Now that the CARES act has been signed into law, small businesses are wondering how it helps them. We looked through the bill to point out some key details.
Stone World understands many of our readers are small business owners and are struggling during this difficult time. We look to share as much information as we can that may offer assistance, but in matters of financing and other business practices we recommend consulting your financial advisors and other leading experts in this field for advice.
Who is eligible?
Any business that employs less than 500 employees.
When is the loan period?
It started March 1, 2020 and ends on December 31, 2020
How much can I take out?
You can take out the lesser of two different options:
- The average total monthly payments by you for your payroll, mortgage payments, rent payments and payments on any other debt obligations incurred during the one-year period before the date that the loan is made, except that, in the case of an applicant that is a seasonal employer, then the average total monthly payments for payroll shall be for the period beginning March 1, 2019 and ending June 30, 2019.
What can I use the loan for?
It can be used for payroll support, including paid sick, medical or family leave, and costs related to the continuation of group health care benefits during those periods of leave. Employee salaries. Mortgage payments. Rent, including rent under a lease agreement. Utilities. Any other debt obligations that were incurred before the covered period.
Is there a fee for the loans?
The fee is either being waived or reduced to the maximum extent possible.
Will the loans be deferred at all?
According to the bill, each eligible borrower that applies for a loan during this program is expected to be an impacted borrower and require lenders to provide complete payment deferment relief for impacted borrowers with loans for a period of not more than one year.
Will there be any loan forgiveness?
An eligible recipient shall be eligible for forgiveness of indebtedness on the covered loan in an amount equal to the cost of maintaining payroll continuity during the covered period. The amount of loan forgiveness shall not exceed the sum of the total payroll costs incurred by the eligible recipient during the covered period and the amount of payments made during the covered period on debt obligations that were incurred before the covered period.
The amount of loan forgiveness will be reduced if you reduce the amount of full-time equivalent employees per month employed by the eligible recipient during the covered period, the average number of full-time equivalent employees per month employed by you during the period of March 1, 2019 and ending on June 30, 2019.
Also, loan forgiveness will be reduced if employees’ salaries are reduced by 25% or more during the covered period.