Coronavirus Aid, Relief and Economic Security Act (CARES Act) Small Business Loans
Congress passed the CARES Act to help address the unprecedented health and economic crisis associated with COVID-19. A vital part of the CARES Act, the Payment Protection Plan, can help brewers weather this economic crisis is the Expanded Authority for Small Business Administration (SBA) Loans to Small Businesses, Sole Proprietors, Entrepreneurs independent workers and employee share ownership plans (ESOP). The bill provides $ 300 billion for loan guarantees and grants from the SBA.
While it is recommended that you consult an accountant or lawyer to help you progress, the following Q&A outline the options available in the CARES Act to help your business and your employees.
What can loans pay for?
These loans can cover the most immediate business expenses related to the COVID-19 outbreak. These include salaries paid to employees, payment of tips in cash, paid leave (sick leave, parental leave, etc.), severance pay, health insurance premiums, retirement benefits and benefits. social charges. Loans can be retroactive for expenses dating back to February 15, 2020.
How much loan can I receive?
The loans are designed to cover two and a half months of payroll, using a calculation of the average monthly payments over the last year before the loan is granted. For example, if your annual pay was $ 1.2 million, you could apply for a loan of up to $ 250,000 (1,200,000/12 = $ 100,000, $ 100,000 X 2.5 = 250,000 $). No loan can exceed $ 10 million.
Am I eligible for a loan?
If your business has fewer than 500 employees, was operational on February 15, 2020, had employees for whom it paid salaries and payroll taxes, and has been affected by COVID-19, you are likely eligible for a loan. You must certify in good faith that you have been affected by COVID-19 and that you will use the funds to retain workers and maintain payroll and other debts.
What about fees and other tests to find out if I am eligible?
There are no borrower or lender fees for participation. Also, unlike other SBA loans, you are not required to prove that you cannot receive credit elsewhere in order to receive the funds provided under this program. Typical warranty and personal warranty requirements are also waived under this program.
What are the loan conditions? What is required for loan forgiveness?
Borrowers are entitled to a loan forgiveness equal to the amount they spend on staff costs during the eight week period after the loan is issued. Loan forgiveness is also available for mortgage interest payments, lease rent payment, and utility payments, as long as these costs are already in place by February 15, 2020. Notably, Eligible salary costs do not include compensation for employees who receive more than $ 100,000 (annually) in salary. Breweries with knowledgeable employees would be pardoned for the additional wages paid to those employees during the period covered.
The amount remitted will be proportionately reduced by any reduction in the number of employees retained from the previous year and any reduction in salary of any employee in excess of 25% of their compensation for the previous year. Borrowers who rehire previously laid-off workers will not be penalized for having a reduced payroll at the start of the period.
Importantly, the forgiven portion of this loan will not be included in the borrower’s taxable income.
Loan amounts not remitted after one year will be carried over as an outstanding loan of up to 10 years at a maximum interest rate of 4%.
When will I have to make payments?
There is a full deferral of loan repayments for one year, so if you expect your loan to be canceled, that loan effectively acts as a grant program.