Help for businesses – The CARES Act

By Stacey Tsarnas Hackenberg:

COVID-19 has caused a great anxiety about our health and daily lives, and of course, economic anxiety. As you are surely aware, Congress passed a $2.2 trillion coronavirus spending bill to help stimulate the economy. Parts of the CARES Act specifically helps small businesses. It establishes a $349 billion lending program for small businesses and helps the unemployed.

The small business portion of the CARES Act known as the Paycheck Protection Program (PPP) provides government guarantees of Small Business Administration (SBA) loans. The small business applies for the PPE through the SBA. The application process provides a formula which is tied to payroll costs as well as other allowable uses. There is loan forgiveness for the small business up to eight weeks after the loan originated for expenses paid toward which include payroll, paid sick or medical leave, mortgage expenses, rental payments, and utility payments.

The loans are generally available to companies up to 500 employees and there are certain gross annual receipts thresholds, and even 501(c)(3) nonprofits, sole-proprietors, independent contractors, and other self-employed individuals are eligible for loans. By bypassing some of the formalities and normal SBA channels, these small businesses can obtain relief faster.

While borrowers will need to certify that the reason for the loan is due to the coronavirus economic uncertainty, the loans do not require collateral and do not require a personal guarantee. For the portion that is not forgiven it sets maximum interest rates at 4%, waives certain fees, and deferral of payments for 6-12 months.

Another option for small businesses is the Economic Injury Disaster Loan (EIDL) through the SBA. The EIDL loan provides for up to an immediate $10,000 grant award. However, EIDL requires personal guarantees and certain collateral requirements. If businesses apply to both programs the EIDL grant award may be subtracted from the amount forgiven under the Paycheck Protection Program.

In concert with your CPA, we will assist our small business clients in navigating the options and programs available through the CARES Act and other Ohio programs which best suit our clients’ needs. Please contact Stacey Hackenberg sthackenberg@gertzrosen.com and Peter Tsarnas ptsarnas@gertzrosen.com for assistance.