02 Apr Coronavirus, Aid, Relief, and Economic Security (CARES) Act Update
In response to the COVID-19 pandemic, Congress passed the CARES act, creating the Paycheck Protection Program under the Small Business Administration (SBA). This guaranteed loan program authorizes approximately $350 billion in forgivable loan funding for small business payroll (including 1099 employees) and other monthly expenses.
Under this program:
- Eligible recipients may qualify for a loan up to $10 million determined by 8 weeks of prior average payroll plus an additional 25% of that amount.
- Loan payments will be deferred for six months.
- If you maintain your workforce, the SBA will forgive the portion of the loan proceeds that are used to cover the first 8 weeks of payroll and certain other expenses following loan origination.
- The loan proceeds must be used before June 30, 2020.
Beginning Friday, April 3rd, businesses can apply for these loans through their private lending institution. Each loan is guaranteed by the (SBA). The entire loan can be forgiven, and SBA will make the lender whole, if the loan proceeds are spent on certain expenditures – essentially making this a grant program. Your private lending institution can lend up to 2.5 x your average monthly payroll, and the lending institution is not required to take your balance sheet, debt, or profit/loss into consideration. Lending institutions will receive a fee from SBA for enrolling businesses and lending under the program. There should be no cost to apply and no collateral required.
This program has a very short timeline to apply so member companies are encouraged to review the program and reach out to their lender very soon. Find more information on this new SBA forgivable loan program Here and Here. The loan application can be found here. Your association will provide more information on this program as it becomes available.