CARES Act

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[av_toggle title=’Q: When was the CARES Act signed into law? ‘ tags=”]
A: On Friday, March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”).
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[av_toggle title=’Q: What does the CARES Act provide? ‘ tags=”]
A: The CARES Act provides significant federal funding and expansions to loan programs already offered by the Small Business Administration (the “SBA”) to account for the significant economic damage caused to small businesses by the COVID-19 pandemic. In particular, the CARES Act provides $349 billion to the Paycheck Protection Program, an expansion of the Section 7(a) loan program of the Small Business Act, and an additional $10 billion to the Economic Injury Disaster Loan (EIDL) Program offered by the Small Business Act in Section 7(b).
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[av_toggle title=’ Q: How do I know if the Paycheck Protection Program is right for me? ‘ tags=”]
A:

If you are looking to obtain capital to cover the cost of retaining employees.
If you already laid off employees and are looking to re-hire them. Before rehiring the employees or applying for the loan, the timing of the re-hire is important to consider for both tax and cash-flow purposes.

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[av_toggle title=’Q: What are the basics of the Paycheck Protection Program?’ tags=”]
A: The Paycheck Protection Program authorizes approved businesses to receive the lesser of: (i) 2.5x the cost of the businesses’ average monthly payroll over the preceding 12 months; or (ii) $10,000,000. Loan proceeds may be used for payroll costs, healthcare costs, interest on mortgage obligations, rent for a lease in place before February 15, 2020, utilities for which service began before February 15, 2020, and other debt obligations in place prior to February 15, 2020. A loan administered under this program shall not have an interest rate of more than 4%, the loan duration shall not exceed more than ten years, and payments on the loan may be deferred for at least six months, but no longer than one year.
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[av_toggle title=’Q: Which businesses are eligible for the Paycheck Protection Program?’ tags=”]
A: Small businesses, non-profit organizations (outside of organizations that receive Medicare expenditures), veterans organizations, and tribal business that employ 500 or fewer people, as well as self-employed individuals automatically qualify for the Paycheck Protection Program. Businesses that employ more than 500 employees may be eligible if the business either: (i) has fewer than the number of employees or has less revenue than is specified in the NAICS table for the business’ specific industry (note: the link to the SBA NAICS table is here); or (ii) falls within the NAICS code 72 classification (primarily food, beverage, and hotel enterprises) that employ 500 or fewer people at each physical location of the business.

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[av_toggle title=’Q: What is the Economic Injury Disaster Loan (EIDL) Program? ‘ tags=”]
A: The Economic Injury Disaster Loan (EIDL) Program allows approved businesses to receive a loan of up to $2,000,000 with collateral and up to $25,000 unsecured. This loan can be used for sick leave for employees unable to work due to COVID-19 as well as for payroll costs, increased material costs due to interrupted supply chains, rent or mortgage payments, repaying obligations that cannot be met due to revenue losses, and obligations that could have been paid had the disaster not occurred. The loan shall not have an interest rate of more than 3.75%, a term of less than 30 years, and no longer requires a personal guaranty on advances and loans of $200,000 or less.

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[av_toggle title=’Q: Which businesses are eligible for the EIDL Program?’ tags=”]
A: Similar to the Paycheck Protection Program, small businesses, non-profit organizations, veterans organizations, and tribal business that employ 500 or fewer people, as well as self-employed individuals, automatically qualify for the EIDL Program, along with ESOPs and cooperatives (including sole-proprietors and independent contractors).
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[av_toggle title=’Q: What if I am looking for a quick infusion of a smaller amount of cash now? ‘ tags=”]
A: The Emergency Economic Injury Grant under the Economic Injury Disaster Loan (EIDL) Program may be right for you. The grant allows applicants who need immediate funds the ability to request an emergency advance up to $10,000 within three days after the SBA receives the application. If the application is subsequently denied, the borrower is not required to repay the $10,000 advance.
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[av_toggle title=’Q: What should I know before applying for the Economic Injurty Disaster Loan (EIDL) Program? ‘ tags=”]
A: You need to fully understand the impact of later applying for the Paycheck Protection Program loan, and whether you can refinance the prior EIDL principal.
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[av_toggle title=’Q: What if I am simply looking to ease my fears about keeping up with payments on current or potential SBA loans?’ tags=”]
A: The Small Business Debt Relief Program may help, which provides immediate relief to borrowers with existing SBA 7(a) loans, 504 loans and microloans.
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[av_toggle title=’Q: How do I apply for the Economic Injury Disaster Loan (EIDL) Program? ‘ tags=”]
A: Apply online. Unlike the Paycheck Protection Program, the SBA directly oversees the EIDL. You can apply for an Economic Injury Disaster Loan through the SBA website. Please click here to access the online application.
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[av_toggle title=’Q: What kind of financial information should I be assembling for an Economic Injury Disaster Loan (EIDL)? ‘ tags=”]
A: The online application will ask you to provide the following:

Completed application (SBA Form 5)
IRS Form 4506T for applicant, principals and affiliates
Complete copies of the most recent Federal Income Tax Return
SBA Form 2202 – Schedule of Liabilities
Personal Financial Statement (SBA Form 413)

For certain applicants, the Small Business Administration (SBA) may also ask for:

Personal tax returns for all principals
Year-End Financial Statements
Current year-to-date Profit & Loss Statement
SBA Form 1368 (Monthly Sales Figures)

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[av_toggle title=’ Q: What if I have more questions about the CARES Act?’ tags=”]
A: The attorneys at Walter Haverfield know that many businesses have questions concerning these programs. We are at the ready to provide you with any legal assistance you may need concerning your business’ eligibility for these programs and the operations of your business. We also can provide you with corporate documents that we have on file for your business, and assist you with any updates to your corporate governing documents. Walter Haverfield is here to help you and your business successfully navigate through these difficult times.
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