In an effort to provide ongoing resources, we want to ensure you are aware of the new CARES ACT, which offers many different avenues for individuals and businesses to obtain assistance during this time.
STEP 1: DO YOU QUALIFY?
If your business is one of the following, you are eligible for the Paycheck Protection Program (“PPP”):
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Small businesses with fewer than 500 employees
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A small business larger than 500 employees that otherwise meets the SBA’s size standard for its industry
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A 501(c)(3) with fewer than 500 employees
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An individual who operates as a sole proprietor
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An individual who operates as an independent contractor
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An individual who is self-employed who regularly carries on any trade or business
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A Tribal business concern that meets the SBA size standard
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A 501(c)(19) Veterans Organization that meets the SBA size standard
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Businesses classified as Food Service or Accommodations may use the 500 employees per location
We would also like to highlight the Economic Injury Disaster Loan (“EIDL”) program, for which many companies may also be eligible. While the EIDL loan does not have the same forgiveness opportunities as the PPP, it does provide an opportunity for an immediate cash advance of up to $10,000.
STEP 2: WHAT IS THE NEXT STEP IF YOU QUALIFY?
If you do qualify for the PPP or EIDL program, you must apply to a bank or credit union that is an SBA 7(a) lender. This link can help you find a lender near you: https://www.sba7a.loans/finding-an-sba-7a-lender. The application period for many businesses opened on Friday, April 3, 2020.
STEP 3: HOW DO YOU DETERMINE HOW MUCH MONEY YOU MAY OBTAIN?
The following summary details the items you can include when estimating the amount of financial support you can receive through the PPP program:
Qualified Small Businesses can borrow up to 2.5 times their average monthly payroll up to $10 million total. Payroll includes all of the following:
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Salary, wage, commission, or similar compensation;
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Payment of cash tip or equivalent;
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Payment for vacation, parental, family, medical or sick leave;
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Allowance for dismissal or separation;
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Payment required for the provisions of group health care benefits, including insurance premiums;
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Payment of any retirement benefit; or
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Payment of State or local tax assessed on the compensation of employees; and
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The sum of payments of any compensation to or income of a sole proprietor or independent contractor that is a wage, commission, income, net earnings from self-employment or similar compensation and that is in an amount that is not more than $100,000 in 1 year, as prorated for the covered period
STEP 4: HOW DO YOU KNOW IF THIS LOAN IS FORGIVABLE?
An eligible recipient shall be eligible for forgiveness of indebtedness on a covered loan in an amount equal to the sum of the following costs incurred and payments made during the 8 weeks following receipt of the loan:
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Payroll costs
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Any payment of interest on any covered mortgage obligation (which shall not include any prepayment of or payment of principal on a covered mortgage obligation)
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Any payment on any covered rent obligation
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Any covered utility payment
For the loan to be fully forgiven, a qualified business may only spend the proceeds on the approved categories, and must maintain its current levels of employment and wages. The amount of the forgiveness may be reduced if employees are laid off or salaries are reduced. Any amount of the loan not forgiven will have a 1 percent interest rate and a 2 year amortization period.
STEP 5: HOW DO I APPLY FOR THIS PROGRAM?
If you need support in preparing an application for this program, the SBA website is a great reference tool. In addition to your accountant or attorney, we may also be able to assist you so feel free to give our team a call.
