What Small Business Owners & Their Employees Need to Know About the CARES Act, Including the Paycheck Protection Program

On Friday, March 27th, the CARES Act was signed into law. Several provisions of the Act provide relief to small businesses and employees impacted by the Coronavirus pandemic. Of particular importance is the Paycheck Protection Program.  

The Paycheck Protection Program allows any business, non-profit organization 501(c)(3), veteran’s organization, and tribal organization that generally, has 500 or fewer full and part-time employees, to apply for a Small Business Administration (“SBA”) Loan for the following purposes: (1) to continue operations during COVID-19 emergency; (2) to retain workers and maintain payroll; and (3) make mortgage, lease, and utility payments. More specifically, the borrower must certify that the loan is necessary to fund ongoing operations and that loan proceeds will be used to fund:

  • Mortgage interest payments
  • Rent payments
  • Utilities
  • Interest on debt obligations previously incurred; or
  • Payroll costs, including
    • All compensation, including salary, wages, commissions, tips, PTO, and severance
    • State and local payroll taxes
    • Compensation to sole-proprietors or independent contractors
    • Up to $100,000 per employee in one year (pro-rated)
    • Health insurance 

Borrowers who were operating and paying employees or independent contractors on February 15, 2020 are presumed to be eligible for loan forgiveness for loans of 6 months to 1 year. The following amounts may be forgiven:

  • Sum of all payments for all permissible uses
  • Reduced by
    • Decreases in full time employees
    • Decreases of more than twenty-five (25%) percent in compensation to employees making less than $100,000 (Annualized)
  • No decrease related to reductions in numbers of employees or compensation incurred between February 15, 2020 and thirty (30) days after enactment of CARES; if employment is restored or if wage reductions are made up by June 30, 2020
  • Note that employee is defined for this purpose only as any employee who did not receive during any single pay period during 2019 a salary or wages at an annualized rate of pay over $100,000.

To have loan amounts forgiven under CARES, the following documentation must be provided:

  • Verification of payroll costs
  • Verification of mortgage, lease, and utility costs
  • Certification by officer of above costs and appropriate use of proceeds

While the Paycheck Protection Program is a vital part of the CARES Act, the Act includes many additional provisions to provide relief to small businesses and their employees. Click here for a full summary of the Act prepared by the Shumaker, Loop & Kendrick, LLP law firm.

Beyond this summary, Shumaker has a 24/7 COVID-19 Helpline to answer legal and legislative questions related to the coronavirus pandemic. For assistance, call (800) 427-1493 at any time or visit Shumaker’s COVID-19 Online Resource Center by clicking here. Fun fact - depending on when you call, you may reach Spread Your Sunshine Founder Melanie Griffin, an attorney of the Shumaker law firm and Senior Advisor, Business-to-Business Relationships with Shumaker Advisors. Her upcoming shifts are from 6 PM – 7 AM on Tuesday, March 31st and Sunday, April 5th.

Hopefully the forgoing resources are helpful to you. But, you know what? We want to help more. If YOU have additional information to provide to the SYS community, we want to share it! Please email Spread Your Sunshine Founder Melanie Griffin at melanie@spreadyoursunshine.com or message Spread Your Sunshine on Facebook or Instagram. We love hearing from you, and together, we can have the greatest impact on our communities and those whom we love most.

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