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Information about the CARES Act Small Business Loan Program

The Floyd Law Firm PC > Information > Information about the CARES Act Small Business Loan Program
Information about the CARES Act Small Business Loan Program

The Floyd Law Firm PC is here to help business owners and entrepreneurs make informed decisions with experienced legal counsel towards practical solutions regarding many business issues and corporate concerns.

Recently, our nation’s governing officials passed a bipartisan agreement known as the CARES Act (Coronavirus Aid, Relief, and Economic Security Act) which provides financial assistance to individual Americans, provides some timely and much needed relief to health care professionals and hospitals, and provides grants and forgivable loans for those small businesses who were forced to close their doors.

Key information about the CARES Act Small Business Loan Program includes:

  • $350 Billion Dollars of federal guaranteed loans, this amount is equal to the entire country’s small business payroll for six weeks.
  • Businesses with fewer than 500 employees qualify.

Loan Availability and Requirements:

  • Loans are likely to be available in as little as one or two weeks.
  • Initially available through the existing 7(a) SBA loan lenders.
  • The U.S. Government is to designate more lenders to offer the loan.
  • This loan does not require collateral, personal guarantee, and proof of inability to receive lines of credit.
  • The loan is essentially being issued in good faith with a 100% guarantee by the federal government.

Loan Terms:

  • Loan size can be 2.5 times the average of your monthly payroll, not to exceed $10 Million Dollars.
  • Interest rate not to exceed 4% annually.

Who Qualifies for this Loan?

  • Companies with fewer than 500 employees.
  • Food and accommodations businesses will qualify based on location and not overall employee headcount.
  • The business applying for the loan had to be in operation before February 15th, 2020.
  • All 501(c)(3) organizations qualify.
  • Veterans Organizations qualify.
  • Sole proprietors, self-employed, independent contractors also qualify – but more information will be required when applying to confirm income.

Option for Conversion to Grant (Forgiveness)

The general rule is that after June 30th , 2020, the Small Business Association (SBA) will look at your average expense with payroll, rent, utilities, and mortgage interest during the eight weeks after the loan is granted and then convert the loan amount used for these items into grants. The grant covers employees making up to $100,000 per year only.

This loan program was created to keep employees employed, there are two caveats that will affect the size of the grant:

  • Reduction of headcount will affect forgiveness.
  • Reduction of wages will affect forgiveness.

Taxes Benefits:

  • Deferment of 50% of payroll taxes to up one year.
  • Deferment of 50% of payroll taxes to up two years.
  • Increase the amount of interest to be deducted.
  • Investments made to businesses will have benefits immediately available.

If you already have an SBA Loan, contact your lender as the SBA is allowing a six months deferment of principal and interest payments.

If you are applying for an EIDL Loan, a $10,0000 advance will be provided until the loan is approved, and this $10,000 will be forgiven.

The Keeping American Workers Paid and Employed Act and The Paycheck Protection Program

The Keeping American Workers Paid and Employed Act would provide $377 billion to help prevent workers from losing their jobs and small businesses from going under due to economic losses caused by the COVID-19 pandemic. The Paycheck Protection Program would provide 8 weeks of cash-flow assistance through 100 percent federally guaranteed loans to small employers who maintain their payroll during this emergency. If the employer maintains its payroll, then the portion of the loan used for covered payroll costs, interest on mortgage obligations, rent, and utilities would be forgiven, which would help workers to remain employed and affected small businesses and our economy to recover quickly from this crisis. This proposal would be retroactive to February 15, 2020 to help bring workers who may have already been laid off back onto payrolls.

The bill would provide $350 billion to support loans through a new Paycheck Protection Program for:

  • Small employers with 500 employees or fewer. as well as those that meet the current Small Business Administration (SBA) size standards;
  • Self-employed individuals and “gig economy” individuals; and Certain nonprofits, including 501(c)(3) organizations and 501(c)(19) veteran organizations. and tribal business concerns with under 500 employees.
  • The size of the loans would equal 250 percent of an employer’s average monthly payroll. The maximum loan amount would be $10 million.
  • Covered payroll costs include salary, wages, and payment of cash tips (up to an annual rate of pay of $100,000); employee group health care benefits. including insurance premiums; retirement contributions; and covered leave.
  • The cost of participation in the program would be reduced for both borrowers and lenders by providing fee waivers. an automatic deferment of payments for one year, and no prepayment penalties.
  • Loans would be available immediately through more than 800 existing SBA-certified lenders, including banks, credit unions, and other financial institutions, and SBA would be required to streamline the process to bring additional lenders into the program.
  • The Treasury Secretary would be authorized to expedite the addition of new lenders and make further enhancements to quickly expedite delivery of capital to small employers.
  • The maximum loan amount for SBA Express loans would be increased from $350,000 to $1 million. Express loans provide borrowers with revolving lines of credit for working capital purposes.

Entrepreneurial Assistance

  • The bill would provide $265 million for grants to SBA resource partners, including Small Business Development Centers and Women’s Business Centers to offer counseling, training, and related assistance to small businesses affected by COVID-19.
  • $10 million would be provided for the Minority Business Development Agency to provide these services through Minority Business Centers and Minority Chambers of Commerce.

Emergency EIDL Grants

  • The bill would expand eligibility for entities suffering economic harm due to COVID-19 to access SBA’s Economic Injury Disaster Loans {EIDL). while also giving SBA more flexibility to process and disperse small dollar loans.
  • The bill would allow businesses that apply for an EIDL expedited access to capital through an Emergency Grant – an advance of $10,000 within three days to maintain payroll, provide paid sick leave, and to service other debt obligations.
  • $10 billion would be provided to support the expanded EIDL program.

Small Business Debt Relief

  • The bill would require SBA to pay all principal, interest, and fees on all existing SBA loan products, including 7(a), Community Advantage. 504, and Micro-loan programs for six months to provide relief to small businesses negatively affected by COVID-19.
  • $17 billion would be provided to implement this section.

The Floyd Law Firm PC is your resource for Business & Corporate Law serving Surfside Beach, Myrtle Beach, and throughout South Carolina. We are committed to helping business owners with professionalism and advocacy. If you need our services, please do not hesitate to Contact Us.

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