CARES Act Resources

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Updated  The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) – a $2 trillion aid package – became law on March 27, 2020.  Some called it the “Stimulus Package.”  It provides loans, grants, unemployment, tax relief, payments to households, REAL ID delays, and others to help deal with the impact of coronavirus shut-down orders.  This Small Business Owners’ Guide to the CARES Act, is an excellent 11-page resource that explains details about the following programs.

Loans and Grants

  • Borrowers may apply for different SBA loans – PPP loans, EIDL loans, non-disaster SBA 7(a), 504 and microloans, and also receive investment capital from Small Business Investment Corporations (SBICs). However, you cannot use your PPP loan for the same purpose as your other SBA loan(s). If you accept the EIDL loan, and you subsequently qualify for the PPP loan, you can re-finance the EIDL loan with the PPP loan.
  • SCORE and Small Business Development Centers and Women’s Business Centers will help reconstruct financial records, prepare financial statements, and submitting loan applications.
    • Of course, we will help with any legal documents you may need.
    • For more detailed questions about all SBA offerings, see the SBA’s COVID-19 website or contact: field@sba.gov
  • Act quickly because the loans and grants are awarded on a first-come, first-served basis.

Paycheck Protection Program (PPP) loans to cover payroll, rent/mortgage payments, group health benefits, etc.  Here is a sample PPP application.

  • PPP applications may be filed beginning April 27 at 10:30 am. PPP Restarted  on April 27.  The $484 billion relief package restarted PPP and EIDL.  It allocated $310 billion to PPP.
  • PPP applications are made directly to the lender (bank). Generally, start with your EXISTING bank.  Ask if they are an existing SBA approved lender and whether they’re still taking PPP applications.  Generally, do not go to the nationwide banks first.  They’re overwhelmed and customer service reports are not good.  Look for a local, banking relationship.  Here is a link to find participating lenders.  Please note, many banks are not accepting PPP loan applications from new customers.  They’re allocating their PPP resources to their existing customer base.
  • FAQs
  • Businesses with < 500 employees are eligible EXCEPT:
    • agriculture businesses
    • casinos & racetracks
    • shopping centers
    • apartment buildings
    • mobile home parks
    • residential facilities that do not provide medical services and other businesses primarily engaged in owning or purchasing real estate and leasing it for any purposes
      • hotels, RV parks, marinas, campgrounds, nursing homes and assisted living facilities are explicitly exempted from this ineligibility and self-storage properties are generally considered to be eligible
      • Developers and landlords in those asset classes should encourage their tenants to apply for PPP loans.
      • These entities would still be eligible to obtain EIDL loans to the extent they otherwise qualify.
    • Still unresolved is whether homebuilders can apply for PPP. Click here to learn more
  • Hotels, full-service restaurants and limited service restaurants with >500 employees may also qualify on a location-by-location basis.
  • 501(c)(3) nonprofits, including religious and faith-based organizations impacted by Coronavirus (COVID-19) are eligible to participate in PPP and the Economic Injury Disaster Loan program”  Click here for SBA’s press release on this, FAQs, and the underlying, clarifying guidance
  • Loan cap:  $10 million or 250% of average monthly payroll, whichever is less
  • Cannot be used for leave payments under FFCRA
  • New In May, SBA released the PPP loan forgiveness form
    • Options to calculate payroll costs using an “alternative payroll covered period” that aligns with borrowers’ regular payroll cycles
    • Flexibility to include eligible payroll and non-payroll expenses paid or incurred during the eight-week period after receiving their PPP loan
    • Step-by-step instructions on how to perform the calculations required
    • Borrower-friendly implementation of statutory exemptions from loan forgiveness reduction based on rehiring by June 30
    • A new exemption for borrowers who made a good-faith, written offer to rehire workers that was declined
  • FORGIVENESS:  If you maintain your payroll through July, the portion of your loan that is used to pay up to 8 weeks of payroll will be forgiven in an amount equal to money spent in the 8 weeks following the loan origination date on:
    • Payroll costs (except compensation above $100,000 in wages, per person)
    • Rent or utilities (provided lease/utility was in place before 2/15/2020)
    • Interest payments on mortgages that were in place before 2/15/2020
    • Payroll must be 75% of the amount sought to be forgiven
    • Loan will only be partially forgiven if an employer
      • Reduces the workforce during this 8-week period; or
      • Reduces the salary/wages paid to an employee by >25%;
      • and does not correct those reductions by June 30, 2020
  • SOLE PROPRIETORS: will need to provide the following information to their PPP Lender to substantiate the forgiveness amount:
    • Form 941;
    • State quarterly wage unemployment insurance tax reporting forms or equivalent payroll processor records that best correspond to the 8-week period (with evidence of any retirement and health insurance contributions);
    • Business rent;
    • Business mortgage interest payments on real or personal property; and
    • Business utility payments.
  • Check with your bank or your CPA for ways to best account for your use of the PPP funds.  Proper accounting will be key to loan forgiveness.
  • Receiving a PPP loan will not trigger a tax
  • Having a portion of the PPP Loan forgiven will not trigger a cancellation of indebtedness income
  • If an employer has a PPP loan forgiven, then from the date of forgiveness, the employer is no longer eligible to defer payroll taxes (see Tax Provisions section below)
  • Even if you are not interested in seeking loan forgiveness, 75% of the PPP loan proceeds must be used for payroll expenses (as that term is defined in the CARES Act) to avoid repayment, penalties, and potential criminal liability

