By Ed Avis
The federal government last week passed the CARES Act, a major piece of legislation designed to help businesses survive the coronavirus crisis. Here are the key details of how the act can help you (find more specifics in the link at the end of the article):
* Business owners with fewer than 500 employees can get a forgivable loan to cover certain costs. “Forgivable” means the loan doesn’t need to be paid back, but there are some restrictions.
* The loan can be used for payroll, sick leave, group health care, state/local employment taxes, rent, mortgage interest, and utility payments for 8 weeks, beginning when the loan is originated.
* The amount of the loan can be as much as two-and-a-half months’ payroll, or $10 million, whichever is less. This amount will be calculated by taking the average monthly payroll from February 15, 2019 (or March 1, 2019, if the business prefers) to June 30, 2019, and multiplying that by 2.5. For example, if you had an average monthly payroll during that 2019 period of $100,000, you could get a loan of $250,000.
* No collateral or personal guarantee is required.
* The idea behind the loan is to encourage businesses to keep their employees, so the entire loan may be forgiven – assuming you use the money for the approved purposes – if the business keeps the same payroll as they had the previous year. If the payroll during the loan period is less than last year, the amount of the loan that will be forgivable may be proportionately less (this gets a little complicated; you can read more details in the link below).
* If you have already laid off employees and you rehire them, you won’t be penalized for having a lower payroll at the beginning of the loan period (see the bullet point above).
* Any amount of the loan that’s not forgiven by the end of one year will become a regular loan at maximum 4 percent interest.
* The loans will be administered through the SBA Loan Program, and any SBA approved lender will be able to make the loans. The program is supposed to be up and running by Friday.
Click here to read many more details from the US Chamber of Commerce about this program.
Click here to watch a recorded webinar on this program
Click here for the application for the loan