The following is a quick summary of the SBA Loans that are available to Businesses under the “Cares Act”.
Who is eligible:
- Applies to businesses with fewer than 500 employees or those that meet SBA’s current size standards for 7(a) loans.
- Applies to self-employed or individual contractors.
- Applies to certain nonprofits including 501(c)(3) organizations and 501(c)(19) veterans’ organizations, and tribal business concerns with fewer than 500 employees.
- Authorizes $17 billion to cover six months of payments for payroll and interest for existing SBA 7(a) borrowers. This provision provides relief on existing obligations.
- Act Now, Funds may not be available later on.
Borrowing Parameters. The maximum borrowing amount will be limited to the lesser of:
- 250% of the average total monthly payments by the applicant for payroll costs incurred during the 1-year period before the date on which the loan is made; if the applicant is a seasonal employer the average total monthly payments for payroll will be measured for the 12-week period beginning February 15, 2020, but no later than March 1, 2020 and ending by June 30, 2020; and, if the applicant was not operating during the full period, the period of January 1, 2020 and ending on February 29, 2020 should be used for the calculation; or
- $10,000,000
Use of Funds:
- During the covered period (February 15, 2020 to June 30, 2020) an eligible recipient may use the proceeds from this loan for: payroll costs; healthcare and benefits costs; employee salaries, commissions or similar compensations; payments of interest on any mortgage obligation (which does NOT include any prepayment or payment of principal mortgage obligations); rent; utilities; and interest on any other debt obligations that were incurred before the covered period.
Forgiveness and Deferment:
- Recipients will be eligible for forgiveness of the covered loan in an amount equal to the sum of the following costs incurred and payments made during the covered period: payroll costs; interest on any mortgage obligation; rent obligations; and utilities. Certain factors will limit the levels of forgiveness based on the reduction of number of average employees during the covered period and reductions related to salaries and wages. Complete payment deferment relief will be provided on covered loans for a period of not less than 6 months, including payment of principal, interest, and fees, and not more than 1 year.
Please contact Patrick O’Connor at O’Connor law firm for a compliance review for your business: 800.655.0175.