Read more about PPP progress in this joint statement from SBA Administrator Jovita Carranza and Treasury Secretary Steven T. Mnuchin; or, in these reports.

Under the Debt relief program, SBA will cover all loan payments on SBA 7(a), 504, or microloans, including principal, interest, and fees, for six months. Applies to existing loans and new loans issued before the end of September 2020.

Economic Injury Disaster Loans (EIDL), up to $2 million, to offset losses from COVID-19.  To apply for a COVID-19 EIDL, click here.

  • $60 billion in new funding was approved on April 24.  However, as of May 4, 2020, due to limitations in funding availability and the unprecedented submission of applications already received, SBA is accepting only agricultural business applications at this time.  Click here for more information.
  • $10,000 economic injury (EIDL) grants – free money
    • Do this right away! There is a limited amount of money.
    • The online application takes ~15 minutes.
    • Businesses do not have to repay the EIDL grant, even if they do not qualify for the EIDL loan.
  • EIDL applications for loans and the $10,000 grant are NOT made through a bank. They are made through the SBA.
  • There is no cost to apply
  • There is no obligation to take the loan if approved
  • Max unsecured loan is $25,000
  • Max loan is $2 M at 3.75 % (2.75% for non-profits), for up to 30 years.
  • Personal guaranty required for loans > $200,000
  • 501(c)(3) nonprofits, including religious and faith-based organizations, are eligible
  • SBA EIDL Slideshow
  • SBA EIDL briefing sponsored by CREDC (~35 mins)
  • Loan applications are currently taking 3 weeks to process and money flows about 1 week after approval

Mid-size employers (500 to 10,000 employees) Emergency Relief and Taxpayer Protections

  • Limited information available. Guidance is expected soon.
  • More requirements and certifications than PPP or EIDL
  • Employer must certify:
    • to use the loan to retain >= 90% of workforce on the date of the application/loan at full compensation and benefits, until 9/30/2020; and
    • intends to restore >= 90% of workforce that existed on 2/1/2020 to full compensation and benefits no later than 4 months after the declared end to the COVID-19 public health emergency

