CARES Act Resources

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, expanded unemployment coverage, 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 PPP loans, EIDL loans, non-disaster SBA 7(a), 504 and microloans, and also receive investment capital from Small Business Investment Corporations (SBICs).
  • This Small Business Guide to Emergency loans link defines all these terms and contains information about who is eligible, what information you’ll need to provide, how much you can borrow, and whether the loans will be forgiven. 
  • You can also go to the SBA Guidance & Loan Resources website and the SBA disaster assistance website for more information.
  • 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.
  • A business cannot use its PPP loan for the same purpose as its other SBA loan(s).
  • If a business accepts the EIDL loan, and subsequently qualifies for the PPP loan, the business can re-finance the EIDL loan with the PPP loan. 

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

  • New.  The deadline to apply for the PPP is June 30.  There is $128 billion still available.
  • PPP applications may be filed directly to the lender (bank). We recommend you start with your EXISTING business bank.  Ask if they are an existing SBA approved lender and whether they’re still taking PPP applications.  The nationwide banks were overwhelmed by PPP applications early, and many have more applications than they can process. 
  • 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.
  • See our Paycheck Protection Program (PPP) Flexibility Act blog for details about new changes and flexibility in the PPP program.
  • 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 (see below for information on EIDL).
    • 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 qualify on a location-by-location basis.
  • 501(c)(3) nonprofits, including religious and faith-based organizations impacted by Coronavirus (COVID-19) are eligible.  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  (see our FFCRA blog and our Tax blog for more information)
  • Receiving a PPP loan will not trigger a tax
  • 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.
  • FORGIVENESS:  If you maintain your payroll during an eight-week covered period, 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 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 60% 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 December 31, 2020
    • New The amount of the PPP loan forgiven will be reduced by the amount of any EIDL grant the business received.
    • See updated information on our PPP Forgiveness blog and our Flexibility Act blog for details.
    • New See the SBA’s guidance for PPP loan forgiveness requirements
    • 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
      • A new exemption for borrowers who made a good-faith, written offer to rehire workers that was declined
    • 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.
    • 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, the SBA previously announced that 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.  It is unclear how this rule will be interpreted, in light of the Flexibility Act.  We will provide an update here, once more guidance is released by the SBA. 

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.

  • New  Beginning June 15, 2020, the SBA reopened the EIDL program to all eligible small businesses.  (Between May 4 and June 15, 2020, the SBA only accepted only agricultural business applications, due to limitations in funding availability.) 
  • $10,000 economic injury (EIDL) grants – free money.  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.
    • The online application takes ~15 minutes.
    • 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
    • Loan applications take ~ 3 weeks to process and money flows about 1 week after approval
  • 501(c)(3) nonprofits, including religious and faith-based organizations impacted by Coronavirus (COVID-19) are eligible.  Click here for SBA’s press release on this, FAQs, and the underlying, clarifying guidance
  • SBA EIDL Slideshow
  • SBA EIDL briefing sponsored by CREDC (~35 mins)

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
    • See our Flexibility Act blog for information on how the payroll tax deferral relates to PPP loan forgiveness.
  • 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
    • There are three kinds of federally-funded pandemic-related unemployment benefit programs – PUA, PUC, and PEUC. Filing a traditional unemployment application is the first step for all 3 programs.  The requirements for looking for work while on unemployment are relaxed
        • Pandemic Unemployment Assistance (“PUA”) is available to those who OTHERWISE WOULD NOT QUALIFY for traditional state unemployment benefits, either because they don’t have a qualifying work history, or because they exhausted their state unemployment benefits.
          • Minimum amount is $205
          • Up to 39 weeks
          • Will expire on Dec 31, 2020, unless otherwise extended
          • Provides unemployment for self-employed, gig workers, independent contractors, workers with penalty disqualification weeks from past claims.
        • Pandemic Emergency Unemployment Compensation (PEUC)
          • Once an employee exhausts their state unemployment benefits, the federal government will pay an extra 13 weeks unemployment
        • Pandemic Unemployment Compensation (PUC)
          • ALL regular unemployment and PUA claimants are entitled to an EXTRA $600 plus whatever other amount they qualify for under their state or PUA program
          • Available through July 25, 2020
        • First week of unemployment coverage is free to the employer. The federal government is paying for this week. 
  •  
  • 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

  • See Washington & Oregon eviction updates
  • Quick 4 minute forbearance video
  • 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.
    • Can’t issue a notice to vacate during that 120 days.
    • 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
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