On Friday, President Trump signed into law the Coronavirus Aid, Relief and Economic Security (CARES) Act. The largest stimulus bill in American history, the $2 trillion package includes forgivable loans to small businesses, individual stimulus checks for families, further support for unemployment and aid to health care facilities and workers.
To read the full text of the 1200 page law, click here.
Paycheck Protection Program
The most relevant portion of the CARES Act for small businesses is the Paycheck Protection Program (PPP). Up to $350 billion in funding will provide small businesses, sole proprietors and non-profits with less than 500 employees with zero-fee loans. Up to 8 weeks of average payroll, utilities, mortgage interest and rents will be forgiven if the business retains its employees and their salary levels.
- This program will be adminstered by the Small Business Administration and your local bank. Please contact your bank for specific details on how to apply for the Paycheck Protection Program.
- Generally speaking, small businesses, including sole proprietors, self employed and non-profits, with less than 500 employees qualify. There are no restrictions on the type of impact your business has experienced during the Coronavirus pandemic.
- The size of the loan you will receive is calculated by taking your average monthly payroll from January 1 to December 31, 2019 (including all wages, tips, commissions and payroll taxes) and multiplying it by 2.5. For example, if your total wages for 2019 were $150,000, divide that by 12 and multiply it by 2.5. Your total loan amount would be $31,250. Keep in mind that wages over $100,000 are excluded from this calculation.
- The loans are capped at $10 million.
- Loan proceeds may be used for: payment of payroll costs (including wages, commissions, tips, vacation or sick leave, payroll taxes, health insurance and retirement programs), payment of interest on mortgage obligations, rent obligations or utility payments.
- If all requirements are met (you continue to employ your employees during the covered period), the loan will be forgiveable. You must apply through your lender for forgiveness.
- There are many other provisions. For detailed information, contact your bank. We are ready to assist you in managing these calculations when you’re ready to apply.
Cash Payments to Individuals
Individuals who earn less than $75,000 will be sent a check (or direct deposit) in the amount of $1,200. Couples who earn less than $150,000 will be sent $2,400 plus $500 per child. There is no need to apply as these checks will automatically be sent.
Extra Unemployment Funding
- The CARES Act adds $600 per week on top of what the state pays out for unemployment benefits to each covered individual. This additional amount will apply for up to 4 months.
- An additional 13 weeks of unemployment benefits will be available on top of state maximums.
- Typically, self-employed individuals, freelancers and contractors cannot apply for unemployment. The CARES Act creates a provision for these individuals to apply for unemployment benefits through the end of the year.
We are here and ready to assist you in running any reports to support these programs. Please let us know if you have any further questions!
Stay healthy & safe,
The Team @ Paper Trails