the $2T stimulus offers forgivable loans for most small biz
Early today my accountants sent me a summary of one of the main benefits for small businesses. Here’s the note:
The CARES Act utilizes the SBA 7A loan program to make or guarantee the loans to be made under the act.
Most, if not all of the loan will be forgiven, so it will really be more of a “grant” than a loan, and it can be used to cover payroll, rent and other costs, and the amount of the loan that is forgiven will not be income!
SUMMARY OF THE CARES Act PROVISIONS
Small Business Administration (“SBA”) Loans
Small businesses and non-profits with no more than 500 employees (per physical location) are eligible to receive an SBA loan of up to $10 million (exact amount is tied to payroll costs).
Number of employees includes both full-time and part-time.
Covered loan period is between February 15, 2020 and June 30, 2020.
Loans may be used for wages, payroll costs, paid leave, costs related to the continuation of group health benefits, mortgage payments, rent, utilities, and interest on other debts.
Loans are also available for certain sole proprietors, independent contractors, and self- employed individuals; must provide documentation such as payroll tax filings, 1099s, and income and expenses.
No collateral or personal guarantees are required.
Some loans may be eligible for forgiveness to the extent of the borrower’s payroll costs, mortgage interest, rent, and utility payments made during an 8-week period after loan origination date.
Amount of loan forgiveness is reduced to the extent employees are laid off or salaries are reduced by more than 25%.
Borrower who rehire employees previously laid off will not be penalized for having reduced payroll at the beginning of the period.
In short, small businesses should be applying if they have been impacted by the COVID virus.
The loans will have no interest/principal payments for up to 1 year, could be fully forgiven, no fees, no personal guarantees, no collateral, and the Lenders have no risk.
I put the whole note sent from my personal accountants here: