There’s no running away from the fact that COVID-19 has brought with it a wave of unprecedented global uncertainty. All across the world, life as we know it has been disrupted by this raging virus that traces its origins to Wuhan, China. Among the profoundly impacted are small and medium-sized business owners.
Small and medium-sized businesses don’t necessarily have vast amounts of surplus capital stashed away for rainy days. And even if they do, the current COVID-19-related challenges affecting enterprises go beyond the issue of money. Restaurants that previously relied on customers to dine in are finding themselves exploring takeout options, where this is feasible. Even then, there’s the additional problem of supply chain interruptions, difficulties keeping employees on a full salary in times of low demand for products and services, among others.
On March 27, 2020, President Trump signed into law the CARES (Coronavirus Aid, Relief, and Economic Security) Act, as a first step towards availing a massive $2.2 trillion stimulus fund that will cushion the US economy against the impact of this pandemic. Out of this figure, $349 billion will go into availing loans to small businesses. These loans will be available through the U.S Small Business Administration (SBA) and will allow business owners to meet their expenses in the face of curtailed operations.
What does this mean for you as a business owner?
First, let’s begin by identifying who qualifies for the CARES Act business loans. If you have a business with up to 500 employees, then you’re eligible for these loans. You will need to show that the monies you apply for will go to supporting your operations and maintaining payroll, so get your documents in order.
The SBA will avail the money through your local bank, i.e., your current banker. The best and most practical thing to do right now is to get in touch with your bank today and find out if they’re participating in the SBA loans provided by the CARES Act.
As a business, you will qualify for loans up to $10,000,000 or your total annual payroll costs multiplied by 2.5, whichever is lesser. If you’re a brand new business without historical records of your payroll costs, use your average January 2020 and February 2020 payroll costs to estimate your annual costs of the same.
You will not be required to pay back your loan for a year, and there are no fees attached to the same. On the question of loan forgiveness, your loan may be entirely forgiven if you retain the same number of FTE (full-time employees) between now and June 2020, as you had in the same period of 2019. Reducing employee wages and laying off employees may exclude you from loan forgiveness.
As a business owner, it’s natural to feel anxious about what the future holds. The CARES Act business loan will go a long way in absorbing some of the shocks caused by the COVID-19 pandemic. As such, it would be in your business’s best interest to reach out to your banker to get cracking on the loan application process right away.
As usual, Aaron Bruner, your trusted attorney at law, is always available to answer any questions regarding the legal implications of these loans to your business.
