Everything You Need To Know About The Senate CARES Bill (HR 748)

While the world has been in crisis due to the sudden onset of coronavirus, small business owners have been concerned they will be left behind in relief efforts. To date, a package has been passed that includes paycheck protection and loan forgiveness for impacted businesses. To speed the approval process, lenders have been authorized to approve borrowers on an expedited schedule, without the usual SBA approval process.

What Businesses Need To Become Approved

The Paycheck Protection Program is a loan offered through the SBA directly to impacted businesses. What this loan does is increase the government guarantee to 100% through December 31, 2020. The business must show they were in operation February 15, 2020 and that they had employees for whom they paid salaries or contractors paid by 1099-MISC.

Unlike standard SBA loans, in the food service and hospitality industry the requirement of no more than 500 employees to qualify as a small business may be counted PER LOCATION rather than per company. This opens up an opportunity for businesses that own and operate more than one location that wouldn’t normally qualify to be eligible. Some sole proprietors, independent contractors or self-employed individuals may also be included in the program.

How Much Funding Are Businesses Eligible For?

To understand the amount of the loan you may apply for, average your monthly payroll in the one-year period before the date the loan is made. Multiply this by 2.5. You may also refinance loans taken after January 31, 2020 within your loan total. The maximum available to any one borrower is $10 million.

The items that qualify as a payroll cost include standard compensation (up to a maximum per U.S. employee of $100,000), tips, paid leave, dismissal allowance, health care and insurance premiums, retirement benefits, compensation tax paid by the company, and up to $100,000 of income for sole proprietors.

What The Loan Pays For

Apply funds to any of the following: payroll, group health insurance, salaries or commissions, owner operated mortgage payments, utilities and interest on prior debt obligations.

These loans are an added benefit because they are nonrecourse loans with no guarantee required by the borrower and no fee assessed by the loan administrator. Payments may be deferred from six months up to one year following initiation of the loan.

Loan forgiveness will be available for up to 8 weeks of payroll costs, mortgage or obligation, and any utility payment in relation to the operation of the business.