President Trump signs CARES Act providing $2 trillion economic relief package

The Federal Government signed into law the Coronavirus Aid, Relief and Economic Security (CARES) Act to assist small to mid-size businesses cope with the current downturn in the economy.

This stimulus bill provides an authorization level of $349 billion for the SBA 7(a) program through December 31, 2020.

Loan Attributes

• Allows businesses to delay payment of payroll taxes.
• These loans will be guaranteed 100% by the US Government.
• The covered loan period will be your anticipated operating expenses beginning on February 15, 2020 and ending on June 30, 2020.
• Creates a national small business sustainability program to provide assistance to partially unemployed workers to support employee retention.
• Implements a new lending program targeted at medium-sized businesses (500-10,000 employees), which will be administered by the Department of the Treasury.
• Streamlines approval of and provides $562 million for the small business disaster loan program.
• Establishes a grant program to educate and advise businesses as they navigate the new programs that will assist in recovery.
• Provides modifications for net operating losses to provide more critical cash flow.
• They will be 10-year term loans from the date of application for forgiveness.
• The maximum interest rate will be 4%.
• There will be no borrower fees for participating in the program.
• There are no credit tests for funds provided under this program.
• There will not be any personal guarantees necessary or collateral requirements for these loans.
• Any loan amount that is not forgiven by June 30, 2020 will amortize over 10 years.
• Loan payments will be deferred between 6 months to 1 year.
• There will be no prepayment penalties.

Who is Eligible?

1. If your business or Non-Profit has fewer than 500 employees (full time, part time or any other basis), you are eligible for this program.
2. Lenders will have to determine if the business was in operations on February 15, 2020 and had employees for whom it paid salaries and payroll taxes, or paid an independent contractor.
3. Borrowers must make a good faith certification that the loan is necessary due to the uncertainty of current economic conditions caused by COVID-19.

Specific allowable uses of the loan include:

1. Payroll support
2. Mortgage, rent, and utility payments
3. EXCLUSIONS:

• Any individual whose salary exceeds $100,000 during the covered period is excluded for the portion of salary above $100,000
• Compensation for any employee outside of the United States

Loan Forgiveness

• There will be a portion of the loan that can be forgiven. That amount is likely to be determined by the number of employees that are retained through the downturn.
• Your wage expense will be compared to the prior year – to ensure that you have maintained employees

Loan Payments

It is expected the SBA will cover 6 months of payments for all current 7(a) borrowers in regular servicing. The details about how they will pay and report has yet to be determined, but the bill does allocate funding for this purpose.