
• Payment of interest on any other debt obligations that were incurred before the covered period,
• Rent & utilities.

TERMS
10 Years Interest – Not to exceed 4%

LOAN DEFERMENT
Payments of principal and interest will be deferred for a period of not less than 6 months up to1 year.

LOAN FORGIVENESS
The Covered Loan may be forgiven in an amount not to exceed the principal amount of the loan equal to the following costs incurred and payments made during the covered period, subject to certain reductions:
• Payroll costs,
• Interest payments on mortgages,
• Rent and utility payments.
The amount forgiven will be excluded from gross income.

WAIVERS
• Waiver of any personal guarantee or collateral – there will be no recourse unless the loan proceeds were used for a purpose not authorized by the CARES ACT.
• Waiver of any fee otherwise charged by either the Administrator or the Administration.
• Waiver of the requirement that during the covered period that “the small business concern is unable to obtain credit elsewhere.”
• Waiver of any prepayment penalty.
 
7(a) EXPRESS LOANS
Increased from $350,000 to $1,000,000 through December 31, 2020.

EXPANSION OF THE SBA’s DISASTER LOAN PROGRAM
The CARES Act amends and expands the SBA Disaster Loan Program to include during the covered period, in addition to the current eligible entities the following:
• A business with 500 or fewer employees,
• A sole proprietorship, with or without employees and independent contractors,
• Cooperative with 500 or fewer employees, ESOPs with 500 or fewer employees, and Tribal small business concerns.

The CARES ACT makes the following additional changes to the SBA Disaster Loan Program during the covered period:
• Waiver rules related to personal guarantees on advance of $200,000 or less,
• Waives the 1 year in business prior to the disaster requirement as long as the business was in operation on January 31, 2020,
• Waives the requirement that an applicant be unable to find credit elsewhere, and,
• Allows lenders to approve applicants based solely on credit scores or other appropriate methods to determine the applicant’s ability to repay (without a submission of a tax return).

DEFINITIONS
Covered Loans means a loan made under the Paycheck Protection Program Covered Period beginning on February 15, 2020 and ending June 30, 2020.

Payroll costs includes:
• Salary, wage, commission or similar compensation,
• Payment of cash tip or equivalent,
• Payment to pay out vacation time, and parental, family, medical, or sick leave,
• Allowance for dismissal or separation,
• Payment for group health care benefits,
• Payment of any retirement benefit,
• Payment of State and local tax assess on the compensation of employees,
• Sum of payments of any compensation to or income of a sole proprietor or independent contract that is a wage, commission, income, earnings from self-employment or similar, not more than $100,000 annually as prorated for the covered period.
 
Payroll costs DO NOT include (as prorated for the covered period):
• Individual employee compensation in excess of $100,000.
• Taxes imposed or withheld.
• Any compensation of an employee whose principal place of residence is outside the US.
• Qualified sick leave and qualified family leave for which a credit is allowed under Section 7 of the FFCRA.

Contact Us: We are open and available to answer any of your questions and to facilitate the process! Please contact Cory Lyon for assistance at 561-209-1120 or This e-mail address is being protected from spambots. You need JavaScript enabled to view it