CARES Act – A Lifeline to Small Businesses in Tough Times Due to COVID-19
Like all of you, Mansour Gavin LPA, its attorneys and staff are living through unprecedented times. On March 27, 2020 the U.S. federal government signed into law the $2 trillion CARES Act. Beginning today, small businesses can apply for the nearly $350 billion earmarked for loans available through the economic rescue plan. U.S. Small Business Administration (SBA) approved lenders expect a flood of applications for Paycheck Protection Program (PPP) loans, which make up one of the three financial rescue packages available to small businesses. To qualify for a PPP loan, a business must meet the following criteria:
- Have fewer than 500 employees;
- Be operational as of February 15, 2020; and
- Certify that due to the economic uncertainty caused by the COVID-19 crisis, the loan is required to maintain operations, among other stipulations.
A qualifying business is eligible to receive funds up to 2.5 times their average monthly payroll expense from 2019, accounting for up to $100,000 for each individual employee’s salary, with a maximum loan value of $10 million.
PPP loans accrue 1% interest and mature after 2 years. However, the borrower can apply for forgiveness of the loan up to 100% if the funds are used on certain qualifying expenses (e.g. payroll, rent, mortgages), they retain its employees and meet other important criteria. Borrowers may only be able to seek loan forgiveness up to 25% of non-payroll expenses.
The SBA recently made a draft application available online. For more information on PPP loans, the Economic Injury Disaster Loans (EIDL) or other resources available to small businesses, please visit https://www.sba.gov/funding-programs/loans/coronavirus-relief-options. You can always contact an attorney from our business group for guidance.
