What’s in the CARES Act for small businesses?

by | Apr 7, 2020 | Tip Tuesday

What’s in the CARES Act for small businesses?

What is the CARES Act?

Small Businesses: The Coronavirus, Aid, Relief, and Economic Security (CARES) Act provides self-employed and small businesses with opportunities to receive grants, loans, and support from the government.

What’s in it for Small Businesses?

The Paycheck Protection Program (PPP) is a forgivable loan to small businesses between Feb 15 and June 30, 2020. This program authorizes up to $349 billion in forgivable loans to small businesses, to pay their employees during the COVID19 crisis. The loan amount is based on the payroll costs, and it’s capped at $100,000 on an annualized basis for each employee.

Who can apply for PPP?

All businesses with fewer than 500 employees are eligible for the Paycheck Protection Program. Including sole proprietorships, independent contractors, self-employed, non-profit or 501(c), and veteran organizations.

Is the Paycheck Protection Program only for payroll?

No, the loan can be used for payroll costs, interest on any mortgage, rent, utilities, and other debt obligations. However, the loan may be forgiven if used for payroll, interest payments on the mortgage, rent, and utilities.

What are the requirements for loan forgiveness?

  • The Loan to be used for at least 75% for payroll expenses.
  • The loan is used exclusively for their intended purposes.
  • The loan is used to offset no more than eight weeks (the maximum amount of time payroll expenses would be fully offset) of eligible payroll expenses.
  • Businesses retain employees at salary levels comparable to before the crisis.

Do I have to pay back any amount which does not meet loan forgiveness criteria?

Yes, businesses will have to repay any amount of the loan which does not meet the forgivable loan criteria.

What are the repayment terms and interest rates?

The interest rate is 0.5% with a term of 2 years. The payments will begin in 6 months on any amount that is not forgiven.

What is the maximum loan amount I can receive?

You will receive a maximum loan amount that is 2.5 times your average monthly payroll expenses.

What’s excluded from payroll expense calculations?

  • Any compensation over $100,000 per employee.
  • Payroll taxes, Railroad taxes, and retirement benefits, and Income taxes withheld on wages.
  • Compensation of employees whose principal place of residence is outside the United States.
  • Qualified sick and family leave for which a credit is already allowed under other sections.
  • Loans used for duplicate purposes of another SBA loan program already claimed by the applicant.

Do I have to guarantee this loan personally?

No, the personal guarantee is not required.

When can I apply for a loan?

Small businesses and sole proprietors can apply beginning April 3rd. Self-employed and independent contractors can begin applying for the loan on April 10th. 

Where can I find eligible lenders for PPP?

It is recommended that you visit your bank’s website since all banks are requiring applicants to have a checking account relationship on or before Feb 15, 2020. You can also visit the Small Business Administration website to find a lender. 

What do I need to apply?

You will need to complete the Paycheck Protection Program loan application and submit the application with the required documentation to an approved lender that is available to process your application by June 30, 2020. Click HERE  to download the application.

You will also need to provide your payroll information to your lender.

Need more information?

You can download the PPP Borrower’s Fact Sheet from here and PPP Lender Information from here.

Final words

As a small business owner, apply for this loan as soon as you can. Even though this program is open until June 30, 2020. The funds for the loan are limited and the lenders are getting flooded with loan applications.

If you’re rejected for PPP, remember there are many other options available on Small Business Administration website or check with your state for small business assistance. 

During this unprecedented time, Be Safe and stay positive!

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