NEW PAYCHECK PROTECTION PROGRAM INCLUDED IN CARES ACT
March 30, 2020
The United States Chamber of Commerce is providing an analysis of the CARES ACT approved by Congress and signed by the President on March 27th 2020.
A new Small Business Lending program has been created. Known as the Small Business “Paycheck protection Program” it is modeled on the existing SBA 7 (A) program and has a 100% government guarantee. Note: the 7A program provided only a 75% guarantee.
Eligibility requirements for small businesses are defined by Small Business Administration (SBA) standards, generally up to 500 employees, but can increase to 1,500 employees depending on the sector and certain sectors based on revenue. Businesses in the Accommodation and Food Services Sector (NAICS Code 72) are eligible with up to 500 employees at each location. Also eligible are 501 (c)(3) non-profits with fewer than 500 employees, sole proprietors, the self-employed, and independent contractors.
Regulatory streamlining includes waiving SBA’s “no credit elsewhere” test, all lenders (non-SBA lenders to be approved by Treasury and SBA) can provide loans, changes to personal guarantee and collateral, deferral of fees, principal, and interest for no less than six months and no more than one year, and Payroll costs exclude compensation paid to individuals including the self-employed above $100,000 a year.
An employer must certify the loan will be used to retain workers, maintain payroll, make mortgage or lease payments, and pay utilities.
Loan forgiveness is included in the CARES Act. The borrower shall have a portion of their loan forgiven in the amount equal to their payroll costs. This does not include costs for compensation above #100,000 annually. The loan can be forgiven for interest payments on mortgages, rent payments, and utility payments between February 15th and June 30, 2020. Loan forgiveness will be reduced if the borrower reduces employment by a ratio similar to their reduction in employment or if the borrower reduces employment by a ratio similar to their reduction in employment or if the borrower reduces salaries and wages by more than 25%.
For additional information please go to: https://www.uschamber.com/coronavirus or contact me at rjohnson@adkl.org.
Robert Johnson
President, ADKL LLC
