CARES ACT: Steps to Apply for SBA Forgivable Loan: By Syed, Aadil & Brian

Many small business owners including physician practices, hotel and convenience store owners are going to qualify for SBA disaster relief loans under the Paycheck Protection Program part of the CARES Act. Below is an overview of this program:

• Small businesses with 500 or fewer employees during the “covered period” – February 15 through June 30, 2020, are eligible. Some industries may qualify with more employees, depending on the Small Business Administration’s applicable industry size standards, accessible here.
• Offers a loan of up to $10 million based on a formula, which is essentially 2½ times the monthly payroll, plus certain other costs, up to $100,000 per employee.
• Employee count is calculated per location for businesses in the hospitality and restaurant industries and certain others.
• No personal guarantees are required.
• Also available for self-employed individuals.
• Loan may be used for salaries, paid sick or medical leave, insurance premiums, and mortgage, rent and utility payments.
• Loans will be made through eligible FDIC lenders.
• Loans may be forgiven if employment and wage levels are maintained. There is a cure period for reductions that occurs between February 15, 2020, and 30 days after date of enactment if released employees are rehired or salary reductions are reversed by June 30, 2020.
• Loan forgiveness is not taxable.

Following is an outline of the loan forgiveness:

• Loans will be forgiven in full to the extent the funds are used to cover payroll costs (on salaries up to $100,000), paid sick or medical leave, medical insurance, rent, and utilities in the 8 weeks following the origination of the loan.
• Loan forgiveness will be reduced to the extent that businesses fire workers or reduce employee pay by more than 25%.  To encourage employers to rehire any employees who have already been laid off due to the COVID-19 crisis, borrowers that rehire workers previously laid off will not be penalized for having reduced their payroll.
• Any portion of the loan not forgiven can be repaid over the course of 10 years with an interest rate not to exceed 4%.
• You can also speak with your Bank Loan Office who can help you with the  loan.

In this critical period our primary objective is to provide you timely information and help you make the right decisions. Please call us if you have any questions.

Source:  Brian Boehler, CPA, Roberts Boehler & Fisher PC