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Coronavirus Aid, Relief, and Economic Security Act

Coronavirus Aid, Relief, and Economic Security Act

The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) has been signed into law. We at Ingram LLP are committed to staying abreast of the requirements and relief available to the public in order to assist our clients and the community as the effects of COVID-19 are felt.

Towards this end, we offer this summary of the small business loan provisions.

$349 billion would be allocated to the Small Business Administration (“SBA”) 7a loan program to make loans to small businesses to help them pay certain covered expenses incurred from 2/15/20 to 6/30/20 (the “Covered Period”).

  • Loan proceeds can only be used to pay payroll costs (excluding salary above $100K for any one employee), rent, health benefits, insurance premiums, taxes on compensation, mortgage payments, utilities and interest on any other debt incurred before the Covered Period (the “Covered Costs”).
  • Small businesses with 500 employees or less are eligible.
  • Loan amount of up to 2.5x a company’s average monthly payroll costs (taking into account the salary exclusion noted above) incurred during the 1-year period before the date of the loan (for business not in operation from 2/15/19 – 6/30/19, the average payroll costs for January and February 2020 are used). The maximum loan amount is $10M.
  • Maximum interest rate is 4%. Loan terms are 10-years and there are no prepayment penalties.
  • Up to $10K advance can be requested 3 days after loan application is submitted (and if loan is denied, this amount need not be repaid if the money was used to pay Covered Costs).
  • No personal guaranty or collateral is required.
  • No personal liability (except to the extent loan is used for non-Covered Costs). A second application can be filed for loan forgiveness of the Covered Costs during the Covered Period (less any reduction in payroll over 25% for employees who earn 100K or less). Any amount forgiven will not be taxable income. Repayment of the loan can be deferred for 6 months (and possibly up to one year).
  • Independents contractors, 1099 workers, self-employed individuals and sole proprietors are eligible.
  • The SBA waives its fee on the loan.
  • Restaurants and hotels are eligible as long as they employ 500 workers or less per location.
  • Loan application can be downloaded from the SBA website and completed application can be uploaded and submitted on the SBA website.
  • We trust this will help affected businesses as they strive to make the most informed decisions in an ever-changing world. Now, more than ever, our clients and friends need good practical counsel in their corner. We at Ingram LLP are here to assist as needed.