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  • Writer's pictureJennie Tannenbaum

Details of the Small Business Aid from the stimulus (CARES ACT & Paycheck Protection Program)

This is what the stimulus package (Coronavirus Aide, Relief and Economic Security (CARES) Act offers to small businesses. The Paycheck Protection Program via the Act will administer $350 billion that is set aside for loans to small businesses which may be partially forgiven if certain requirements are met. What makes this program more encompassing is that sole-proprietors, independent contractors, and other self-employed workers are included unlike other programs. Included is a 50% refundable tax credit on wages. The most that can be borrowed depends on the small business’s average total monthly payroll from one year’s time before the date of the loan. There is a $10 million limit that can be borrowed subject to specific payroll costs.

The SBA will oversee the program and banks will administer the loans. The loan covered period is from 2/15/2020 through 12/31/2020.

To be eligible for the loan the following must be met (the last 4 require certification): ·        The small business must not have already obtained an Economic Disaster Injury Loan; ·        The small business must have 500 or less employees to qualify; ·        The small business was in operation on February 15, 2020; ·        The small business had employees or independent contractors for which the business had paid compensation, payroll taxes and salaries.

  • The small business must certify that funds will be used to retain employees, maintain payroll or make mortgage payments, lease payments, and utility payments;

  • The small business must certify that due to the present uncertain economic conditions the loan is necessary to support the ongoing operations of the business;

  • The small business must certify that from 2/15/2020 through 12/31/2020 it has not been a recipient of a loan from the Paycheck Protection Program for the same purpose; and

  • The small business must certify that it does not have a SBA (7)(a) loan pending for the same reason.

These loans are unique because of its following features: ·        No applicable SBA loan fees; ·        No collateral or personal guarantee required unless the loan funds are used for non-allowable uses; ·        No prepayment penalties; ·        The principal and interest payments are deferred for six months and up to a year; ·        The maximum term of a loan is ten years from the date the business applies for loan forgiveness; ·        The maximum interest that can be charged is 4%; and ·        The small business cannot use the payroll tax credits available under the Families First Coronavirus Response Act (FFCRA) for employee retention or the deferral of employer social security payroll taxes as per the CARES Act.

The loans can be used for the following: ·        Pay costs related to continuing group health care benefits during periods of paid sick, medical, or family leave, and insurance premiums; ·        Pay employee salaries; ·        Pay interest payments for mortgage; ·        Pay interest payments on any other debt obligations that were incurred before February 15, 2020. ·        Pay payroll costs; ·        Pay rent; and ·        Pay utilities.

The loans may be forgiven if the loan funds are used for the following: ·        Interest on both real and personal property mortgage from before 2/15/2020 made in the ordinary course of the business; ·        Payroll; ·        Rent that was from a lease made prior to 2/15/2020; and ·        Utilities for service that was made prior to 2/15/2020.

Specifics on applying for the loans will be posted once available. For further information or discussion contact me at or at 978-681-0017. This article is for information purposes only and is not meant to be construed as legal advice.

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