Introduction to CARES Act – COVID-19 loan availability

March 30, 2020

Dear Tenants,

Fallout from the Coronavirus crisis continues to have a devastating impact on all our tenants. Fortunately, the Coronavirus Aid, Relief, and Economic Security (CARES) Act which passed last week may provide a lifeline for your business.  Although I am still digesting full details of the act, information below describes how the act can provide funds to pay your rent and payroll expenses and how a portion of this loan can be forgiven.   Call your banker now to get in the que for this loan process.

Please use this information as a guide for moving forward but be sure to speak to your individual legal or financial advisor before making any business decisions.

Included in the $2 trillion CARES stimulus package is $350 billion to help small businesses stay afloat during this crisis. The Paycheck Protection Program of the act provides federally guaranteed loans to small businesses of up to $10 million per business to cover payroll expenses (including paid vacation time, sick leave and health care benefits) and certain other business obligations such as mortgage interest, rent and utilities.  This program is available to businesses and churches and available to some sole proprietors, independent contractors, and self-employed individuals.  Self-employed individuals can include their own compensation as payroll to qualify for these loans.  The loans will have a maximum maturity of 10 years and an interest rate not to exceed 4%.  No personal guarantee is required and standard SBA fees are waived.

To start the process, you can call the SBA at 800.659.2955 or go to their website shown below but my recommendation is that you start a conversation immediately with your local banker who may be an authorized agent for this program. A complete list of lenders under the program should be released soon.

Highlights of the Paycheck Protection Program include:

  • Eligible recipients can qualify for a loan in an amount determined by 2.5 times total monthly payroll incurred during the 12 months prior to the loan. Special rules apply for businesses that are less than one year old.
  • Loan payments can potentially be deferred for six months.
  • If you maintain your workforce, SBA will forgive the portion of the loan proceeds that are used to cover certain business expenses during the 8 week period beginning on the origination date of the loan. These expenses include payroll, rent, interest on mortgages and utilities.

To learn more about the Payroll Protection Program see the following resources:

  • SBA Website for small business guidance and loan resources
  • Summary guide to the act from the US chamber of Commerce showing who is eligible and what lenders will look for as qualifiers for these loans
  • A summary of the act prepared by the NY Times

 Other Benefits to small businesses provided by the CARES Act:

Traditional SBA Lending Program.  SBA loans and Economic Injury Disaster Loan (“EIDL”) lending programs have been expanded and revised to assist small businesses and nonprofit organizations affected by COVID-19.

Refundable Tax Credit: Organizations whose operations are fully or partially suspended due to COVID-19 or that have seen a 50% decline in revenue as a result of COVID-19 are eligible for a refundable payroll tax credit of 50% of qualified wages paid to employees between March 13, 2020 and December 31, 2020. Qualified wages are capped at the first $10,000 of compensation, which may include health benefits. For employers with an average of 100 or fewer employees in 2019, all wages are qualified.  Employers who receive a loan under the Paycheck Protection Program are not eligible for this refundable tax credit.

Payroll Tax Deferral: Employers may defer payment of the employer share of social security tax (6.2%) they would otherwise be responsible for paying in 2020. Fifty percent of deferred amounts must be paid back no later than December 31, 2021, and the remaining 50% must be repaid no later than December 31, 2022.  This effectively functions as a no-interest loan to the employer.  Self-employed individuals are allowed to defer up to 50% of self-employment taxes.

Relief for existing loans: There is $17 billion in the act to cover six months of payments for small businesses already using SBA loans.

Direct payment to individuals.  In addition to the above areas of relief, the act provides direct payments to most taxpayers of up to $1,200 for individuals and $2,400 for married couples, with a $500 additional payment for each qualifying child.  These payments may help customers support your enterprise when business returns to normal.

I will continue to share information as more details become available. Stay strong and be safe

Best Regards,

Michael Habif