Thanks to Paul Fenaroli for putting together this quick summary of small business provisions in the CARES Act:
Forgivable Loan (Paycheck Protection Program)
Businesses with 500 employees or less are eligible for an SBA 7(a) deferred loan which provides funds to cover COVID-19 pandemic-related costs for the period of Feb. 15 – June 30. Collateral and personal guarantee requirements are waived for PPP loans.
The loan amount is tied to payroll costs incurred by the business, capped at $10M.
How to apply
You will be able to apply at local banks. The CARES Act relaxed standards for lenders as well, making finding a lender easier. Lenders do not have application forms available yet, but the documents to compile for a typical SBA 7(a) loan include:
Borrower Information Form (Form 1919);
Statement of Personal History (Form 912);
Personal financial statement (Form 413);
Business Financial Statements (Profit and Loss Statement, Projected Financials)
Ownership and Affiliations
Loan Application History
Income tax returns – personal and business for the last three years;
Resumes for each principal;
A written summary of the loan request and history of operating company
Amounts spent over an 8-week period after the loan was authorized, used to maintain payroll, or pay mortgage, rent or existing debt, may be forgiven
The amount forgiven will be reduced proportionally by any layoffs or cut in employee pay over 25%.
Borrowers that re-hire workers previously laid off will not be penalized for having a reduced payroll at the beginning of the period.
Amounts not forgiven can be deferred for 6 to 12 months, and the interest on the loan is capped at 4%.
Emergency Grant to allow an eligible entity (Businesses with less than 500 employees, sole proprietors, independent contractors) who have applied for an economic injury disaster loan (EIDL) due to COVID-19 to request an advance on that loan, of not more than $10,000, which the SBA will distribute within 3 days.
Applicants are not required to repay advance payments, even if their EIDL loan is denied.
CARES Authorizes $265M for SBA to provide financial assistance to resource partners to businesses providing counseling, training, and education to small business owners affected by COVID-19.
If you are currently paying back a 7(a), 504 or microloan product, SBA will cover your payments for six months.
Section 2301 provides refundable payroll tax credit for 50 percent of wages paid by employers to employees during the COVID-19 crisis for the first $10,000 of compensation paid from March 13 – Dec. 31.
Employers may defer Social Security tax on employee wages for one year, split between 2021 and 2022.
Net operating losses arising in 2018. 2019, or 2020 can be carried back five years, and the taxable income limitation is temporarily removed; allowing companies to carryback 100% of losses as far as 2013 to offset taxable income.
Businesses can deduct up to 50% (rather than 30%) business interest
Improvement Property: improvements to the interior of nonresidential buildings can be depreciated over 15 years (rather than the 30-year life of the building)
Modifies eligibility thresholds for one year. Contact your legal representative for further information.
Keeping your Workers Informed
Most individuals earning less than $75,000 can expect a tax rebate or cash payment of $1,200.
Unemployment benefits have been expanded, providing $600/week for four months on top of amounts received by the state and adds 13 weeks to the maximum allowance.