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This article was written by Michela Moscufo, Contributor

A woman wearing a protective mask buys produce from a street vendor in San Juan, Puerto Rico on … [+] March 25, 2020. – Almost one billion people were confined to their homes worldwide as the global coronavirus death toll topped 12,000 and US states rolled out stay-at-home measures already imposed across swathes of Europe. More than a third of Americans were adjusting to life in various phases of virtual lockdown — including in the US’s three biggest cities of New York, Los Angeles and Chicago — with more states expected to ramp up restrictions. (Photo by Ricardo ARDUENGO / AFP) (Photo by RICARDO ARDUENGO/AFP via Getty Images)

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President Trump signed the third and final economic stimulus package into law this afternoon.  The law provides clear guidelines on what small businesses are eligible, and what their loans will look like.  Here are the details.

The total amount of money going in the fund is $349 billion.  The loans are federally-guaranteed (meaning there is no interest on the loan), and tax-free.  All loan payments are deferred for one year.

Any business with less than 500 employees is eligible for the loan.  All states and territories are eligible. Self-employed individuals, independent contractors, and sole proprietors are also eligible.

Priority will be given to businesses in under-served and rural communities, businesses owned by veterans and members of the military community, women or other socially and economically disadvantaged individuals, as well as businesses that are less than two years old. 

More than 1,000 lending agencies will be participating in the program, according to a spokesperson for Senator Marco Rubio.

 How Does the Loan Work?

The loan is forgivable, meaning it doesn’t have to be paid back, during what is called a “covered period.”  This period is eight weeks, chosen by the small business owner and the lending agency, between February 15, 2020 to June 30, 2020. 

The total amount of this forgivable loan, which is more akin to a grant, is 2.5 times the businesses’ monthly operating costs.  The maximum amount that can be given to a single business is $10 million.

All operating costs, including employee payroll (and other forms of compensation), employee health care, mortgage, rent, utilities, and debt payments are included.  The monthly payroll cost for an employee cannot be more than $33,333 (i.e., the equivalent of an annual salary of $100,000).

If a small business had to lay off employees during the covered period, the forgivable amount of the loan will also be reduced proportionally.  For example, if a small business cut back half of their workforce, the amount of the loan will be reduced by 50%. If employee salaries were reduced by more than 25%, the loan will be reduced proportionally.  But, if all employees are rehired and their full salaries restored by June 30, no reduction of loan will occur. 

If the crisis continues longer than expected, the law can be amended and the time period extended, according to a spokesperson for Senator Marco Rubio.  The eight-week period was determined in discussions with business industry leaders.

To expedite the loan process, personal guarantees have been waived. All that is required is a “good faith certification” that your business has been affected by the COVID-19 pandemic, and that the funds will be used according to the guidelines. 

“Our best guess is that by two weeks it will be up and running,” according to a spokesperson for Senator Marco Rubio.

Additional resources have been assembled by the Small Business Investor Alliance, and can be found here.

The U.S. Senate Committee on Small Business & Entrepreneurship has put together a list of frequently asked questions that can be found here.

Post Author: Tricia O'Connor CPA MBA