On March 27, 2020 the president signed into law the CARES Act that provides, in part a $349 billion boost to small businesses.
The economic boost is provided in the form of forgivable loans in which the government will pay for eight weeks of payroll costs plus 25%, up to $10 million. If qualified, the loan is forgiven tax-free. Qualifications include that the proceeds must be used for payroll cost (75%) or for mortgages, rent, and other debt obligations up to 25% of the loan proceeds. That’s right, if you meet the criteria, the loan turns into a grant from the government. The forgivable amount is adjusted by a formula that I won’t get into here, but it is generally based on keeping your people employed.
Eligible entities include all US based businesses up to 500 employees whether they be corporations, partnerships, sole proprietor’s, or nonprofit organizations including churches. Eligible entities do not include criminals, deadbeats and non-US based businesses.
For most businesses, calculating the maximum loan amount includes payroll costs such as salaries, wages, 401(k) contributions, health insurance payments, state and local unemployment taxes. Excludable costs include employer-paid social security, medicare taxes, and wages paid in excess of $100,000 per employee.
The loan application process is relatively simple by government standards. The loan application window is open until June 30, 2020 or until funds run out.
The documentation that banks may require include income tax returns, payroll tax returns, and profit and loss statements from the relevant time periods. Officers and owners (20% or more) will be required to give their demographic information such as date of birth, social security number, etc.
I am lending a helping hand to a limited number of businesses with their loan application process for no charge. Please contact me if you would like a free helping hand from me.
If you would like more information, join us for a live webinar titled “Paycheck Protection Program” on Tuesday, April 14, 2020 at 5 PM EDT. Pre-registration is required.
(Webinar is complete. Please stay tuned for future webinars!)