The small business owners guide to the CARES Act

The $2 trillion Coronavirus Aid, Relief, and Economic Security Act recently passed by Congress is the largest U.S. stimulus package ever to provide economic relief to businesses and workers affected by the COVID-19 outbreak. The bill offers the following aid for small businesses , 5013s, sole proprietors and independent contractors.

The maximum loan amount under the Paycheck Protection Act is $10 million, with an interest rate of 1%. The lenders are expected to defer fees, principal and interest for no less than six months and no more than one year. The credit is not available to employers receiving assistance through the Paycheck Protection Program. The Department of Treasury will also be What Is The Cares Act? Small Business Owners Guide To Cares Act in charge of authorizing new lenders, including non-bank lenders, to help meet the needs of small business owners. Certification from a representative of your business or organization that is authorized to certify that the documentation provided is true and that the amount that is being forgiven was used in accordance with the program’s guidelines for use.

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The paid leave benefits only apply to companies that are still operating. If an employer is shut down, for example, if a nail salon or a gym is shut down, and there isn’t a qualifying reason for paid leave or sick leave, that would be addressed by unemployment insurance and the CARES Act. If the employees can’t work from home or telecommute, that would fall under the CARES Act. A payroll tax credit for wages paid by businesses that fully or partially close due to Coronavirus. The law also allows any mid-sized nonprofit to get access to quick, low cost, government guaranteed credit through their local lender or financial institution. Borrowers will also commit to rehiring their workforce back to pre-existing levels upon the end of the COVID-19 health emergency. Currently, the SBA guarantees small business loans that are given out by a network of more than 800 lenders across the U.S.

Documentation verifying payments on covered mortgage obligations, lease obligations, and utilities. Payroll costs plus any payment of interest on any covered mortgage obligation plus any payment on any covered rent obligation plus and any covered utility payment. Workers that were laid off after March 1, 2020, but then rehired, are eligible for paid FMLA leave provisions described in the FFCRA immediately instead of needing to be an employee for 30 days. The SBA’s Economic Injury Disaster Loans are part of an existing program that makes loans available in the event of a disaster. The CARES Act made several changes to expand the program due to the COVID-19 pandemic. Any business concern that employs not more than 500 employees per physical location of the business concern and that is assigned a NAICS code beginning with 72, for which the affiliation rules are waived.

Treasury and Federal Reserve Lending Fund

Up to 8 weeks of average payroll and other costs will be forgiven if the business retains its employees and their salary levels throughout the coverage period of February 15, 2020 – June 30, 2020. Principal and interest is deferred for up to a year and all borrower fees are waived.

Lenders will be required to defer payment of that loan for 6-months to 1-year, with the ultimate deferral period set by SBA. While reductions in workforce usually result in a reduction in loan forgiveness, the program allows companies that already laid off workers to rehire them while still benefiting from full loan forgiveness. There are also various stipulations and requirements attached to this program related to the availability of alternative financing, restrictions on stock buybacks, efforts to retain employees, prevention of loan forgiveness, restrictions on dividends, and more. A key focus of this bill and earlier bills have been relief for small businesses. The bill contains many provisions that support small businesses, including a Paycheck Protection Program, Emergency Economic Injury Grants, Debt Relief for Existing and SBA Borrowers, and Resources for Business Counseling Services. Note that some of the business tax provisions described in a later section also apply to small businesses. On Friday, March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act was signed into law.

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All current SBA 7 lenders (see more about 7 here) are eligible lenders for PPP. The Department of Treasury will also be in charge of authorizing new lenders, including non- bank lenders, to help meet the needs of small business owners. For any amounts not forgiven, the maximum term is 10 years, the maximum interest rate is 4 percent, zero loan fees, zero prepayment fee . Businesses that were due to receive corporate alternative minimum tax https://www.wave-accounting.net/ credits at the end of 2021 can instead claim a refund now, in order to improve cash flow during the COVID-19 emergency. Businesses that have net operating losses have some limitations relaxed. If your business had an NOL in a tax year beginning in 2018, 2019, or 2020, that NOL can be now be carried back five years instead. Pass-through businesses and sole proprietors will also be able to take advantage of the relaxed NOL limitations.

• You can read our full story on the Paycheck Protection Program here.
• $10 billion in funding for a provision to provide an advance of $10,000 to small businesses and nonprofits that apply for an SBA economic injury disaster loan within three days of applying for the loan.
• You might want to look into the $10,000 emergency grant cash advance available through the SBA Economic Injury Disaster Loan program.
• “There’s also a benefit under the Emergency Paid Sick Leave Act for that same reason, and you can get up to 80 hours at two-thirds pay to take care of your son or daughter.
• Loans can be up to 2.5x the borrower’s average monthly payroll costs, not to exceed $10 million.
• The CARES act should be applicable to most independent consultants, whether they are operating as an independent contractor or have set up an LLC or S-Corp under which to operate.