Navigating Cares Act - SmartTalks Monthly Meeting Part Two of Two
April 23, 2020
1. What is this? Payroll Protection Program Loans are an economic stimulus to incent employers to retain employees during difficulties brought on by the Coronavirus.
2. What employers are eligible?
Employers with fewer than 500 employees, including:
- businesses, non-profits, Native American ventures
- those who fit into various SBM small business definitions, and
- certain self-employed and contract laborers.
- Employers not eligible include
- those who have previously defaulted on SBA loans,
- incarcerated owners who own at 20% of the business, and
- other businesses of a nature not considered legitimate business (gambling, sexually oriented, etc.)
3. What amount is available for loans? Basically,the loan amount can be up to 2.5 times your monthly average payroll costs,including medical plans and pension plan benefits, plus state taxes on wages. Loans may be up to $2 million.
4. How do I apply? This loan is available from any eligible SBA lending institution. Due to the overwhelming volume of requests,many banks are limiting applications to their current customers.
5. What are the loan terms?
THE LOAN MAY BE FORGIVEN, otherwise,
- the loan is for two years,
- the interest rate is 1%,
- there are no payments for 6 months,
- there are no fees paid by the employer,
- there are not collateral or personal guarantees required,
- there are required statements affirming eligibility,
- the deadline for application is June 30,2020.
6. How do I get forgiveness?
Forgiveness must be requested with a statement affirming:
- the loan funds were used for payroll,or
- for mortgage interest, rent, utilities or other interest on loans received prior to February 15, 2020, and,
- the funds were spent for the above items during the eight weeks after the loan was first funded.
- Requirements for proving eligibility for forgiveness and the documentation have not been issued to date.
The amount of forgiveness will be reduced if:
- -At least 75% of the funds were not spent on payroll costs,
- The number of full-time-equivalent employees was reduced, (compared to FTE on 2/15/20 payroll) May be restored by 6/30/20
- The rate of pay for an employee was reduced more than 25%.
7. What do I need to do now?
- Get with your banker and discuss their requirements for processing loans.
- Complete the one-page SBA Application or your bank's comparable form.
- Provide the documentation for calculating your payroll costs needed by your bank.
- Wait for approval.
- Reports are that $211 million in loans have already been approved.
- A total of $349 million is allocated in the CARES Act. Promises have been made to increase this if necessary.
BE PREPARED TO PROVE YOU SPENT THE FUNDS ON THE REQUIRED EXPENSES AND CAN PROVIDE DOCUMENTATION.