Public Announcements

     

    Forgivable Loans Under The CARES Act

    FORGIVABLE LOANS TO BE MADE AVAILABLE FOR ELIGIBLE SMALL BUSINESSES UNDER THE CORONAVIRUS AID, RELIEF, AND ECONOMIC SECURITY ACT (CARES)
    Small businesses that were impacted by COVID-19 may be eligible for a very significant forgivable loan under the Paycheck Protection Program of the Coronavirus Aid, Relief, and Economic Security Act (The CARES Act). The CARES Act was signed by President Trump this past Friday and is now law. It is offering significant relief to eligible small businesses to encourage them to maintain their existing payrolls.
    WHO CAN APPLY?
    Small businesses may be eligible for the program if they:
    1.     Employ 500 employees or less (includes full-time, part-time, and those employed on other
    bases); or if applicable, the size standard in number of employees established by the
    Administration for the industry in which the entity operations.
    a.      There is a special eligibility rule for businesses in the hospitality and dining industries. For businesses with more than one physical location, if it employs 500 or fewer employees per location is assigned to the "accommodation and food services" sector (Sector 72) under the North American Industry Classification System (NAICS), the business is eligible based on this size standard.
    b.      Sole proprietors, independent contractors, and eligible self-employed individuals (as
    defined in Congress's last COVID-19 bill, the Families First act are eligible as loan
    recipients), subject to some documentation requirements to substantiate eligibility.
    2.      Were in business on Feb. 15, 2020 and remain in business; and
    3.      Can make a good faith certification that, among other things, the applicant has been impacted
    by COVID-19.
    Loan applications are submitted through banks and guaranteed by the Small Business Administration (SBA). Many of the normal SBA qualifications are waived. No collateral or personal guarantees are required.
    RECEIVE UP TO $10 MILLION!
    The maximum loan amount is the least of:
    (A)   2.5 times average total monthly payroll costs incurred in the one-year period before the loan is made (or for seasonal employers the average monthly payroll costs for the 12 weeks beginning on February 15, 2019, or from March 1, 2019 to June 30, 2019); OR
    (B)   Upon request, for eligible businesses that were not in existence during the period from February 15, 2019 to June 30, 2019 – 2.5 times the average total monthly payroll payments from January 1, 2020 to February 29, 2020; OR
    (C) $10 million.
    Loan recipients may, in addition to uses already allowed under the SBA’s existing Business Loan Program, use the loans for:
    (1)   Payroll costs, which includes compensation to employees, such as salary, wage, and
    commissions;
    (2)   Paid leave, severance payments, payment for group health benefits (including insurance
    premiums), retirement benefits, state and local payroll taxes and compensation to sole
    proprietors or independent contractors (including commission-based compensation) up to
    $100,000 in 1 year (prorated for the covered period);
    (3)   Group health care benefits during periods of paid sick, medical, or family leave, and insurance
    premiums;
    (4)   Interest on mortgage obligations;
    (5)   Rent/lease agreement payments;
    (6)   Utilities; and
    (7)   Interest on any other debt obligations incurred before the covered period.
    COVERED LOANS MAY BE FORGIVEN UP TO 100% OF THE LOAN AMOUNT. ANY REMAINING PORTION OF THE LOAN WILL BE REPAID OVER 10 YEARS AT A MAXIMUM INTEREST RATE OF 4% PER ANNUM. FORGIVENESS OF ANY AMOUNT OF THE LOAN WILL NOT CREATE CANCELLATION OF INDEBTEDNESS INCOME FOR FEDERAL INCOME TAX PURPOSES (MEANING, THERE WILL NOT BE ANY TAX ASSESSED AGAINST ANY FORGIVEN PORTION).
    Forgiveness on a covered loan is equal to the sum of the following incurred during the covered 8 week period:
    (1)   Payroll costs: plus
    (2)   Interest paid on any covered mortgage (which shall not include any prepayment of or payment
    of principal on a covered mortgage) incurred prior to February 15, 2020; plus
    (3)   Payment on rent of any lease in force prior to February 15, 2020; plus
    (4)   Payment on any utility for which service began before February 25, 2020.
    Certain of this indebtedness will even be forgiven if the borrower re-employs those that were recently laid-off employees as a result of COVID-19 and retains them for the applicable 8 week period. This federal relief package is designed to help small businesses fund these exact expenses to provide some much-needed financial assistance.
    ACT QUICKLY, BEFORE FUNDS ARE GONE
    Presumably, the guidelines will go into effect shortly. Despite the $350 billion allocated to help small businesses fund payrolls under the CARES Act, so many companies and individuals are suffering financially due to COVID-19 that it is very important to act quickly.