Coronavirus Aid, Relief, an Economic Security (Cares) Act – Paycheck Protection Program
Dear Clients and Interested Parties:
I hope this message finds you safe and well. Last week the President signed the Coronavirus Aid, Relief and Economic Security Act. (CARES)
The Paycheck Protection Program is part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. This is a nearly $350-billion program intended to provide American small businesses with eight weeks of cash-flow assistance through 100 percent federally guaranteed loans.
- There is no cost to apply.
- The funding is meant to help retain workers, maintain payroll, and cover rent/mortgage/utility expenses.
- The loan covers expenses dating back to February 15, to June 30 2020
- The loan can be forgiven and essentially turn into a non-taxable grant.
What can I use the funds for?
You must acknowledge that the funds will be used to retain workers and maintain payroll or make mortgage payments, lease payments, and utility payments. Funds you use for other purposes will not be eligible for forgiveness.
The funds can be used for:
- Payroll and commission payments
- Group health care benefits/insurance premiums;
- Mortgage interest payments
- Rent and lease payments
- Interest on any other debt obligations that were incurred before the covered period.
How much funding can I receive?
The maximum amount you can receive from your SBA-approved lender is your monthly payroll cost times 2.5, but no more than $10 million.
If you are a seasonal employer, the monthly average cost will be calculated differently. The SBA will use a 12-week period beginning either February 15, 2019 or March 1, 2019, and ending June 30, 2019.
If your business did not exist before June 30, 2019, the SBA will look at your costs in January and February 2020.
How do I apply?
The SBA itself doesn’t lend you the money, they just “back” the loan that the lender provides. You can apply for the Paycheck Protection Program through an SBA-approved lender.
As part of your application, you’ll be asked to verify:
- That the uncertainty of current economic conditions makes necessary the loan request to support the ongoing operations of the eligible recipient;
- That funds will be used to retain workers and maintain payroll or make mortgage interest payments, lease payments, and utility payments;
- That the business does not have a SBA loan pending for the same purpose and duplicative of amounts applied for or received under a covered loan;
- During the period beginning on February 15, 2020 and ending on December 31, 2020, the business has not received amounts under the Paycheck Protection Program for the same purpose or duplicative amounts applied for or received under a covered loan.
How can I get my loan forgiven?
In the 8 weeks following your loan signing date, all expenses related to the following can be forgiven:
- Payroll—salary, wage, vacation, parental, family, medical, or sick leave, health benefits
- Mortgage interest—as long as the mortgage was signed before February 15, 2020
- Rent—as long as the lease agreement was in effect before February 15, 2020
- Utilities—as long as service began before February 15, 2020
When submitting your application for loan forgiveness, you must provide the following documentation (no exceptions):
- Documentation verifying the number of full-time equivalent employees on payroll and pay rates for the periods described in subsection (d), including:
- payroll tax filings reported to the IRS
- State income, payroll, and unemployment insurance filings
- Documentation to prove your mortgage, lease, or utility payments:
- cancelled checks
- payment receipts
- account statements
- A certification from a representative of the eligible recipient authorized to make such certifications that:
- the documentation presented is true and correct; and
- the amount for which forgiveness is requested was used to retain employees, make interest payments on a covered mortgage obligation, make payments on a covered rent obligation, or make covered utility payments; and
- Any other documentation the Administrator determines necessary.
The lender must make a decision within 60 days of your forgiveness application submission.
Many of our homeowner clients do not have payroll. Management fees would not qualify. For clients that have payroll, this would be a good way to obtain funds if activities have been curtailed. Regular businesses with payroll may be good candidates for this program.
Please note that the SBA is gearing up to handle all of the expected applications as are SBA lending Banks.
Because funds allocable to this program are limited, I would recommend contacting your bank as soon as possible if you believe this program would be of benefit to your entity.
Links for additional information are provided above.