Last week Congress passed the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, which was signed into law Friday, March 27, 2020.
Among the extensive programs and economic incentives included in the legislation is the Paycheck Protection Program, which may benefit your business. The Paycheck Protection Program is an emergency loan program providing funding to cover your business’ payroll, debt service, utility, and rent costs incurred from February 15, 2020 through June 30, 2020 (the “covered period”).
Eligibility
While administered through the Small Business Administration, businesses eligible for the Paycheck Protection Program have been expanded to include any business concern with no more than 500 employees and includes, among others, sole proprietors, non-profits, independent contractors, and certain self-employed individuals. Full and part-time employees are counted toward the employee total. However, if your business is classified under NAICS in Sector 72 “Accommodation and Food Services,” the 500 employee maximum is applied per location.
Typical SBA rules do not apply: No personal or business collateral is required. Loans are non-recourse. Franchise and affiliate rules do not apply. SBA loan fees are waived.
Costs covered
Generally, this program will fund emergency loans of up 2.5 times average monthly eligible payroll, rent, utilities, and mortgage and other debt interest payments to a loan maximum of $10 million. The maximum rate of interest charged is 4%. Repayment can be deferred for at least six months and, under certain circumstances, up to a year.
Loan forgiveness
So long as the funds are used for the restricted purposes, the emergency loans may be forgiven with no tax consequences to the business. The amounts forgiven will be reduced, however, by reductions in its employees or salary/wage decreases during the covered period.
For more information contact Linda Balok at lbalok@cmprlaw.com or call (707) 526-4200 x.125.