CARES Act – SBA Emergency Assistance

On this page we provide information for our neighbors, clients, community and small businesses to help them better understand the opportunities that the CARES Act provides for us to coop with and survive the current crisis caused by the pandemic. We will continue to update it and provide additional information. If you are looking for guidance to navigate through the process please feel free to contact us.

The CARES Act is the comprehensive financial support package passed by the Federal Government that includes significant opportunities for small businesses (those businesses with up to 500 employees).

The primary programs for small businesses:

Paycheck Protection Program (“PPP”)

The paycheck protection program offers qualified small businesses the opportunity to obtain an SBA forgivable loan equal to 250% of the business’s average monthly payroll. The monthly payroll calculation includes benefits and other compensation items that you may not routinely consider to be part of payroll, including compensation to independent contractors routinely do work for you. Additionally, so long as the loan is utilized during the crisis period primarily for making payroll, then it can qualify for being fully forgiven. A smaller portion of the loan can go to covering overhead expenses with the loan still qualifying to be forgiven. If you qualify for the PPP loan and utilize it correctly, then it will essentially be a grant. These loans are processed through SBA approved lenders and lenders who have obtained delegated authority (temporary approval of sorts) to issue the loans.

 

UPDATE 6/4/2020: US SENATE PASSES PAYCHECK PROTECTION FLEXIBILITY ACT

As a follow-up to our post 2 days ago on the passage in the US House of the Paycheck Protection Flexibility Act, that Act has now approved, by unanimous voice vote, this important PPP legislation. With this Senate approval, it now moves on to President Trump, who is expected to sign it. To reiterate, the Paycheck Protection Flexibility Act makes these important changes to the SBA PPP loan program:

-Existing PPP borrowers can choose to extend the 8-week spending period to 24 weeks, or they can keep the 8-week spending period. New PPP borrowers will have this new 24-week spending period (but not to extend beyond Dec 31, 2020).

-The payroll expenditure requirement drops to 60% from 75%. However, it appears that under this new legislation, this 60% requirement is now a “cliff,” meaning that PPP borrowers must spend at least 60% on payroll or no loan forgiveness will be achieved. Under the original 75% payroll expenditure requirement, forgiveness was not eliminated, but would be reduced, if the 75% requirement was not met. This may need to be clarified by legislators.

-You can use this new 24-week period to restore their workforce levels and wages to the pre-pandemic levels required for full forgiveness (but not to extend beyond Dec 31, 2020). Further, PPP borrowers may achieve full loan forgiveness may be able to achieve full forgiveness if they don’t fully restore their workforce because employees turned down good faith offers to be rehired, if they could not find qualified employees, or if they were unable to restore business operation to 2/15/20 levels due to pandemic related operating restrictions.

-PPP borrowers now have 5 years to repay their PPP loan instead of 2 years under the original legislation (the interest rate remains at 1%).

-PPP borrowers may also now delay payment of their payroll taxes, which the original CARES Act prohibited.

These changes will help many small business owners who continue to be impacted by COVID-19 related shutdowns. If you or your business needs help navigating the PPP loan rules, call or email us today.

 

Economic Injury Disaster Loan program (“EIDL”)

The economic injury disaster loan program offers qualified small businesses the opportunity to obtain an SBA long term working capital loan up to $2,000,000.00 at a favorable interest rate of 3.75% with 30 year repayment terms. The loans are based on need, creditworthiness and ability to repay the loans. The EIDL program also has a fund allocated for the SBA to cover requests for emergency grant assistance up to $10,000.00. While traditional SBA loans typically require the personal guaranty from all owners, the requirement will not be enforced for loans under $200,000.00. These loans can be submitted directly through the SBA or SBA approved lenders and lenders who have obtained delegated authority (temporary approval of sorts) to issue the loans.

The above is for informational purposes only. It does not constitute attorney advice and does not establish an attorney-client relationship. To the extent you wish to engage the firm to assist you formally, please feel free to contact us, and we will provide the terms and conditions under which Stern & Eisenberg can offer assistance. Click on this link to see our disclosures page.