The newly enacted federal Coronavirus Aid, Relief and Economic Security (CARES) Act aims to ease financial concerns for small businesses, provide an emergency increase for unemployment benefits, aid small businesses through a “paycheck protection program,” and set up a loan program and support for Federal Reserve credit facilities, among several other provisions.
One of the most helpful provisions in the Act is a “Paycheck Protection Program.” The program provides eight weeks of cash-flow assistance through 100 percent federally guaranteed loans to small employers who maintain their payroll during this emergency. The program is intended to help workers remain employed and allow affected small businesses and the economy to recover from this crisis. This proposal would be retroactive to February 15, 2020, so to encourage employers to bring back workers who may have already been laid off back onto payroll.
Congressman Jack Bergman issued a newsletter to his constituents over the weekend with these answers to frequently asked questions:
If your small business is struggling due to the recent Coronavirus epidemic:
- Your business may be eligible for a new Paycheck Protection Loan.
- This 4% interest rate loan is 100% guaranteed by the SBA.
Who is eligible?
- Businesses and 501(c)(3)s with less than 500 employees.
- Physician practices are eligible, no matter how they are structured.
Where can you get this loan?
- Any existing SBA lenders and any lenders that are brought into the program through the Treasury.
- You should talk to your preferred financial lender to see if they qualify.
What can you use the loan amount for?
- Payroll costs – Group health care benefits.
- Employee salaries – Interest on any mortgage obligation.
- Rent.
- Utilities.
- And any other debt obligations occurred before Feb. 15, 2020.
How much can you borrow?
- The maximum amount is the lesser of $10 million or 2.5 times the average monthly payroll based on last year’s payroll.
How long will it take to receive the money?
- The SBA has authorized lenders to process, close, and service loans without SBA approval, giving you the means to invest in your business immediately.
What if you can’t pay it back?
- First, all payments on principal, interest, and fees will be automatically deferred for six months.
- Second, for businesses that retain their staff up until June 30, 2020, this loan will be forgiven.
Can the entire loan be forgiven?
- No, only the portion of the loan used to cover payroll costs, mortgage interest, rent, and utilities can be forgiven.
- In addition, only 8 weeks can be forgiven.
Employee retention credit – how will this work?
- The Employee Retention Credit provides a refundable payroll tax credit equal to 50 percent of up to $10,000 in wages per employee (including health benefits) paid by certain employers during the Coronavirus crisis.
- The credit is available to employers.
- Wages paid to employees during which they are furloughed or otherwise not working (due to reduced hours) as a result of their employer’s closure or economic hardship are eligible for the credit.
- However, for employers with 100 or fewer employees, all employee wages qualify for the credit, regardless of whether they are furloughed or face reduced hours.
- To prevent double-dipping, employers that receive Small Business interruption loans are not eligible for the credit. Additionally, wages that qualify for the required paid leave credit are not eligible for the credit.
The Michigan Chamber has a number of great resources on the CARES Act in our COVID-19 toolkit and we are working to get more added. We’d encourage you to check out this Summary of the Employee Retention Credit Provision of the CARES Act (Section 2301) and the US Chamber’s analysis of the bill.
Please contact Wendy Block or Dan Papineau with any questions at wblock@michamber.com or dpapineau@michamber.com.