The $2 trillion CARES Act signed into law last month is intended to help people and businesses stay afloat during the Coronavirus crisis. There is a lot to parse through in the 880-page law, but here is a quick guide for businesses and non-profits to get the help they need:
Who can apply
The following applies to businesses with fewer than 500 employees, including businesses, 501(c)(3) organizations, some self-employed individuals, independent contractors, sole proprietorships, restaurants, hotels and others in the hospitality industry with fewer than 500 employees per location.
What you can apply for
You can get a loan for as much as $2 million and up to a 10-year term (amortized) at 4 percent interest, with principal and interest payments deferred for up to six months (and up to one year). Many of the SBA requirements are waived. These loans require:
- No personal guaranties of shareholders, members or partners
- No collateral
- No requirement that the recipient cannot obtain funds elsewhere
- No SBA fees
- No prepayment fee
Loan Forgiveness
For every business that has loans that threaten their future, Section 1106 of the CARES Act is a critical piece to pay attention to. It provides for forgiveness of certain loans.
The forgiven amount will match the amount the business actually pays for payroll costs, salaries, benefits, rent, utilities and mortgage interest during the eight weeks following disbursement of the loan. Wages paid to tipped employees under Section 3(m)(2)(A) of the Fair Labor Standard Acts may also be forgiven.
That amount is reduced if there are layoffs, furloughs or some other workforce reduction or salary reduction. But it is important to note that reductions in workforce, salaries and wages that occur from February 15, 2020 to April 26, 2020 will not count toward reducing the forgiveness amount, so long as those reductions are rolled back by June 30, 2020. The rules for this are somewhat complicated. Call us at (617) 535-7763, if you would like an explanation.
The lender has 60 days to review the application. The loan is forgiven will be excluded from gross income.