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The CARES Act Explained Thumbnail

The CARES Act Explained

The CARES Act Explained
In order to assist our clients and regular readers, we are offering this business tip. 

As part of the Coronavirus Aid, Relief and Economic Security ("CARES") Act enacted on March 27, Congress made $349 billion available in loans under the Paycheck Protection Program.

While the program has received a lot of publicity, many people are unaware that self-employed individuals and independent contractors are also eligible to apply.
The Department of Treasury has now issued an Information Sheet which provides further details about the program. Here, we summarize the main provisions.
  1. Small businesses with 500 or fewer employees-including self-employed individuals, sole proprietorships, and independent contractors-are eligible to apply. Larger businesses are eligible in certain industries.
  2. Starting April 3, 2020, small businesses and sole proprietorships can apply. Starting April 10, 2020, independent contractors and self-employed individuals can apply.
  3. You must confirm that your business needs financial relief because it was impacted by Coronavirus events.
  4. The loan will require no collateral or personal guarantees.
  5. Generally the loan amount will be based on 2.5 times your average monthly payroll costs (which includes benefits and state and local taxes), for salaries up to $100,000 per year.
  6. The loan amounts are eligible for forgiveness as long as (1) the proceeds are used to cover payroll costs, mortgage interest, rent, and utility costs over the 8 week period after the loan is made; and (2) employee and compensation levels are maintained.
  7. The fixed interest rate is 0.5% and payments on the loan are deferred for at least six months. 
  8. Although the program is open until June 30, 2020, applicants are encouraged to apply as quickly as you can because there is a funding cap. 
  9. Applicants are encouraged to apply through their business bank, and a copy of the application is here.
Small businesses, the self-employed, and independent contractors would be well-advised to apprise themselves of the pertinent details so they can be at the front of the line when the application window opens. Rarely does the government offer the prospect of a loan that can be forgiven and for many businesses, it may help to secure their survival.

We would encourage you to use this client-friendly chart in all appropriate client relationships.

Click Here to View the Chart

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