COVID-19 is impacting individuals and organizations of all sizes. The Coronavirus Aid, Relief, and Economic Security (CARES) Act allocated $350 billion to help small and mid-size businesses keep their worker employed despite the pandemic. Also known as the Paycheck Protection Program,this Act provides loans which may be forgiven under certain conditions.
Here are six key facts of the CARES Act:
1. The Payment Protection Plan loan will be generally available to companies with 500 employees or less; individuals who operate under a sole proprietorship, are independent contractors, or self-employed; businesses with a NAICS code that begins with 72 (accommodations and food services) that has more than one physical location and less than 500 employees per location; as well as 501(c)(3) nonprofit organizations, 501(c)(19) veterans organizations, and some Tribal business concerns.
- Organizations must confirm they require financial relief due to the coronavirus pandemic.
- The 500-employee threshold includes all employees including full-time and part-time.
2. In evaluating eligibility, lenders will be looking for organizations where the loan will help cover costs related to payroll (including healthcare-related costs), rent, mortgage interest, interest on existing debt and utility payments.
3. Loan payments will be deferred for six months. Lenders will require no collateral or personal guarantees, and neither the government nor lenders will charge small businesses any fees.
4. Generally, the loan amount will be based on 2.5 times your average monthly payroll costs, not to exceed $10 million.
5. You may be eligible to have all or a portion of the loan principal forgiven, equal to the amount spent on the following items during the 8-week period from the origination of the loan:
- Payroll costs
- Interest on the mortgage obligation
- Rent on a lease agreement
- Payments on utilities
- Additional wages paid to tipped employees
6. Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels. Due to anticipated high subscription, at least 75% of the forgiven amount must have been used on payroll.
For more information including payroll and loan forgiveness calculators, check out this flyer from MichBusiness or visit https://www.sba.gov.
