The Coronavirus Aid, Relief, and Economic Security (CARES)
Hello
Friends,
Tuesday’s
update included a link to access information about the Coronavirus Aid, Relief,
and Economic Security (CARES) bill. The CARES Act will allocate $350
billion to help small businesses keep workers employed amid the pandemic and
economic downturn.
Known as
the Paycheck Protection Program, the initiative provides 100% federally
guaranteed loans to small businesses. Most importantly, these loans may be forgiven if borrowers
maintain their payrolls during the crisis or restore their payrolls afterward.
This bill
is significant for all small businesses. As such, we are again providing the
link (below) to access the information, which provides more detail, as well as
posting a similar report below. There are many articles posted on the
internet regarding this major bill, which you may wish to research.
You are also encouraged to contact your bank or one of our member
financial institutions to learn more about this major Corona Virus relief fund
and determine their participation in the program.
Please take
a few minutes to read the information provided below. Here is the link
from Tuesday’s COVID – 19 Update: COVID
– 19 Paycheck Protection Program.
CORONAVIRUS
EMERGENCY L OANS
Small Business Guide and Checklist
The Paycheck Protection Program, one of the largest sections of
the Coronavirus Aid, Relief, and Economic Security (CARES) Act, sets aside $350
billion in government-backed loans from private banks to help small businesses
survive through the coronavirus outbreak. In some cases, these loans can
be converted to grants, which means that if you meet certain requirements, you
won’t need to pay the loan back.
Here are the most important things small businesses need to know
about the Paycheck Protection Program.
How does the
Paycheck Protection Program work?
The Paycheck Protection Program’s $350 billion in small business
loans will be issued by private banks. Currently, the Small Business
Administration (SBA) guarantees loans that are given out by a network of more
than 800 lenders across the U.S. The Paycheck Protection Program creates a type
of emergency loan that can be forgiven when used to maintain payroll through
June. The basic purpose of the Paycheck Protection Program is to incentivize
small businesses to not lay off workers and/or to rehire laid-off workers that
lost jobs due to COVID-19 disruptions.
What businesses are
eligible for these loans?
The Paycheck Protection Program offers loans for the following
types of businesses experiencing revenue disruption as a result of COVID-19:
- Small businesses with fewer than 500 employees.
- Select types of businesses with fewer than 1,500 employees.
- 501(c)(3) non-profits with fewer than 500 workers.
- Some 501(c)(19) veteran organizations.
- Self-employed workers, sole proprietors, and freelance or gig economy workers.
Businesses, even
without a personal guarantee or collateral, can apply one of these loans as
long as they were operational on February 15, 2020, and had paid employees at
that time (even if the owner is the only employee). On a final note, the SBA’s
500-employee threshold includes all types of employees: full-time, part-time,
and any other status.
What are the terms of these loans?
Loans under the
Paycheck Protection Act can be 2.5 times the borrower’s average monthly payroll
costs, and they cannot exceed $10 million. The interest rate for Paycheck
Protection loans are set at .5%, and loans mature after two years. No personal
guarantee or collateral is required. The lenders are expected to defer fees,
principal and interest for no less than six months and no more than one year. The
SBA notes that all loans will have the same terms regardless of lender or
borrower. Loan payments will be deferred for six months
Lenders will also ask
you for a good faith certification that:
- The loan is needed to support ongoing operations;
- The loan will be used to retain workers, maintain payroll, and pay for mortgage, lease, and utility payments;
- The borrower does not have a pending application for a similar loan; and
- The borrower did not get a similar loan between Feb. 15, 2020 and Dec. 31, 2020.
Small businesses that take out these loans can get some or all of
their loans forgiven.
How can I get my loan forgiven?
Small businesses that
take out these loans can get some or all of their loans forgiven. Generally
speaking, if employers continue paying employees at normal levels during the
eight weeks following the origination of the loan, then the amount they spent
on payroll costs (excluding costs for any compensation above $100,000
annually), mortgage interest, rent payments and utility payments can be
combined and that portion of the loan will be forgiven. Businesses that rehire
workers that were laid off prior to the loan origination will not be penalized.
If businesses can restore normal payroll in the eight-week period, they should
be able to get the loan forgiven, effectively making the loan a grant.
When can I apply for a Payroll Protection Loan?
The Paycheck
Protection Program application process will roll out in two phases, one week
apart.
- On April 3, 2020, small businesses and sole proprietorships can begin applying for these loans.
- On April 10, 2020, independent contractors and self-employed individuals can begin applying. The SBA advises that all businesses should “apply as quickly as you can because there is a funding cap.”
How do I apply?
First, fill out the SBA’s Paycheck Protection Program
sample application. Businesses can submit their application to any
existing SBA-approved private lender or through federally insured depository
institutions, federally insured credit unions, and Farm Credit System
institutions that are participating.
The SBA and local banks around the country are still finalizing
the program, so check with your local bank or credit union to see if they are
taking part in the program. Banks that are already SBA-approved lenders may be
quicker to put the loan program in place. Businesses may want to start by
talking to any lender they currently work with first to see if they are taking
part in the program as well.
Prepared by the U.S. CHAMBER OF
COMMERCE
