CARES Act Designed To Keep Small Business& Employees At Work
The Coronavirus Aid, Relief and Economic Security Act (CARES Act) recently signed into law last Friday creates a specific loan program through the Small Business Administration to help small businesses retain employees and pay critical expenses in this challenging time. Under the Paycheck Protection Loan Program, the SBA’s current 7(a) loan guaranty program would be expanded and modified to provide up to $349 billion of federally-guaranteed loans for small businesses. This loan program is designed to keep small businesses, and their employees, at work.
Here are some highlights of this loan program:
- Available primarily to small businesses, non-profits, accommodations, restaurants with fewer than 500 employees, as well as self-employed, sole proprietors, freelance and gig economy workers are also eligible to apply (again, you have to be in operation before February 15, 2020).
- The maximum interest is capped at 4%
- No personal guarantee or collateral is required for the loan
- Payments are deferred up to six to 12 months
- Part of this loan may be forgiven and not counted as income to you, if it’s spent during the first eight weeks on operating expenses such as:
- Payments made toward mortgage interest.
- Payments made toward covered rent.
- Payments made toward covered payroll costs.
- Payments made toward covered utility expenses.
In order for the amounts to be forgiven, you must maintain the same average number of employees for the first eight-week period beginning on the origination date of the loan as you did from February 15, 2019 - June 30, 2019 or from January 1, 2020 until February 15, 2020. If you don’t meet this requirement, the amount forgiven is reduced. Additional exceptions apply. The bill in it's entirety is available for review here: www.congress.gov/bill/116th-congress/house-bill/748/text. A summary is also provided here by US Travel.Org.
Very high demand for this program is expected. You can help yourself prepare by using this checklist from the US Chamber of Commerce.