CARES Act – COVID-19 Government Relief Package

I speak to a lot of business people throughout the day and wanted to share what information I have at the moment in terms of next steps to apply for relief since there seems to be a lot of confusion on what we need to do.  Based on my conversations with everyone and additional information I was able to find on the internet, here is some information that I thought would be valuable.

There are two types of loans that you can apply for:

    • Economic Injury Disaster Loan through the SBA
      • Can be used for payroll, fixed debts, accounts payable and other expenses that can’t be paid because of the impact of COVID-19
      • Maximum loan is $2mil
      • 3.75% interest rate
      • Loan term can be up to 30 years
      • This loan is applied for by going directly  to the SBA website, filling out information online and then you will be assigned a SBA lender.  https://covid19relief.sba.gov
      • THIS LOAN IS NOT FORGIVABLE
    • Paycheck Protection Program – THIS IS THE ONE MOST OF US ARE INTERESTED IN!!
      • Can be used for payroll expenses, employee salaries, mortgage interest, rent and utilities
      • Maximum loan is 2.5 times your average monthly payroll
      • 4% interest rate
      • No payments required for the first 6 months and then a 10 year loan term.
      • This loan is applied for through your bank…NOT the SBA.
        • Many banks don’t have full information on how they are implementing the program so you may need to keep following up with your bank until they have the information available.
      • UP TO 100% IS FORGIVABLE IF USED FOR ITEMS MENTIONED IN THE FIRST BULLET
        • Borrowers are entitled to loan forgiveness equal to the sum of the following expenses paid during the eight-week period, which begins on the loan origination date:
          • Payroll costs
          • Covered utility payments, including electric, gas, water, transportation, telephone, and internet access for which service began before Feb. 15, 2020
          • Covered rent obligation, including rent obligated under a leasing arrangement in force before Feb. 15, 2020
          • Covered mortgage interest obligation, including a mortgage on real or personal property incurred prior to Feb. 15, 2020
          • The loan forgiveness amount will not exceed the amount of the loan.
      • Reduction of Forgiveness Amount
        • The loan forgiveness amount will be reduced if there is a reduction in the number of Full Time Equivalents (FTEs). This reduction percentage is calculated at the election of the borrower by either of the following:
          • Average number of FTEs per month (over the eight-week period)
          • Average number of FTEs between Feb. 15, 2019, and June 30, 2019
          • Average number of FTEs per month (over the eight-week period)
          • Average number of FTEs between Jan. 1, 2020, and Feb. 29, 2020
        • The loan forgiveness amount will be reduced by any reduction in total salary or wages of any employee that is in excess of 25%. This applies only to employees that received a 2019 annualized salary of less than $100,000.
        • There is a special rule for a reduction in seasonal employees.
        • Employers can mitigate – or eliminate these reductions – if they restore the number of FTEs and total salary by June 30, 2020.
      • What can be included for payroll costs?
        • Salary, wages, commission, tips, vacation, payments for group health insurance, retirement benefits and state/local taxes on compensation
      • What is excluded from payroll costs?
        • Compensation in excess of $100K
        • Compensation to employee with principal residence outside of the US
        • Qualified sick wages or wages paid under the Families First Coronavirus Response Act
  • Great reference material that was used to put together this information:
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