The Corona virus Aid, Relief, and Economic Security (CARES) Act- A brief guide for small business owners


Small business Administration (SBA) Loans/Grants

  • Expanded eligibility for loans
  • Grant period: 2/15/20 - 6/30/20
  • Qualified businesses: ≤500 employees
  • Signed into law 3/27/2
Max Loan Amount
Lesser of: $10,000,000 OR 2.5x the average total monthly payment for covered payroll costs* incurred during the 1-year period preceding the date of the loan is the maximum loan amount.

*Covered payroll costs include salary, wages, cash tips, payments for vacation, parent, family, medical or sick leave, allowance for dismissal or separation, payments for group health care benefits, payments of retirement benefits, payments of state or local taxes on employee compensation.
**some exclusions apply

Maturity and Interest Rate
Max maturity = 10 yrs from date or loan
Max interest rate = 4%

No Collateral Requirements or Personal Guarantees
Unsecured loans 
Waiver fees are waived, but institution extending loan may charge origination fee 
All principal and interest payments deferred 6mo - 1yr

Loan Forgiveness 
Forgiveness of the loans in the amount equal to the sum of payroll costs, mortgage interest payments, rent and utilities incurred during the 8-week period following the origination date of the loan*

*Loans are proportional based on reduction in employee headcount or certain reductions in salary or wages) loan forgiveness for amounts spent on payroll costs, utilities, rent and mortgage interest during the 8-week period after the loan origination date
All or a significant portion of this loan can be FORGIVEN based on the percentage of people companies continue to employ during the pandemic compared to the same period in 2019. 
If companies use this loan to keep paying their employees, paying your rent, utilities, etc, and maintain their workforce, companies can get all or most of the loan FORGIVEN
If companies decrease the number of people employed, the amount of the loan that is forgiven will be affected. 
If companies' loans are forgiven, it will be deemed “canceled” and will NOT be included in the gross income of the business by the IRS
Certifications include:
● The money due to the uncertainty caused by the COVID-19 pandemic,
● The loan funds will be used for legitimate business purposes, and
● The loan will not duplicate assistance already received via another program.

Exemption in Loan Forgiveness
Employees who were terminated or had pay reductions from February 15, 2020 through 30 days after the enactment of the CARES Act are rehired or given wages or salary increases by June 30, 2020

Qualified Lenders and Application Process
SBA certified lenders: JP Morgan & Wells Fargo (others may be added at a later period)
Apply to traditional 7(a) banks and institutions authorized by SBA 


Payroll Tax Provisions 

Families First Coronavirus Relief Act (FFCRA) requires certain employers to pay sick or family leave wages to employees who are unable to work or telework due to certain circumstances related to COVID-19
Employers entitled to refundable tax credit for required leave paid (to a limit)
Same wages cannot be counted for both credits

Employee Retention Credit
Fully refundable tax credit for employers equal to 50% of qualified wages (including allocable qualified health plan expenses) that eligible employers pay their employees
Applies to qualified wages paid after 3/12/20, and before 1/1/21
Per employee: the maximum amount of qualified wages taken into account for all calendar quarters is $10,000, thus the maximum credit for an Eligible Employer for qualified wages paid to any employee is $5,000

Who is an Eligible Employer?
Any employer who carries on a trade or business during calendar year 2020, including a tax-exempt organization, which either:
● Fully or partially suspends operation during any calendar quarter in 2020 due to orders from an appropriate governmental authority limiting commerce, travel, or group meetings (commercial, social, religious, or other purposes) due to COVID-19; or
● Experiences a significant decline in gross receipts during the calendar quarter.
* Exclusions include: Governmental employers are not considered eligible employers for the Employee Retention Credit; self-employed individuals are not eligible for this credit for their self-employment services or earnings.



Resources: 

https://quickbooks.intuit.com/small-business/coronavirus/resources/what-is-cares-act/

https://www.kareo.com/covid-19

https://www.hbma.org/news/coronavirus-disease-covid-19