CARES Act is Now In Effect
Today the House of Representatives passed the $2.2 Trillion stimulus Senate Bill that was passed a couple of days ago titled the CARES act. President Trump has now signed it, so the Cares act is now the law. Check the email from yesterday for more details, but one of the most promising parts of this new law is the Paycheck Protection Program SBA Loan.
We are still trying to get a better understanding of The Paycheck Protection Program loan, so there are still many details to determine. What we know so far is that it will cover significant expenses like payroll, rent, utilities, and interest on loans for small businesses affected by the virus.
Key points of the loan:
- Not direct lending – this is handled by SBA approved banks – avoids SBA.gov portal.
- Bank provides service on SBA docs and will reduce the amount of paperwork required by the borrower.
- Term – up to 10 years
- Interest Rate – not to exceed 4%
- No personal guaranty or collateral required
- SBA waives their guarantee fee
- Max loan amount is 2.5 times the average monthly payroll costs during the one year before the date of the loan (max of $10 million)
- Loan Forgiveness – the debt used for payroll costs, mortgage interest, rent, and utility payments is forgiven as long as the business maintains the same number of employees it had before the coronavirus crisis and all employees receive at least 75% of their prior pay. For companies that reduce their headcount or reduce wages more than 25%, the amount of the loan forgiven will be reduced in proportion to payroll cuts. Still, the companies can rehire employees in the coming weeks without penalty
- The forgiven portion of the loan will not be considered taxable income
Some of you who may have had to lay off or furlough employees may need to reconsider those decisions considering the Paycheck Protection Program. Please understand that this is very new, and many of the details will need clarification, but it sounds very promising.
We will continue to inform you as we learn of new developments. Our goal is to assist small businesses in navigating this time as smoothly as possible. Let us know how we can help you.
