Within the Coronavirus Aid, Recovery and Economic Security (CARES) Act that President Trump signed yesterday is a $350 billion Paycheck Protection Program that will allow businesses and nonprofits with fewer than 500 employees to apply for loans up to $10 million each to cover losses caused by the COVID-19 pandemic.
What makes this relief even more significant is the possibility for loan forgiveness, which is available to employers who retain their workforce levels through the crisis. If you follow the guidelines carefully, you can essentially convert your business loan to a grant – even if you’ve already laid off employees.
Loan Forgiveness Requirements
Loans may be forgiven if businesses use the money to pay for payroll costs, salaries, benefits, mortgage interest, rent and/or utilities. The forgiven amount would be equal to the amount actually paid for these expenses during the eight weeks following disbursement of the loan. Additional wages paid to tipped employees under Section 3(m)(2)(A) of the Fair Labor Standard Acts may also be forgiven.
Forgiveness will be scaled back if the business has a reduction in employees, salaries or wages. Reductions in workforce, salaries and wages that occur from February 15, 2020 to April 26, 2020 will be disregarded for purposes of reducing the forgiveness amount, as long as the reductions are eliminated by June 30, 2020.
For purposes of the loan forgiveness, a reduction in workforce and salary or wages will be calculated as follows:
Please do not hesitate to contact us for help during the application process.