What You Need to Know about Small Business Relief

The CARES Act specifically outlines the Paycheck Protection Program, a forgivable loan program that allows small businesses to get cash quickly and incentivizes them to not lay off employees.

Paycheck Protection Program 

Who qualifies for a forgivable loan?

Businesses with 500 or fewer employees

How much are the loans for?

Loan amounts for established businesses:

  • 2.5x monthly average payroll costs (based on payroll costs in 2019) 
  • $10 million limit

Loan amounts for new and seasonal businesses:

  • 2.5x monthly average payroll costs (Based on whichever time period is applicable: March 1, 2019 – June 30, 2019 or Jan. 1, 2020 – Feb. 29, 2020) 
  • Payroll cost cap of $100,000 per employee (annualized) 

What is the interest rate?

1% fixed rate 

When can businesses apply?

April 3 for small businesses and sole proprietors
April 10 for self-employed individuals and independent contractors 

How can businesses apply?

Businesses can apply through the following:

  • Existing SBA lenders 
  • Federally insured banks
  • Federally insured credit unions
  • Farm Credit System institutions

What qualifications does a business have to meet for their loan to be forgiven? 

The loan should be used to pay for the following expenses over an 8 week period after receiving the loan:

  • Payroll 
  • Mortgage interest 
  • Rent 
  • Utilities

Forgiveness is reduced if a business decreases full-time employee headcount or if they decrease wages by more than 25% for any employee who makes less than $100,000 in 2019. 

When do businesses have to start paying loan interest? 

Payments are deferred 6 months, but interest will accrue over that time.

When are these loans due?

In 2 years. 

Quick facts for business taxes 

  • Refundable tax credit on 50% of worker wages paid between March 12, 2020 and Jan. 1, 2021 with a maximum amount of $10,000 in qualified wages per employee.
  • Employers’ portions of payroll taxes for Social Security will be delayed until 2021 and 2022. 
  • Net operating loss rules under the Tax Cuts and Jobs Act have been modified. Losses for 2018, 2019, and 2020 can be carried back 5 years and the 80% rule is suspended until 2021. 

Looking for more information about small business relief? Check out 5 Ways Businesses Can Maximize Cash Flow Under the CARES Act