- Most businesses up to 500 employees are eligible for a loan under the CARES Act.
- The amount a business can borrow is 2.5 times monthly payroll expenses up to $10 million.
- Loan forgiveness is available for funds used toward payroll expenses within 8 weeks’ of receipt.
As we all know, the federal government recently enacted the Coronavirus Aid Relief and Economic Security (CARES) Act, providing emergency assistance the likes of which have never been seen to individuals and business impacted by the pandemic. While the individual distribution seems fairly straightforward and keyed toward an individual’s income, the government’s actions concerning their plans to help small-business owners needs further implementation through the Small Business Administration.
ContractsCounsel is pleased to provide a platform for small-business owners, sole proprietors, and anyone contemplating launching a start-up access to top legal talent. To that end, many of you may be curious to how the government’s recent measures might apply to you.
Paycheck Protection Plan.
While the name may be a little misleading, the Paycheck Protection Program provides up to $359 billion in loans through the Small Business Administration. The loans are subject to forgiveness under certain circumstances to eligible entities employing less than 500 people. Economists are therefore considering these payments to be more like grants or gifts rather than traditional loans.
The money cannot be used for any purpose. Instead, it can only be applied to payroll costs (wages, salary, paid-time office, health insurance premiums, etc.), rent, utilities, mortgage interest, and debt existing prior to the COVID-19 pandemic. Businesses, non-profit organizations, veterans’ groups, certain self-employed individuals, independent contractors, and sole proprietors will especially benefit from this program.
Maximum Amount Available.
The calculation of the maximum amount available under the CARES Act is tricky: it is the lesser amount of $10 million or the average monthly payroll cost times 2.5 plus any SBA Economic Injury Disaster Loans received after January 31, 2020.
Loans are available for up to a 10-year term (amortized) at 4% interest, with six months (and up to one year) deferral of principal and interest payments, providing significant cushion to small-business owners. They may also be eligible for forgiveness in the amount equal to the amount actually paid for payroll costs, salaries, benefits, rent, utilities and mortgage interest during the eight weeks following disbursement of the loan. To put it another way, if a small-business utilizes its loan immediately, it will be forgiven rather than subject to repayment. These forgiven loans are also excluded from taxable income.
How to Apply.
According to the CARES Act, the Small Business Administration must issue regulations within 15 days of enactment, meaning that it is possible that lenders could begin taking loan applications as soon as mid-April. ContractsCounsel expects that those regulations will provide additional guidance from the SBA about how to find a qualified lender. Nevertheless, those businesses who already have an SBA loan should contact their existing lender in order to potentially expedite the process.
Should I Apply?
It depends. Even the most well-thought-out business plan did not anticipate this level of economic volatility. Consult with an attorney and your tax professional to see if a CARES Act SBA loan is right for you, especially in terms of whether you anticipate using the loan quickly (and therefore avoiding repayment) or over the long-terms (therefore subject to modest interest and deferment).
Meet some of our Lawyers
Pura Rodriguez, JD, MBA is the President and Managing Partner of A Physician’s Firm, based in Miami. She represents healthcare providers from different specialties in a broad range of issues, including contract review, business planning and transactions, mergers and acquisitions, vendor and contract disputes, risk management, fraud and abuse compliance (Anti-Kickback Statute and Stark), HIPAA compliance, medical staff credentialing, employment law, and federal and state regulations. She also assists providers in planning their estates, protecting their assets, and work visa requirements.
Jaclyn is an experienced intellectual property and transactional attorney residing and working in NYC, and serving clients throughout the United States and internationally. She brings a targeted breadth of knowledge in intellectual property law, having years of experience working within the media, theater, PR and communications industries, and having represented clients in the music, entertainment, fashion, event production, digital media, tech, food/beverage, consumer goods, and beauty industries. She is an expert in trademark, copyright, and complex media and entertainment law matters. Jaclyn also taught as an Adjunct Professor at Cardozo School of Law, having developed and instructed the school’s first Trademark Practicum course for international students. In her spare time, Jaclyn’s passion for theater and love for NYC keeps her exploring the boundless creativity in the world’s greatest city!
A bilingual attorney graduated from J.D. with a C.P.A. license, an M.B.A. degree, and nearly ten years of experience in the cross-border tax field.
Experienced and business-oriented attorney with a great depth of contract experience including vendor contracts, service contracts, employment, licenses, operating agreements and other corporate compliance documents.
Lawyer and title insurance agent based in Fort Lauderdale, Florida
With over 21 years of practice, Chet uses his vast experiences to assist his clients in the most efficient manner possible. Chet is a magna cum laude graduate of University of Miami School of Law with an extensive background in Business Law, Commercial Real Estate, Corporate Law, Leasing Law and Telecommunications Law. Chet's prior experience includes 5 years at two of the top law firms in Georgia and 16 years of operating his own private practice.
Steve Clark has been practicing law in DFW since 1980. He is licensed in both Texas and Louisiana state and federal courts. He concentrates his practice on business clients and their needs. He has been a SuperLawyer in Texas since 2011, and is Lead Counsel rated in Business Law. He is also a Bet the Company litigator in Texas.
I am a top-performing bi-lingual legal services professional with a proven record of success. Reputation of assessing and evaluating client’s needs and providing individualized solutions in line with those needs while efficiently handling multiple tasks simultaneously. Able to create a collaborative work environment ensuring business objectives are consistently met. Seeking an attorney role within a legal setting to apply skills in critical thinking, executive communications, and client advocacy.
I run a small law firm in Pasadena, CA. I have been practicing for almost 10 years and the other attorneys at my firm each have 12+ years of experience. We focus on business and employment law, protecting and defending business owners. While my clients are all sizes, I particularly enjoy helping smaller companies and individuals manage their legal needs without the high price tag.
I have over 25 years' experience representing individual and company clients, large and small, in transactions such as mergers and acquisitions, private offerings of securities, commercial loans and commercial endeavors (supply contracts, manufacturing agreements, joint ventures, intellectual property licenses, etc.). My particular specialty is in complex and novel drafting.
Attorney specializing in litigation and transactions.