Walter & Shuffain - Certified Public Accountants & Business Advisors

CARES Act introduces Paycheck Protection Program, Disaster Assistance from SBA and Other Options

Phase 3 of the COVID-19 response plan, The Coronavirus Aid, Relief and Economic Security (CARES) Act was signed into law on March 27, 2020.  Below outlines some changes to the existing SBA 7(a) loan programs and also provides information on SBA Disaster Loans and the Facebook Small Business Grant. 

Paycheck Protection Program (PPP)- Expansion of SBA 7(a) - See W&S blog post What is the Paycheck Protection Program (PPP)?

The CARES Act would expand the Small Business Administration 7(a) Loan Program to address working capital needs of certain businesses, to be funded with up to $300 billion in appropriations.  The Act increases the maximum Small Business Administration’s 7(a) loan amount to $10 million and would expand allowable uses of 7(a) loans to include payroll support (including paid sick or medical leave), employee salaries, mortgage interest payments, group health insurance premiums, retirement benefits, rent, utilities and interest on any other debt obligations incurred prior to February 15, 2020.

A portion of an SBA 7(a) Loan equal to the costs of maintaining payroll continuity (certain covered payroll costs) during the Covered Period will be eligible for forgiveness, subject to certain reductions and limits. The amount to be forgiven will be reduced ratably for any reduction in the average number of full-time equivalent employees during the Covered Period as compared to the period of March 1 – June 30, 2019, as well as for certain reductions in employee compensation in excess of 25%.

The US Treasury has provided an overview here.

The SBA is authorizing banks and other commercial lenders currently authorized to make SBA loans to originate and administer the new loan program. The federal government is pushing for rapid adoption and expects to have numerous lenders in place within a week of the signing of the Act.  Check with your current lender or your local bank to provide information about 7(a) loans.  If you need to find a lender, use SBA’s Lender Match.

Have an existing SBA 7(a) business loan?

Starting no later than 30 days after the date on which the first payment is due, the SBA will pay all principal, interest, and fees on existing SBA loans for 6 months pursuant to 7(a), Community Advantage, 504, and Microloan programs. If the loan is currently in deferment, then the SBA will begin making payments after the deferment period. Borrowers who obtain new loans under those programs within six months after the enactment of the CARES Act are also entitled to have the SBA make a full 6 months of loan payments. These provisions of the CARES Act do not apply to loans under the new Paycheck Protection Program.

Disaster Loan Assistance (administered by SBA)- See W&S blog post What is the Economic Injury Disaster Loan Program (EIDL)?

In addition to expansion of the SBA's Business Loan Program described above, the SBA is providing low-interest working capital loans of up to $2 million to small businesses and nonprofits affected by the coronavirus.

These loans carry an interest rate of 3.75% for small businesses and 2.75% for nonprofits. Loan repayment terms vary by applicant, up to a maximum of 30 years.

https://disasterloan.sba.gov/ela/

All SBA options available 

Facebook Small Business Grant Program

Facebook is making $100 million in cash grants and ad credits available to small businesses in over 30 countries. The grant money can be used to cover operational costs, take care of employees, pay rent, and more. Facebook says it will start taking applications in the coming weeks, and businesses can sign up for updates on their grant page. 

https://www.facebook.com/business/boost/grants?ref=alias%20for%20more%20information

Additional Resources:

Visit the SBA site:

https://www.sba.gov/page/coronavirus-covid-19-small-business-guidance-loan-resources

Visit the Mass.gov site:

https://www.mass.gov/info-details/covid-19-resources-and-guidance-for-businesses

Visit the US Chamber of Commerce site:

https://www.uschamber.com/co/small-business-coronavirus

Contact us directly should you have any further questions.  At this time, the majority of our staff are currently working from home, which means the best means for contact is via email.  We continue to work hard to ensure your personal and business needs are met during these tumultuous times. Stay safe and healthy!

Yours truly,

Walter & Shuffain, P.C.