(Updated March 28th, 2020)
CARES Act Questions and Answers
The CARES Act passed was signed by President Trump on Friday, March 27th, 2020 and relief is coming soon for America’s small businesses. One of the biggest areas of financial support comes in the form of forgivable loans. To see if your business qualifies, and get details, see the questions below.
Who is eligible for the SBA forgivable loans?
You are eligible for a loan if you are a small business that employs 500 employees or fewer, or if your business is in an industry that has an employee-based size standard through SBA that is higher than 500 employees. In addition, if you are a restaurant, hotel, or a business that falls within the North American Industry Classification System (NAICS) code 72, “Accommodation and Food Services,” and each of your locations has 500 employees or fewer, you are eligible. Tribal businesses, 501(c)(19) veteran organizations, and 501(c)(3) nonprofits, including religious organizations, will be eligible for the program. Nonprofit organizations are subject to SBA’s affiliation standards. Independently owned franchises with under 500 employees, who are approved by SBA, are also eligible. Eligible franchises can be found through SBA’s Franchise Directory.
I am an independent contractor or gig economy worker, am I eligible?
Yes. Sole proprietors, independent contractors, gig economy workers, and self-employed individuals are all eligible for the Paycheck Protection Program forgivable loan program.
How much can I borrow?
The amount any small business is eligible to borrow is 250 percent of their average monthly payroll expenses, up to a total of $10 million. This amount is intended to cover 8 weeks of payroll expenses and any additional amounts for making payments towards debt obligations. This 8 week period may be applied to any time frame between February 15, 2020 and June 30, 2020. Seasonal business expenses will be measured using a 12-week period beginning February 15, 2019, or March 1, 2019, whichever the seasonal employer chooses. Any compensation over an annual salary of $100,000 is excluded.
What can I use the forgivable loans for?
The amount of principal that may be forgiven is equal to the sum of expenses for payroll, and existing interest payments on mortgages, rent payments, leases, and utility service agreements. Payroll costs include employee salaries (up to an annual rate of pay of $100,000), hourly wages and cash tips, paid sick or medical leave, and group health insurance premiums. If you would like to use the Paycheck Protection Program for other business-related expenses, like inventory, you can, but that portion of the loan will not be forgiven.
What is the covered period of the forgivable loan?
The covered period during which expenses can be forgiven extends from February 15, 2020 to June 30, 2020. Borrowers can choose which 8 weeks they want to count towards the covered period, which can start as early as February 15, 2020.
How much of my loan will be forgiven?
The purpose of the Paycheck Protection Program is to help you retain your employees, at their current base pay. If you keep all of your employees, the entirety of the loan will be forgiven. If you still lay off employees, the forgiveness will be reduced by the percent decrease in the number of employees. If your total payroll expenses on workers making less than $100,000 annually decreases by more than 25 percent, loan forgiveness will be reduced by the same amount. If you have already laid off some employees, you can still be forgiven for the full amount of your payroll cost if you rehire your employees by June 30, 2020.
Am I responsible for interest on the forgiven loan amount?
No, if the full principal of the PPP loan is forgiven, the borrower is not responsible for the interest accrued in the 8-week covered period. The remainder of the loan that is not forgiven will operate according to the loan terms agreed upon by you and the lender.
What are the interest rate and terms for the loan amount that is not forgiven?
The terms of the loan not forgiven may differ on a case-by-case basis. However, the maximum terms of the loan feature a 10-year term with interest capped at 4 percent and a 100 percent loan guarantee by the SBA. You will not have to pay any fees on the loan, and collateral requirements and personal guarantees are waived. Loan payments will be deferred for at least six months and up to one year starting at the origination of the loan.
When is the application deadline for the Paycheck Protection Program forgivable loan?
Applicants are eligible to apply for the PPP forgivable loan until June 30th, 2020.
I took out a bridge loan through my state, am I eligible to apply for the Paycheck Protection Program forgivable loan?
Yes, you can take out a state bridge loan and are still be eligible for the PPP loan.