Tax Provisions

  • CREDC webinar on CARES Act tax relief
  • Employee retention tax credit
    • if 50% loss in revenue, can record a 50% refundable payroll tax credit on up to $10,000 per employee
  • Delay in payment for employer payroll taxes
    • Employers and self-employed can defer the employer portion (6.2%) of social security and SECA (6.2%) tax liability
    • ½ of deferred amount to be paid by 12/31/2021
    • ½ of deferred amount to be paid by 12/31/2022
    • If an employer has a PPP loan forgiven, then from the date of forgiveness, the employer is no longer eligible to defer payroll taxes
  • Tax changes for businesses (see pages 5-6 of the linked document), including:
    • Increase in amount of allowed net operating loss carry-back;
    • Fixes drafting error that increased depreciation schedule for retailers, restaurants and other commercial real estate to 39.5% and returns it to 15%
    • Business may now immediately write off costs of improving facilities instead of depreciating them over the 39-year life of the building
      • Because this change is retroactive, businesses can amend their prior year’s tax returns and receive a refund, adding to their cash reserves.”
    • Temporarily increases interest expense businesses may deduct on their tax returns from the 30 percent limit to 50 percent of taxable income (with adjustments) for 2019 and 2020.
    • Also see the HLG tax blog for more information on tax credits related to the FFCRA

Unemployment

  • Unemployment provisions of the CARES Act
    • Expands existing state unemployment benefits
    • Must prove unemployed for COVID-19 reasons:
      • Diagnosis or symptoms & seeking medical care
      • Household member diagnosed
      • Providing care for family member diagnosed
      • Child cannot attend school because of closure (this reason will expire when school year ends)
      • Cannot reach workplace because of quarantine/stay home order
      • Advised by healthcare provider to self-quarantine
      • Scheduled to start but no job or unable to reach employer
      • Am now breadwinner because head of household died
      • Place of employment closed as direct result of COVID-19
      • A person quits work because of a COVID-19 related situation
    • Extra $600/week unemployment for 4 months – federally funded, known as the Pandemic Unemployment Assistance (“PUA”)
      • Filing a traditional unemployment application is the first step.
      • PUA applications are being accepted. Payments generally start in 1-2 days.
      • First week of unemployment coverage is free to the employer. The federal government is paying for this week.
      • Extra 13 weeks unemployment – federally funded
      • Unemployment for self-employed, gig workers, and independent contractors
  • Bottom line:  don’t assume you know the rules for unemployment anymore.  A lot of them have changed.
  • This helpful video from Washington’s Employment Security Department explains the latest changes to unemployment benefits.

Evictions, Forbearance, and Foreclosures

  • Updated See Washington & Oregon eviction updates
  • Quick 4 minute forbearance video
  • Updated.  Moratoriums on Evictions and Foreclosures for all HUD, USDA, FHA, VA, Fannie Mae and Freddie Mac (federally-backed) mortgages, for 120 days beginning on March 27, 2020.
    • Updated. Can’t issue a notice to vacate during that 120 days.
    • Updated. Once the 120 days expire, then issue a notice to vacate that becomes effective at least 30 days later.
    • Borrowers may request additional forbearance for 180 days, at a time.
    • Multifamily housing owners may request 30-days’ forbearance, which can be extended another 60 days if they agree not to evict tenants or charge tenants’ late fees.
  • Fair Credit Reporting
    • Lenders who defer or forbear one or more consumer loan payments or accounts receivable, and the consumer makes the payments or is not required to make the payments, the lender shall report the account as current (if the account was delinquent before, report only the previous delinquent status)
    • The Federal government will consider the circumstances and does not intend to bring an enforcement action against a consumer reporting agency or lender that is making good faith efforts to investigate delinquent payments or credit report disputes as quickly as possible, even if the investigations take longer than the law requires timeframe.

Other:

  • Payments to households (see page 3 of the linked document)
  • Federally backed student loan payments suspended.  Click here for information
  • Real ID delayed
  • Counseling and training available through the SBA. SCORE can connect small businesses with a mentor to get customized, remote one-on-one advise for your disaster planning and business continuity
  • Government contract adjustments are available