$2 Trillion Relief Package for Americans and Businesses: What You Need to Know

ELIGIBILITY

The CARES act provides direct payroll and operating support to business with up to 500 employees, nonprofit organizations and eligible independent contractors and sole proprietors as well as loan assistance for specific industries through federally backed and quickly available loans. To be eligible, a company is required to retain an average monthly number of employees that is no less than the number it had before pandemic began.

KEY LOAN PROVISIONS

Under the Paycheck Protection Program which is a core component of the CARES Act, any eligible business can receive up to $10 million or 2.5 times the total average monthly payroll costs for the prior year, at a maximum interest rate of 4%, to cover expenses between March 1, 2020 and December 31, 2020, such as:

- Rent,

- Payroll costs, including compensation to individual employees up to an annual salary of $100,000; payments for vacation, parental, family, medical or sick leave; group health care benefits payments (including insurance premiums), retirement benefits, and state and local employment taxes,

- Utilities, and

- Interest payments on debt or mortgage payments existing prior to February 15, 2020.

Loans provided pursuant to this program differ from traditional Small Business Administration (SBA) 7(a) loans because no personal guarantee or collateral is required. Instead, an eligible borrower is presumed to have been adversely impacted by COVID–19. Loan payments will be deferred for 6 months up to 1 year.

LOAN FORGIVENESS

Recipients are eligible for forgiveness of indebtedness of the cost of maintaining payroll continuity, rent and utility payments or mortgage interest payments for the initial 8 weeks from the loan origination date.

Loan forgiveness is reduced proportionately to the extent to which employers’ layoff employees and/or reduce their wages.

ESSENTIAL FACTS ON THE PAYCHECK PROTECTION PROGRAM

- Businesses and eligible sole proprietors can borrow 2.5 times their monthly payroll expenses, up to $10 million.

- The Program provides up to $1M in loans for up to a 7 year term, which will be approved or denied in 36 hours.

- SBA will waive all applicable fees.

- SBA will provide guidelines regarding how to apply for loans and how to find a qualified lender.

- An Employers’ ability to obtain full loan forgiveness for 8 weeks after loan origination will be impacted by the extent to which the employer reduces staff and/or employees’ wages.

- Regulations will be issued within 30 of the CARES Act’s enactment.

EMERGENCY ECONOMIC INJURY DISASTER LOAN (EIDL) GRANT

The CARES Act also expands access to the EIDL grant program which enables borrowers needing immediate funds to obtain a $10,000 advance within 3 days which can be used for payroll, rent, utilities, materials or other obligations that a business cannot meet due to lost revenue. Borrowers can apply for both a grant and a loan if the funds are not used for the same purpose. If a grant application is denied, the grant applicant is not required to repay the advance.

REFUNDABLE PAYROLL TAX CREDIT

Employers whose 1) operations were fully or partially suspended, due to a COVID-19-related shutdown order, or (2) gross receipts declined by more than 50 percent when compared to the same quarter in the prior year will be eligible for a refundable payroll tax credit for 50 percent of wages paid by employers to employees between March 13, 2020 and December 31, 2020.

DEFERMENT OF PAYROLL TAXES

Under the Act, the employer portion of payroll taxes will be divided into two equal installments and will not be required to be paid until December 31, 2021 and December 31, 2020.

WIDE ACCESS TO UNEMPLOYMENT BENEFITS

American that would not traditionally have access to unemployment insurance benefits will be eligible for benefits pursuant to a short-term Pandemic Unemployment Assistance Program, including individuals who are self-employed and independent contractors.

Anyone who is able and available to work but is unemployed or underemployed due to the COVID-19 crisis will be eligible. This includes, but is not limited to, the primary caregiver for a child or other person in the household who is unable to attend school due to COVID-19; those self-quarantining based on a healthcare professional’s recommendation, anyone diagnosed with COVID-19, family care takers for those suffering from COVID-19.

Furthermore, benefits will be expanded to 39 weeks in most states from 26 weeks and will include the amount provided by state law plus an additional $600 per week for four months with no waiting time period.