On Friday, March 27, 2020, Congress acted and President Trump signed the historic $2 Trillion economic stimulus package with critical provisions to help small businesses impacted by the COVID-19 outbreak titled the Coronavirus Aid, Relief, and Economic Security (CARES) Act. There are three areas in the bill that have vital support for small businesses:
- Debt Relief for Existing and New Borrowers – Under this provision, the SBA will cover all loan payments for existing SBA borrowers, including principal, interest and fees for six months. This relief will also be available to new borrowers who take out an SBA loan within six months after the signed bill on March 28, 2020. The measure encourages banks to provide further relief to small business borrowers by allowing them to extend the duration of existing loans beyond existing limits.
- Paycheck Protection Program (PPP) – The program will provide small businesses, certain non-profits and other entities with zero-fee loans up to $10 Million. Details are being developed by the U.S. Small Business Administration. We know that eight weeks of average payroll and other costs will be forgiven if the business retains its employees and their salary levels. We know that principal and interest is deferred for up to one year and all borrower fees are waived. The US Chamber of Commerce provided details on how the program is to work. The SBA will be administering the program and will provide specific program guidelines in the coming weeks. See Guide and Checklist at bottom of this newsletter.
- Emergency Economic Injury Grants – This grant provides an advance of $10,000 to small businesses and non-profits that apply for an SBA Economic Injury Disaster Loan (EIDL) within three days of applying for the loan. EIDL’s are loans of up to $2 Million that carry interest rates up to 3.75% for companies and up to 2.75% for private non-profits, as well as principal and interest deferments at the Administration’s discretion.
The CARES Act is comprehensive in its approach to bring relief to small businesses. There are provisions for government contractors, business counseling services, tax provisions and delay of payment of employee payroll taxes.
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