In the wake of the COVID-19 pandemic, the U.S. federal government passed the CARES Act, a $2 trillion stimulus package aimed at softening the economic distress suffered by American businesses and individuals. The massive stimulus package authorizes up to $349 billion in forgivable loans through the Paycheck Protection Program to help small businesses pay their employees during the COVID-19 crisis.
When can you apply?
Starting Friday, April 3, 2020, small businesses and sole proprietorships can apply for and receive loans to cover their payroll and other specified expenses through Small Business Administration (SBA) lenders. Starting April 10, 2020, independent contractors and self-employed individuals can apply for and receive similar loans.
Who is eligible?
All businesses with 500 or fewer employees can apply. These include nonprofit, veterans organizations, Tribal businesses, sole proprietorships, self employed individuals, and independent contractors. Even some businesses with more than 500 employees can qualify if they meet employee-based size standards and operate in specified industries.
Small businesses and other eligible entities will be able to apply if they were harmed by the COVID-19 pandemic between February 15, 2020 and June 30, 2020. The program has many features to help business owners, including forgiveness of up to 8 weeks of payroll based on employee retention and salary levels – if a business lays off employees, it may lose this benefit, no SBA fees and deferrals from 6 months to 1 year.
How much can I receive?
The maximum loan amount is $10 million, and the loan amount will be calculated in different ways for different businesses situations. For most businesses, the loan amount is equal to 250% of average monthly payroll costs. For example, if a business has $12 million of annual payroll costs ($1 million per month), then the maximum loan amount would be $2.5 million.
Do I have to pay back to loan?
In many instances, businesses do not have to pay back the loans if the loan proceeds were used to pay for qualifying expenses. Qualifying expenses include payroll costs to employees, payment of interest on mortgage obligations, payment of rent, and utility payments. Although these are loans, if the funds are used for their intended purposes, they effectively become grants.
Are there multiple loan options available?
Yes! Business owners must evaluate their options and select the best option or options for the particular business.
The SBA is administering various types of loans, including disaster assistance loans that were a part of Congress’s second emergency bill, the Coronavirus Preparedness and Response Supplement Appropriations Act signed into law on March 6, 2020. Under the Economic Injury Disaster Loan (EIDL) program. The EIDL program has the added benefit of establishing an emergency grant to allow an eligible entity to request an advance on the EIDL of up to $10,000. The advance does not need to be repaid even if the business is ultimately denied the EIDL.
How do I apply?
First, it is crucial to understand the various programs available to determine which program or combination of programs are the best fit for a business or individual. Once a loan is obtained, it is important to understand the allowed uses for funds. Importantly, it is essential to comply with the applicable program to ensure that the loan is ultimately forgiven.
Since the programs have just launched, some of the details are still being determined in a rapidly changing environment. We have a team of attorneys researching and analyzing the programs and staying up to date as the programs are established and updated.
Call an Experienced Los Angeles Business Lawyer Today
If you have been impacted by the COVID-19 pandemic, we are here to help. We are ready to quickly evaluate a business’ current situation to identify the best programs available and help apply for and secure critical funds. The highly capable Los Angeles Business attorneys at Structure Law Group, LLP can help you find the right path, which could save you a lot of time and money. Schedule a consultation today by calling (323) 880-7500 today.