For business owners impacted by COVID-19, help looks to be on its way at last. With a $2 trillion relief bill, the federal government will offer loans, tax relief and other assistance to business owners and workers. This information was shared with us by Stroud Wealth Partners, UBS Financial Services, Inc. We thought it was good information to share with you.
The Coronavirus Aid, Relief and Economic Security Act (the "CARES Act" or "Phase III") provides support for business owners in the form of loans, guarantees, tax deferrals and other support. While many of the details are to be spelled out in the days to come, we do know a lot more than we did a week ago.
An overview, as of March 26, 2020, is provided below, but additional details of the various relief programs for business owners can be found by clicking here.
1) Paycheck Protection Program – forgivable loans related to COVID-19 for small businesses
• Businesses and certain nonprofits with fewer than 500 employees that have been affected by COVID-19
• The loan amount will be the lesser of (a) $10 million or (b) 2.5 multiplied by the average monthly payroll by the applicant for the one-year period before the loan was made (with an alternative time period for newer and seasonal businesses)
• Allowable uses for an 8 week period from loan origination include
- Payroll support, including sick, health care and retirement benefits
- Employee salaries (up to $100,000 per employee)
- Mortgage, rent and utilities
- Interest on debt obligations
• Loans are non-recourse with no personal guarantee
• Loans are forgivable in an amount equal to the cost of maintaining payroll continuity and other allowable costs during the 8 weeks from loan origination compared to the prior year
• Any loan forgiveness will be reduced in proportion to reductions in payroll
• Forgiven indebtedness is excluded from gross income
• Final rates are not to exceed 4% with a maximum maturity of 10 years. Terms and conditions to be
finalized after the enactment of the bill
• Loans will issued by SBA 7(a) lenders
2) Credit Support for Other Affected Businesses
• The Secretary of the Treasury (the "Secretary") is given discretion to determine which businesses will be beneficiaries of the credit support but likely to include businesses that would otherwise not qualify for the Paycheck Protection Program assistance
• The Secretary will be authorized to make nonforgivable loans, guarantees and other investments in support of eligible businesses as well as states and municipalities
• Borrowers must agree maintain levels of employment as practical and to caps on compensation and may not conduct stock buybacks nor dividends nor capital distributions to investors while the loan is outstanding plus an additional 12 months
Click here for a podcast recorded on March 25, 2020 with Barry Sloane, CEO of Newtek Business Services to get insights about small business lending.