If I have applied for, or received an Economic Injury Disaster Loan (EIDL) related to COVID- 19 before the Paycheck Protection Program became available, will I be able to refinance into a PPP loan?
Yes. If you received an EIDL loan related to COVID-19 between January 31, 2020 and the date at which the PPP becomes available, you would be able to refinance the EIDL into the PPP for loan forgiveness purposes. However, you may not take out an EIDL and a PPP for the same purposes. Remaining portions of the EIDL, for purposes other than those laid out in loan forgiveness terms for a PPP loan, would remain a loan. If you took advantage of an emergency EIDL grant award of up to $10,000, that amount would be subtracted from the amount forgiven under PPP.
Where do I get the SBA forgivable loans?
You can apply for the Paycheck Protection Program (PPP) at any lending institution that is approved to participate in the program through the existing U.S. Small Business Administration (SBA) 7(a) lending program and additional lenders approved by the Department of Treasury. This could be the bank you already use, or a nearby bank. There are thousands of banks that already participate in the SBA’s lending programs, including numerous community banks. You do not have to visit any government institution to apply for the program. You can call your bank or find SBA-approved lenders in your area through SBA’s online Lender Match tool. You can call your local Small Business Development Center or Women’s Business Center and they will provide free assistance and guide you to lenders.
How hard is it to get a loan?
The loan process is designed to be simple and doesn’t require you to extensively prove specific hardship. The bill text requires only a “good faith” certification that the economic conditions make the loan necessary, and that you will use the funds to “retain workers and maintain payroll or make mortgage payments, lease payments and utility payments.”
Looking for more information?
- CLICK HERE to learn about the Senate CARES bill tax provisions.
- CLICK HERE to learn about the Senate CARES bill unemployment provisions.
- CLICK HERE to learn about the Senate CARES bill small business provisions.
Small Business Support
Unfortunately, small businesses and their hard working employees are hurting because of the COVID-19 outbreak. In order to help reduce the spread of the virus, many restaurants have switched to delivery and take-out only and stores have altered business hours or even closed their doors for the time being. However, there are still ways to support these businesses that are the backbone of the economy.
Already larger businesses have aided relief in certain aspects to lessen the economic burden. For example, Uber Eats, GrubHub and Postmates have waived all delivery fees for independent restaurants to encourage customers to still frequent their neighborhood eateries. Additionally, Facebook has instituted a new $100 billion program to support small businesses that have been impacted by the crisis.
Other government funded programs–at the federal, state and local level–have been implemented to assist during this time of need. Here is a full list of available resources.
However, individuals can also support small businesses during this time of difficulty. If you order takeout or delivery from a local restaurant, consider tipping generously. This will go a long way for workers who have had their hours cut.
Some alternatives to dining in or shopping in person include purchasing a gift card online, sending flowers or a gift to a loved one, or purchasing clothes online from a local shop instead of a large retailer. USA TODAY‘s parent company has released a new website dedicated to supporting local restaurants. The website allows customers to purchase gift cards to use at a later date. Visit supportlocal.usatoday.com to purchase a gift card to a restaurant in your city.
Many businesses and residents face financial challenges, especially when it comes to their rent. If you are a landlord, consider delaying rent payments for individuals who are affected by this crisis.
There are options for us to come together without monetary transactions. For example, if you are able, donate blood or charitable goods to a local food bank. It’s nearly spring, so take this time to do a deep spring clean and donate items you no longer need.
Additionally, if you or someone you know needs to apply for government benefits during this difficult time, visit www.careeronestop.org for instructions and additional information.
Some banks, like Bank of America, are offering mortgage relief during this time. Check with your bank to see if they are offering help.
As of March 24, the Department of Labor has published guidance explaining the Paid Sick Leave and Expanded Family and Medical Leave under The Families First Coronavirus Response Act. This act will take effect on April 1, 2020. To ensure that you are up to date on all guidelines, read the Fact Sheet for Employees, the Fact Sheet for Employers and a Questions and Answers document. Each of these pages provides explanations to each detail, including how an employer must count the number of their employees to determine coverage, how small businesses can obtain an exemption and how to count hours for part-time employees.